What should finance leaders know about Brexit?
Dun & Bradstreet’s economists have weighed in on the recent Leave vote. Here are their core assumptions:
- Article 50 will be invoked in October 2016, and the UK will exit the EU in October 2018.
- Dun & Bradstreet has downgraded the UK’s Country Risk Rating from DB2a to DB2c with a “deteriorating” outlook
- The UK will enter a recession in H2 2016, and growth will take a hit.
- Clarity on the new trade deal between the UK and EU will determine many future implications.
Although it is too early to assess the full impact of the decision, companies doing business with the UK should brace themselves for an open-ended period of uncertainty.
Markus Kuger, Senior Economist, Dun & Bradstreet
Impact on the US
What might Brexit mean for the United States? Our economists predict:
- A spike in volatility in US markets
- Measurable appreciation of the US dollar as investors flock to safe haven currencies
- Costlier US exports for foreigners
- Diminished corporate profits of US multinational companies
- Changing patterns in global trade and investment flows
- Increased caution toward interest rates from the Federal Reserve
- Slightly reduced GDP growth (from 2% in 2016 to 1.8%)
Impact on the UK
What might Brexit mean for the United Kingdom? Our economists predict:
- GDP growth will likely slow
- A sharp increase in political and economic risk
- A decline of the pound sterling
- Risk of lost access to the EU’s common market over the medium run
- A hard hit to the financial sector if EU passport rights are eventually lost
- A period of slower growth, regardless of whether Article 50 is invoked
- A short-term boost for manufacturing and hospitality (due to the weaker pound)
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