A few weeks ago, the gloomy news that Britain left the European Union took the world by storm. Global markets crashed, the British pound hit a 31-year low, uncertainty reigned over the world and to top it off, Britain’s credit rating was reduced. However, over the following weeks other news stories stole the headlines, many global markets regained their losses and the pound has partly regained its value. Underneath this thin layer of calmness, uncertainty still reigns and this is leaving many Canadians wondering what will happen next and how will this affect us?
This week we’ll look at what can happen next as Britain slowly heads for the exit. Next week, we’ll look at how Brexit has and will affect Canadians.
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Britain is at a crossroad; there are many different directions that it can venture. Even though 51.9% of the British voters chose to leave the European Union (EU) it doesn’t mean that it will actually happen. There are many barriers that have the potential to suddenly halt Brexit.
The procedure to leave is as follows; Britain must invoke article 50 of the Lisbon Treaty and once this is done they will have up to two years to renegotiate the terms with the EU. If an extension is needed, all 27 countries in the European council must agree. If an agreement is not made within the time period then Britain will have to trade under the World Trade Organization’s (WTO) rules. They will then be required to negotiate new trade agreements.
Many potential barriers exist in-front of the act of ratifying article 50. The past Prime Minister, David Cameron, has resigned and stepped down without ratifying article 50. Replacing him is Theresa May and it’s still uncertain when they will ratify article 50. Already, we are seeing a lot of “voter’s remorse” and a snap election may be called to reduce the negative political impact. If a snap-election is held, there’s a chance that they may elect a politician that has a platform of staying in the EU. Further, British Parliament has the ability to reject the results.
Other big barrier can come from other areas of Great Britain. Scotland, Wales and Northern Ireland can veto British Parliament’s vote. Although this veto can be overruled, doing this would create a large amount of instability as regions have often vied for their own independence.
Overall, what we do know is that we can expect random spats of economic instability when the process unfolds. We can also expect a very slow Brexit that will probably take a couple years to be finalized. There’s also a low chance that Britian may stay in the Euro if social and economic condition begin to deteriorate.
Next week we’ll be looking at how the instability from Britain will affect Canadians.
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