I write this on the morning of a new phase of existence for the United Kingdom – the great leap into the unknown represented by the vote for Leave, as decided yesterday by the British public. While there is a broad plan for our exit from the European Union, the finer details have still to be decided or, at least, made known to us.
The impact of Brexit on the economy for any term of time is as yet unclear but already currency and equity markets, and the announcements on plans for some US financial services companies with UK offices to move to the Continent, have shown that life ahead in our new ‘liberated’ format will not be a smooth ride.
Much has been written from both sides of the argument of the likely or possible implications for UK business of a vote to Leave but it is clear that IROs in the UK face busy times ahead, whatever sector they operate within.
Uncertainty is hardly the preferred environment for the long-term equity investor and every UK public company must be prepared to attempt to explain the impact of market conditions which have yet to be understood fully.
Given that we already know that other major European markets outside the UK (for example, Norway and Switzerland) conduct themselves largely according to EU regulatory practice, there may be little chance of ridding ourselves of what many firms see as the common market’s stifling bureaucracy. Given the potential loss of the EU passport model (a strong possibility as I write), we may yet see the outflux of many financial services companies from London to Frankfurt or other EU cities.
The poll taken at this year’s Society Conference showed overwhelming support for remaining in the EU, as a result, I assume, of the belief among UK IR professionals that departure would be bad for their companies and the economy in general, if only for an indeterminate while.
I am sure many of those conference attendees now wonder what will happen next: to their businesses, to sterling, to the regulatory environment, to their share price, and to the markets within which they operate.
The ripples of Brexit spread far and wide – many have spoken of this as a global event, extending way beyond our shores. The whole EU project is now under threat from dissent in some of the major market constituents. Talk of nationalism and self-interest has replaced the now tainted project of globalisation. Market protectionism is the avowed way forward for US presidential nomination, Mr Trump, who is perhaps a more likely winner of his election as a result of Britain’s choice.
Brokers have been saying that the IPO and M&A markets would get busier in September, after the Referendum and the summer recess, but I am not sure that took into account a Leave voting outcome. Markets may well become far more active but perhaps not for the best reasons. I am sure the hedgies are delighted by the current turmoil, and the sell-side will enjoy trading levels they will remember from the halcyon days, as volatility ramps up.
UK IROs should enjoy their summer holidays as much as they can, as the next months could prove arduous. There will be much to do.