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|Atradius: United Kingdom votes to leave the European Union|
|Friday, 24 June 2016|
After weeks of speculation the future path for the United Kingdom’s relationship with the European Union is confirmed.
In a poll turnout of 72%, the decision to leave the EU is confirmed by a majority of 51.9%. Although the decision is reported as momentous, in practical terms few things will change in the immediate future. However, inevitably there will be impacts felt in the UK and other member states.
A period of uncertainty is inevitable for the UK with the focus on political stability in the light of the Prime Minister David Cameron’s announcement that he will step down from office before the end of 2016.
Following the ‘Brexit’ decision, leading trade credit insurer Atradius has released an economic briefing highlighting the key sectors that are expected to be affected by the leave vote and predicting that insolvencies may rise in the short-term, for example in Ireland, the Netherlands and Belgium, due to close trade and investment ties. However, it is anticipated that most other European countries would see little impact.
For the UK, in anticipation of a potential leave vote, some impact has already been felt with the depreciation of the British pound and delayed investment in businesses and staff. Following the Brexit decision UK GDP is expected to reduce by 1% to 3% in the next two years. The structure of trade agreements over the coming two years will determine the longer term impact.
An impact will also be felt elsewhere. For example, for the Netherlands foreign direct investment will be affected and for Ireland and Norway export trade could be impacted. Further, the Benelux countries and Ireland are expected to see increases in insolvencies ranging from 1% to 3.5%. The change in insolvencies in other European countries is expected to be negligible.
Andreas Tesch Chief Market Officer for Atradius said “In the UK the economy had settled to a more moderate growth of 0.4% in the first quarter. However, the vote to leave has had an immediate impact on the exchange rate against all primary currencies. Whilst we acknowledge that trading treaties need to be addressed, in the short term, businesses trading overseas will continue and benefit from a lower exchange rate.”
Alun Sweeney Country Director for Atradius UK & Ireland said: “There will be no short term impact on our underwriting stance for the UK market. When the emotion of the result subsides, it is important to recognise that UK business will adapt and those with strong management, executing a clear and well-funded strategy, will continue to thrive. The UK continues to be open for business and so do we. Businesses that choose to credit insure recognise that a robust risk management strategy enables trade and we remain confident that we can support our customers to grow their businesses, in the domestic market, in Europe and in other markets around the world”
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