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It is nearly two weeks since this country went to the polls and voted by a slim majority for Brexit and in that time the outlook for the UK economy has unsurprisingly become less upbeat. In this situation, a clear cunning plan would be good. However, it is rapidly becoming apparent that no-one has a cunning plan on how to conduct brexit, and financial markets are now aware of this fact. At the risk of sounding the infamous 'Project fear' klaxon some of the realities of Brexit are starting to come true.
As of today, six property investment funds have suspended trading as investors are rapidly withdrawing their money, meaning investment is pouring out the UK commercial property sector. The sterling/dollar exchange rate, currently at $1.29 to £1, is down nearly 14 per cent and is at the lowest level since 1985. The Sterling/Euro rate is not much better at EUR1.16 to £1. The stock market, though recovering, is still in a fragile state and in particular sectors such as banking, travel and construction the losses are worrying. Indeed, Barclay's lost nearly 40 per cent of its share value. House builders such as Persimmon and Barratt Development dropped 3.2 and 5 per cent respectively, which comes on top of further losses earlier this week.
Yesterday, the Governor of the Bank of England Mark Carney said some of the effects of Brexit were beginning to 'crystallise' and based on the above examples, he's not wrong. The experts, Mr Carney included, who were so expertly derided by Michael Gove, are starting at least in part to be proved right. The Daily Mail called for Mr Carney to stop talking Great Britain down, unfortunately patriotic filibustering will not convince the traders of Singapore, New York or Tokyo that everything is hunky-dory on this wind-swept but pleasant island.
And as if it couldn't get any worse, France has now overtaken Britain to become the fifth largest economy in the world. It may only be in dollar terms but symbolically, as any tea-drinking, cricket watching Brit would admit is just embarrassing given that France seems to be in a perpetual cycle of strikes.
The bitter irony of all this uncertainty is that the UK is still in the EU. With the Tory party's current leadership election the UK isn't going to be trigger article 50, the process for leaving the EU, until at least September when the party elects its new leader and Prime Minister. However when article 50 is triggered and with no vague plan in place, the uncertainty in financial markets is only likely to get worse.
Which brings me back to the point that no-one seems to have a credible plan for Brexit. This is precisely not what the markets want to hear. Images of UK politicians aimlessly squabbling amongst themselves are being broadcast across global trading trading floors. Brexit politicians, such as Messrs Johnson and Gove, are unsurprisingly calling for reconciliation with 48 per cent. The Brexit press are telling remainers to 'calm down dears, everything is going to be fine' whilst reporting the threat to their house prices, spending power and investment. Shockingly, some remainers don't seem to be in a conciliatory mood or buying the narrative of the new sunlit uplands. Traders are even less convinced.
However, despite this uncertainty the sky hasn't fallen in - the Project Fear klaxon can now be switched off. Government bond yields, the interest rate paid on the national debt have fallen to unprecedented level currently standing at 0.73 per cent. Also with the pound at such low levels, UK exports will be cheaper abroad meaning the manufacturing sector will receive a boost. Indeed, to increase liquidity in the market, the Bank of England have lowered the bank capitalisation rate, the amount UK banks have to hold in reserve, to increase lending. I would not call this a win for Vote Leave but the worst excesses of project fear do not seem to have materialised.
As welcome as this ray of sunshine is we now need a Private Baldrick or someone slightly more qualified to come up with a cunning plan. Markets don't like uncertainty and uncertainty breeds instability. With the Conservatives choosing a new Prime Minister, the Labour opposition about to run a referendum of their own; only this time on whether an elderly socialist from Islington should remain as the Dear Leader and the Scottish Nationalist sounding the bagpipes towards Indy-ref II, uncertainty is abound.
Westminster needs to come together and have serious debate on how Brexit is to be conducted to reassure markets and provide some indication of Britain's post-Brexit future. The time for ideological bickering, political intrigue and general snipping is over. The UK government and its Civil Service need to provide at least a vague indication of what Britain's relationship with the EU will look like to calm this instability.
Without a vague indication by the time article 50 is triggered of the UK's plan, the market turmoil is only likely to continue and probably intensify, which harms remainers and brexiters alike.