The UK voted to leave the EU following the Brexit referendum after a narrow 52:48 majority. Prime minister David Cameron resigned shortly afterwards. The currency and financial markets have been in turmoil over the past couple of weeks with both the FTSE250 and the DAX falling on news of the announcement. The British pound has fallen to a 31 year low against the US Dollar and currently stands at a rate of 1.29.
Both Standard & Poor’s and Fitch have cut the UK's sovereign credit rating from AAA to AA citing concerns over economic and fiscal uncertainty following the referendum. The downgrades are likely to lead to a rise in the UK government’s cost of borrowing on the international markets. Whether this will have a knock on effect on UK interest rates remains to be seen as the Bank of England have suggested otherwise. UK Mortgage rates on the high street fell to an all time low after the vote.
It is unclear how the UK market will be impacted following the referendum. Some industries will benefit and others will be adversely affected by the result. The weakening of the Pound will increase the competitiveness of UK exporters and will also benefit companies who derive the majority of their income from overseas. This explains why the FTSE has not been significantly impacted by the Brexit in comparison to the FTSE250 which is made up of a larger proportion of companies generating profits in the UK.
UK businesses and contractors will continue doing what they do best. Strong businesses will prosper and 2016 will bring opportunity to those who are prepared.