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What now?

What now?

For those behind the Leave campaign, issues of immigration and the cost of remaining in the EU are mainly behind their reasoning for wanting to step out from under the EU. They feel that leaving will result in the UK economy becoming stronger and that trade will be unaffected.

Well, we have seen democracy in action and UK voters have decided that being a full member of the European Union is not for us after 40 years. Global reaction has been one of shock - including some who voted "leave"!

Talking to many people from many nations, on a short break to watch the football in France, people are genuinely shocked. The markets reacted in a way that one would expect when the status quo is changed and a state of uncertainty prevails. This fluctuation in the markets is likely to continue for some time - indeed the only certain thing over the next few months will be uncertainty, which perversely brings a certainty in that things will be uncertain - however markets may not appreciate that subtlety and it's clear that Bobby Axelrod and his like are shorting Sterling and key stocks right now.

This situation has created a cadre of instant experts and the term "article 50" is being talked about more than England's tactics against Iceland but another certainty is that using the 2 years of planning permitted by Article 50 is a highly uncertain process for the UK Government and will take significant time when and if they invoke the article - until that time we may see stability in the markets at least.

The act of invoking Article 50 will have negative macroeconomic consequences for the UK, Europe and global economies; it may potentially impact mature market currencies more than emerging market currencies. What's very clear is that there was no plan for the exit and as such the politicians, industry leaders and policymakers will have to take steps to counter uncertainty and mitigate any contagion. Happily, we do see the Bank of England and now George Osborne - with some plans around reducing Corporation Tax - stepping up to the plate here.

It's been noted that Brexit may strengthen the position of those in other EU countries looking to achieve the same for their country and talk in restaurants in France while I was there were mooting the "domino effect" of other countries exiting (Nexit, Frexit (?)). However those interested in doing so may not be so quick to chance their arm having witnessed the consequences of doing so over the last few days with the added threat that the EU may punish the UK with tariffs and drawn out negotiations for having the temerity to leave and thereby frighten off others considering the same.

Longer term unintended consequences could be the breakup of the UK. The first Minister of Scotland is seeking to maintain the democratic right of Scotland to remain in the EU and a Scottish MEP got a standing ovation in the EU parliament recently. And then of course there is a quandary for Northern Ireland, net beneficiaries of EU grants - and it's not clear what could happen to our closest ally, Ireland - it's feasible that Ireland could become the English speaking FS centre of Europe - if they play their cards right.

However, the much rehearsed adage is that "Change is good" and I believe that - things remaining the same stagnate and die; change moves us out of our comfort zone and change is learning, learning is growing and growing is living.

So the die is cast and we will make the best of it - and as I write this on 4th July I am reminded that it is US independence day and it worked out alright for that country so why shouldn't it for us?

Ever onward...

Jon Murphy

Head of UK Consulting, ea Change Group