Prior to the UK's vote on the referendum to leave the European Union, CFOs around the globe expressed less concern about capital markets than they have in past quarters, according to the 2016 Q2 CFO Signals report from Deloitte. But now that the referendum has passed, anxiety appears to be returning quickly.
Last week, Britain's vote to leave the European Union came as a surprise to many investors. And with it a collective panic that sent the world's stock exchanges into a spiral. Now that we've had a week to let the news sink in, the real work of figuring out what the vote means for everyone can begin.
Because right now, lack of knowledge is driving everything. And until the next round of decisions are made in the UK – triggering Article 50 of the Lisbon treaty, which would actually start the separation process, isn't likely to happen until after Prime Minister David Cameron steps down in September, for example – uncertainty will continue to reign.
But here are some key points for businesses to keep an eye on:
Firms and governmental entities likely will be "testing the waters" before Article 50 goes into effect, according to a release from The Conference Board. This "testing period" may put the UK in a better negotiation position with the governing body of the EU once Article 50 is invoked. The EU and Britain's opposition party, however, are pushing for a more rapid response.
Several reports indicate that several countries – including the U.S. – are already teasing the trade agreement discussion. One of the big concerns going into the aftermath was how willing other countries would be to quickly negotiate independent trade agreements with the UK. But it may be an opportunity for the U.S. to finally get a European trade agreement through the UK, something it hasn't been able to get with the EU.
The global banking industry will "recalibrate," according to a bulletin from Deloitte. European banks will bear the brunt of the fallout from the looming separation, but "U.S. will need to reassess their commitments to individual markets and segments," the bulletin notes. This may lead to challenges for companies seeking international expansion.
Foreign exchange will be in flux. In the aftermath of the vote, the value of the British pound plummeted to 30-year lows. Any company that with a presence in the UK will see an impact on the bottom line. This will also likely affect imports and exports for many countries, and this impact could be felt more broadly – even by companies without direct exposure to the UK and other international markets.
There is no crystal ball for the long-term effect of the "Brexit," and it will take some time for the dust to settle and the emotional response to wane. Those that keep a cool head in the meantime are likely to come out better than those that react now.
