So following the EU referendum and the vote for the UK to leave the EU, we saw the financial markets plummet, so far that two of our big banks have actually suspended trading, namely Barclays and RBS.
It wasn’t the the end? what is left for the UK?
Firstly the markets always react to times of election. Just look back to the general election, same thing happened, markets dropped and then recovered. The thing to remember in reality is that the market in basic terms is split into two areas Share/Stocks in other words valuation of actual companies, the other is the Forex or foreign exchange markets the value of one currency against another.
For this article I am going to concentrate on the Forex market and in particular the GBP to USD relationship, or how many US dollars it takes to buy one UK pound. At the time of writing this it was about $1.31 for every 1 UK pound, this is a drop of around 15 cents since before the referendum, so in reality not really that much unless you are dealing in hundreds of thousands or even millions of dollars.
A Drop in the Pound is Good News!!
Wait Sean what are you saying, why is our currency being weaker a good thing, surely its bad. Well although the actual value of the economy is lower in real terms, it also means it costs us more to trade with other nations.
You said it was Good!!!
Wait for it, whilst our currency is worth less than it was before, this opens the door for inward investment into the UK, especially for companies that are already owned by overseas parent companies. Such as ASDA, which is owned by Walmart, and Cadbury which is owned by Kraft. Both of these parent companies are American, which means that if they chose to invest in the UK it would cost them less than it did a few days ago.
So if ASDA wanted to build another branch, my message is do it now, as it will be cheaper and will help the UK economy grow and not just on a fiscal basis but in real terms, jobs, expansion, etc.
So before you go all doom and gloom with the news or your holiday money, remember this is a golden opportunity for the UK, as we have already sold of most of our large companies to overseas parent companies, now is the time to reap the rewards for this, and get some money back in this country.
This could save the UK Steel Industry
We all know the problems surrounding our steel industry, and the lovely British government sold it off many years ago to Tata steel, an Indian based company. Now they are closing plants, well this is a good time for the steel industry, as any overseas investors will be getting a better deal, saving hundreds of jobs in the process.
This also goes for our manufacturing and service sectors, all of which rely heavily on overseas trade, in particular the US and outside the EU, this means they will see a grow in both their sectors as well as the economy in general.
So I say embrace this fall in the markets and lets get some inward investment into the UK.