The initial shock of Brexit was widespread. The internationally-dominated FTSE 100 tumbled, and the prognosis was even worse for the mainly UK-dominated FTSE 250. UK sterling fell sharply as investors swapped pounds for dollars and yen.
However, nearly a month on and we might not have expected the amount of positive action and news that we’ve seen. It seemed initially that the UK would have a vacuum of power whilst post-Brexit plans were formulated, but in typical British style, we’ve cracked on with the job.
Firstly, a new Prime Minister is in place very quickly. What looked like being a long, drawn out process in appointing a new leader for government has actually happened with great speed. And Theresa May has wasted no time in appointing key figures to key roles. With Philip Hammond as chancellor, the UK markets see real safety and stability at No.10 and No.11. The Brexit campaigners, David Davis and Boris Johnson, have key roles to play in how we exit the EU, but that process will not begin for a few months probably – and it’s a two-year exit from when we do trigger Article 50. The news from the new chancellor that there is to be no emergency budget, suggests that the economy is well placed to navigate headwinds, particularly on the back of much of the resilience planning built up by the 2008 recession.
The markets have responded buoyantly to this level of stability provided by a new government. The FTSE 100 has recovered all of its losses and the pound is strengthening. And the news from The Bank of England that it plans to hold interest rates at 0.5% shows a resilience in the housing market, suggesting it has the ability to withstand short-term pressures – although it may look to lower interest rates to help maintain growth in the housing market. Whilst there are rumours that house prices could fall, many are forecasting merely a reduction in house price growth.
The UK is also already looking at how trade deals with our closest trading partners would form. The Australian government has extended an invitation to begin talks about a free trade deal imminently.
The mood amongst the city is one of caution, but optimism. Mechanisms are in place to help manage and contain any crisis that saw banks being 30 minutes away from running out of cash in 2008. This time, we are a little more prepared. This potential crisis is one the UK can manage carefully and a lot of rhetoric has been how the UK can remain together with Scotland, and how we can maintain access to the single market and passporting rights that we currently enjoy.
It remains to be seen what the full extent of Brexit will be, but it seems that most of UK industry is focusing on how it can take advantage of the opportunity.