One obvious thing about the Brexit is that it will definitely have gains and losses in the United Kingdom.
There are several grim forecasts about how sterling will plummet, how the London stock market will get pounded, and how the trade deficit may be impossible to finance as foreign capital flows out of the country.
However, markets have hardly thought of the impending huge effects on the rest of the continent should Britain leave the European Union, focusing on the threats on British assets instead. The Brexit is far more than just a British event.
When the world’s fifth biggest economy leaves the world’s largest trade union, it is sure to make a huge wave across the world, not just Europe.
Probably a positive outcome of the leave campaign for the rest of the world is that opportunities will come knocking on the doors of the countries, such as prospects for jobs and investment from Britain.
Take for one, the fact that the French finance minister, Emmanuel Macron, has begun preparing to welcome the world’s bankers and financiers set to leave London for Paris if the Brexit gets voted on June 23.
Seemingly, that is the only good news.
Compare the chances of poaching jobs and investments from the U.K. to the possibilities of the debt crisis blowing up yet again, banking system strains, labor markets dumped in turmoil, and countries and regions exposed to a severe slump.
It is very much a missed fact that Europe will be more jeopardized than Britain. Europe needs the United Kingdom.
If Britain starts gaining support for it to leave, bond yields will begin to increase, and the world will experience the 2011 crisis all over again—the Eurozone debt crisis will rise once more.
A Brexit will encourage populist politicians in Greece, Spain, Portugal and Italy that want to escape from the whole thing.
It is not as if these countries are exactly thriving as members of the bloc; are they to be blamed then? The Italian and Geek economies have significantly shrunk, and it is difficult to argue that the EU or the euro works for them.
Another trend to possibly come after the U.K. leaves is that there will be a lot of stress on Europe’s banking system. After all, Britain is a major economy that all of the continent’s banks have a lot of exposure to.
None of the banks in Europe are doing excellently at present; the Spanish banks have 16 percent of their loan exposure to Britain, while Ireland has 8 percent.
If the U.K. decides to leave the EU, it will create financial instability across Europe, and of course, the banks will be in the frontline.
A Brexit will also mean a slump in particular countries and industries. U.K. receives fifteen percent of Irish exports, and 10 percent of Dutch and Belgian exports. A trade friction of any sort between Britain and the rest of the continent will make them suffer.
Britain also serves as the biggest market for German cars, accounting for 20 percent of the total for what remains that country’s largest industry.
There will be restless times at BMW (DE:BMWG) and Volkswagen (DE:VOWG_p) while a trade deal is discussed, and shareholders in the aforementioned companies will notice that right away.
If Britain, a magnate for foreign workers, votes to leave the EU, labor markets will be in turmoil. There are approximately 2 million Eastern European workers in the country and growing numbers of young Spaniards and Italians as well who are not able to find jobs in their home countries. It is also home to more than 500,000 Poles.
Brexit might make it more difficult to come to the U.K., or may force them to go home. These events will immensely escalate the supply of labor in their own countries, and will gradually weaken wages.
In the final few weeks of campaigning, polls indicate that 46 percent will vote to remain in the EU, while 41 percent will chose to leave, and 14 percent still remain undecided.
The result of the referendum is now dependent on those remaining people who have not made up their minds yet.
Essentially, the pollsters have little experience of this kind of referendum that they may be even more out than normal.
It is possible that U.K. will have decided to leave the bloc, feasibly by a considerable margin, come June 24.