That noise you just heard? It was 700-odd European Union
(EU) politicians simultaneously choking on their croissants.
The UK public has voted to leave the union.
Things are moving fast today. Already, Prime Minister David
Cameron has given himself four months’ notice, pledging to step down in October
as the country needs “new leadership.”
Markets opened early in London and are still whipsawing as
news and views emerge. The pound has reportedly taken such a hammering that
France is now a bigger economy than the UK due to the fluctuating exchange
We’ve been asking “what does Brexit mean?” for weeks, and
very few have been able to bring any kind of certainty. For all the noise you’ll
hear today, there will be very little indication of a true direction for either
the UK or Europe for some time.
is now incumbent on everyone in the financial sector to work to try to
mitigate the risk to our beneficiaries created by politics.”On announcing the referendum, Cameron vowed to invoke
Article 50 of the Lisbon Treaty in the event of a ‘leave’ vote, which would begin
the exit process. It’s scheduled to take two years to negotiate, but some have
warned it could take much longer. The UK needs to get its negotiating team in
place first, which will involve the ruling Conservative party trying to patch
up the rift it created between pro- and anti-EU campaigners in the past few months.
On the European side, the EU’s openness to negotiation will
depend upon which way of thinking wins out. On the one hand, the UK’s financial
sector is crucial to Europe, and European politicians will likely be unwilling
to put up barriers to doing business with London.
On the other hand, politicians will be fearful of a ‘domino
effect’ throughout the rest of the union, and so may be reticent to make it
easy for Britain to leave. Even before the polling stations opened, reports
emerged in the pro-Brexit areas of the British press of demands in Italy, the
Netherlands, France, and Denmark for similar public referenda on EU membership
by predominantly right-wing parties. Ironically, the anti-Europe camp was
citing European examples of why a united Europe was a bad idea. A poll by the Pew
Research Center earlier this month found Euroskepticism to be growing
throughout the EU’s population.
My inbox is already filling up with comments from asset
managers, trade bodies, and other service providers. The overwhelming rhetoric
is one of uncertainty, but with the expectation of immediate negative impacts
across asset classes.
Pension funds, sovereign wealth funds, endowments, and
foundations now need to prove they are long-term investors.
As Saker Nusseibeh, CEO of Hermes Investment Management, the
BT Pension Scheme’s in-house asset manager, put it succinctly in a comment this
morning: “Throughout, our main purpose remains to help our beneficiaries retire
better… It is now incumbent on everyone in the financial sector to work to try
to mitigate the risk to our beneficiaries created by politics.”
I need to sit down and drink
a big cup of tea.
· Recommended reading:
Buzzfeed’s “16 Pictures That Accurately Predict Life in
Related: Infographic: What Brexit Would Look Like
& Pension Tensions Mount Ahead of Brexit Vote