Tuesday, June 28, 2016

Brexit

Assuming you've been anywhere near a news source since last Friday, you already know that the people in the United Kingdom voted to leave the European Union. Approximately 52% to 48%, which is close but still a margin of around a million votes.
Pretty much everyone was surprised by the result. Certainly people outside of England and Wales were, since Scotland, Northern Ireland, and Gibraltar all voted heavily to stay in the EU. So did most of London, where the financial industry is a major player. Much of the media coverage leading up to the vote sounded pretty confident that the "remain" side would win.

Much has been made of Google's report that people in the UK were searching for things like "What does it mean to leave the EU" after the vote. It's tempting to look at that and assume that the voters didn't really know what they were doing. I'm sure that's true in a few cases, but largely I suspect that all the doom and gloom in the media was sending people to the Internet for some hope. Having said that, I'm pretty sure a lot of British voters would love a second chance to vote to stay in the EU.

There's already been a whole lot of weeping and gnashing of teeth over this, from all over the world. Financial markets have dropped like rocks, presumably because investors didn't think Britain would shoot itself in the financial foot. British prime minister David Cameron has promised to resign. Scotland is already talking about another vote for independence from the UK. Pretty much every world leader sounded worried about how this whole thing will play out.

It's going to be rough financially in the UK for a while. A large part of that will be businesses deciding that they should locate elsewhere, due to the coming instability during the EU exit, plus the loss of access to the EU direct market. On top of that, British politics are going to be pretty crazy for a while, since the majority of the current government was heavily in favor of staying in the EU. Political upheaval is rarely good for business.

Outside of the United Kingdom, though, now would be a good time for everyone to calm down over this whole thing. Europe isn't going anywhere, and neither is the United Kingdom. There won't even be any changes for at least months, and more likely years. The world economy will take a hit, but it should be short-lived. There will be a new equilibrium reached before long.

Most importantly, no one should let the media frenzy and the short-term market drops push them into any financial decisions. Short-term market instability is never a good reason to change a financial plan. The only people making significant decisions because of Brexit should be business leaders with interests in the United Kingdom, and even they should be taking it slow.

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