June 24th, 2016 | Work to Wealth
We wake up this morning to a historic event inside the European Union that has shocked the world both emotionally and financially. The citizens of the United Kingdom voted to exit the European Union just 23 years after joining.
The EU was created to unite the various countries’ cultures and economics to help ensure peace and prosperity. However, the citizens of the United Kingdom decided that the EU was no longer a beneficial arrangement for its countries and that a referendum to declare its independence presented a better solution for the future. The world’s reaction is of shock and awe because of the perceived unlikeliness that the referendum to leave would actually pass. As of late yesterday, the odds were heavily in favor of remaining in the EU. But as has been learned by many sport fans over the years, that’s why they play the game.
In 1991, two years prior to joining the EU, the UK came to an agreement to secure an “opt out” provision to keep the Pound Sterling. The historical importance of its currency was and is deeply ingrained in the UK’s identity as one of the original world powers of commerce and trade. In 2002, the Euro was created to rival the dominance of the US Dollar in world trade. However, the UK exercised their provision to remain part of the EU but not part of the EU currency union. As of today, the markets are repricing the Pound significantly lower due to the unknown consequences of the referendum outcome as it relates to the future financial relationship with the member states of the EU and the world. For some perspective, in the year 2000 the Pound’s conversion to the US Dollar was 2 to 1. Today, it is back to levels not seen since the depths of the Great Recession in 2009 at around 1.36 to 1. For those traveling to the UK this summer, having US Dollars to spend is a big bonus. However, for UK citizens traveling and UK importers doing business in Pounds, they just received a big financial haircut.
As for relations between the US and the UK based on the Department of State’s analysis, “the United Kingdom is one of the largest markets for U.S. goods exports and one of the largest suppliers of U.S. imports. The United States and the United Kingdom share the world’s largest bilateral foreign direct investment partnerships. The United Kingdom is a large source of foreign tourists visiting the United States”. Few can imagine this long standing and very close relationship changing in a material way anytime in the near future. I extend my best wishes to my British friends and to all of the people of the UK on this exciting and uncertain time in their history.
Finally, the feature article is the official joint statement by the leaders of the European Union regarding the United Kingdom referendum.
If you have concerns about how the Brexit affects your investments, please contact me directly at 856.235.3830 or firstname.lastname@example.org. I would be happy to review your current holdings and to explain the protections we had in place prior to this surprising event.
Joint statement by Donald Tusk, President of the European Council, Martin Schulz, President of the European Parliament, Mark Rutte, holder of the rotating Presidency of the Council of the EU, and Jean-Claude Juncker, President of the European Commission, on the outcome of the United Kingdom referendum
Posted 24/06/2016 10:45
President Tusk, President Schulz and Prime Minister Rutte met this morning in Brussels upon the invitation of European Commission President Juncker. They discussed the outcome of the United Kingdom referendum and made the following joint statement:
“In a free and democratic process, the British people have expressed their wish to leave the European Union. We regret this decision but respect it.
This is an unprecedented situation but we are united in our response. We will stand strong and uphold the EU’s core values of promoting peace and the well-being of its peoples. The Union of 27 Member States will continue. The Union is the framework of our common political future. We are bound together by history, geography and common interests and will develop our cooperation on this basis. Together we will address our common challenges to generate growth, increase prosperity and ensure a safe and secure environment for our citizens. The institutions will play their full role in this endeavour.
We now expect the United Kingdom government to give effect to this decision of the British people as soon as possible, however painful that process may be. Any delay would unnecessarily prolong uncertainty. We have rules to deal with this in an orderly way. Article 50 of the Treaty on European Union sets out the procedure to be followed if a Member State decides to leave the European Union. We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union. Until this process of negotiations is over, the United Kingdom remains a member of the European Union, with all the rights and obligations that derive from this. According to the Treaties which the United Kingdom has ratified, EU law continues to apply to the full to and in the United Kingdom until it is no longer a Member.
As agreed, the “New Settlement for the United Kingdom within the European Union”, reached at the European Council on 18-19 February 2016, will now not take effect and ceases to exist. There will be no renegotiation.
As regards the United Kingdom, we hope to have it as a close partner of the European Union in the future. We expect the United Kingdom to formulate its proposals in this respect. Any agreement, which will be concluded with the United Kingdom as a third country, will have to reflect the interests of both sides and be balanced in terms of rights and obligations.”