Future proceedings

Brexit is a word combination for Britain and Exit and describes the withdrawal of the United Kingdom (UK) from the European Union (EU). It has been the goal of various individuals, advocacy groups, and political parties since the UK joined the European Economic Community (EEC), the predecessor of the EU, in 1973. Continued membership of the EEC was approved in a 1975 referendum by 67% of voters. In the June 2016 referendum on EU membership, 52% voted to leave, resulting in the complex process of withdrawal being initiated and political and economic changes in the UK and other countries.

Withdrawal from the European Union has been a right under Article 50 of the Treaty on European Union of EU member states since 2007. The process for the UK’s withdrawal is uncertain under EU law – Article 50, which now governs the withdrawal, has never been used before. Unless extensions are agreed, the timing for leaving under the article is two years from when Britain gives official notice, but this official notice was not given immediately following the referendum in June 2016. The assumption is that during the two-year window new agreements will be negotiated, but there is no requirement that there are new agreements at that stage. This can create difficulties in the future.

Article 50 of the Lisbon treaty is the first step to take. It states: “Any member state may decide to withdraw from the union in accordance with its own constitutional requirements.”  The treaty sets out how an EU country might voluntarily leave the union. The wording is vague, almost as if the authors thought it would be unlikely it would ever happen.

Since the vote to leave the EU, unfortunately, a downfall of the UK economy started. The currency is weak, the FTSE100 is indirectly on government support, real estate funds and property prices are under pressure and pension funds need to be very creative to make their monthly payments. These are just a few of the effects of the uncertainty a Brexit vote created. This is not scaremongering, these are the facts.

The bond buying program from the Bank of England, a bumper package of stimulus measures to back up the severe predictions for the UK economy after the result of the EU referendum, had miserably failed its second day already. The Bank of England reserved 250 Billion GBP to create additional liquidity for the financial industry and wanted to buy-back long term government debt. Pension funds and insurance companies were behind the missed target as they hung on to Government bonds, or gilts, which are seen as a safe haven asset that retains value in times of economic uncertainty.  Low yields force pension funds to hold more dent. The lower gilt yields go the bigger pension deficits become, and that leads to them being told that they need to cut risks and increase the long term bonds that they hold.

Eventually, Britain might be better off outside the EU. However, the short term value fluctuations in different markets and industries have a real impact on society. Asset protection is recommended for everyone, but your government will not guide you. You need to find out all yourself.