What’s Going On Here?
The UK’s spent the last few weeks going head to head with the European Union (EU) over the terms of the former’s departure from the latter. They reached an agreement last week – but on Saturday, the UK’s Parliament failed to approve it, leaving the country precious few options…
What Does This Mean?
The previous Brexit deal was voted down three times by Parliament, so the UK’s newly installed prime minister has been trying to agree a new deal that’d win over the country’s politicians. But rather than vote on that deal, Parliament instead voted to ask the EU for a delay to the October 31st departure date, in order to avoid leaving without a deal.
There’s no guarantee the EU will say yes, and Parliament may yet ratify the currently tabled deal. Alternatively, it may decide that a public vote or general election is held to determine the country’s next steps.
Why Should I Care?
For markets: Brexit means volatility.
Goldman Sachs said there’s a 60% likelihood of a deal last week, in which case it thought the value of the British pound might rise to $1.30. By Friday, the pound was only one cent shy of that target, but its value may fall now a deal seems less likely (tweet this). In a no-deal scenario, some investors think the pound’s value could fall to parity with the US dollar. Likewise, they expect the shares of the smaller but domestically-focused British companies (included in the FTSE 250 index) to swing in value more than those with large international businesses (which are primarily in the FTSE 100 index).
For you personally: Join the uncertainty club.
Further uncertainty will delay British and international companies’ investing and hiring decisions, which could make it tougher to get a job. And if Brexit is postponed, purchases that were made to prepare for an October exit may leave a hole in demand this quarter – likely meaning weaker earnings and economic growth than expected.
