On 23 June, the UK made the decision to leave the European Union. Ever since the national vote, there has been a change in the political infrastructure, with David Cameron stepping down as prime minister and the former home secretary, Theresa May, taking his place.
The British exit from the 28-nation EU promised to curb immigration, reduce the economic burden of EU membership and create new opportunities for trade.
Brexit means Brexit as it has been said, and there have been advances in the last six months to give the financial sector a better idea on what to expect.
Although initially, the pound dropped to its lowest level since the 1980s, the UK economy seems to have weathered the initial shock of voting leave. Opinions however are still split on the stability of the UK’s financial sector. Some believe that Brexit started the disintegration of Europe, and has acted as a catalyst for major political and economic changes around the world. Some may believe that constitutional change in Britain was long overdue, and that as a nation it had to face these problems head on.
In the autumn statement, chancellor Philip Hammond presented tax cuts for big businesses and for corporate banks to invest in small firms. Part of the statement is as follows:
- Committing to cutting corporation tax to 17 per cent by 2020. The main rate of corporation tax has already been cut from 28 per cent in 2010 to 20 per cent, and will be cut again to 17 per cent by 2020, by far the lowest in the G20 and benefitting over 1 million businesses.
- £400 million through the British Business Bank to invest in growing innovative firms
- The funds will be invested in innovative small businesses with potential for growth, to provide the finance that they need to expand. This will support up to £1 billion of new investment.
This could boost growth in companies and allow greater investment in new innovations and firms.
Businesses are still growing
According to a survey of professionals by Santander, London’s business community remains surprisingly upbeat about the city’s economy and outlook for the next 12 months. The poll found that just 9 per cent of local business people are pessimistic about London’s economy; in contrast, almost half feel that despite Brexit, London’s economy is unchanged and 45 per cent are optimistic, including 13 per cent who are ‘very’ optimistic, reports GTNews.
The impact on Europe
Italian Prime Minister Matteo Renzi resigned after the nation held a similar referendum.
“I think that the beginning of European disintegration has started with Brexit,” said Sandro Gozi, an ally of Renzi, on BBC Radio 4’s Today programme. “It is up to the other 27 governments to re-launch Europe. That was our policy, that was our goal as the Renzi government. It is clear that now Europe loses a major political actor to its relaunch,” reported The Independent.
Effects on the fintech market
According to Business Insider, a ‘hard’ Brexit may be beneficial to fintech companies and traditional financial services. The market might compel the UK government to ensure the fintech industry continues to flourish. It would also be in the government’s interest to avoid any damage to the economy from the EU market, and could therefore drive the government to devote drastically more resources to creating a comfortable regulatory environment for fintechs.
Looking to the future
Until Article 50 has been triggered, the road ahead is certainly unclear. The government must form up new deals with Europe, covering trade, businesses and laws, to provide better insight to the future of how deals in the UK will operate with Europe post-Brexit.
“The UK cannot conclude new trade agreements until it leaves the EU,” says Richard Elgin, senior trade policy analyst in the Geneva office of law firm White and Case LLP.
“A stable UK-EU relationship is a global economic priority,” Chris Southworth, secretary general of ICC United Kingdom, told GTNews.
“A lot is at stake in terms of jobs, investment and standards of living, so it is important that businesses of all sizes feel properly informed to make the right decisions at the right time.”