Had former Prime Minister Cameron not felt so overly confident of victory, doubtless he would have thought to include provisions for a Parliamentary Bill that would follow an Exit outcome of the Referendum, thereby avoiding the embarrassing confusion that exists now. He should have made clear that the referendum result would be binding on Parliament, and what, if any, role Parliament was to play in the negotiations with the EU. The result of this gross oversight is that Prime Minister May, who voted ‘Remain’, inherited a mess. It is a mark of her integrity, skill and courage that despite powerful countervailing forces, she intends to respect the expressed will of the people.
Doubtless, May is relieved that the UK’s Supreme Court found expressly that she would not have to consult the devolved national Assemblies of the UK (Scotland, Wales, etc.), all of which are against Brexit. However, she won’t find much more sympathy in Parliament where some 74 percent of her own party in the House of Commons and a majority of Peers in the House of Lords hold Remain sympathies. However, 61 percent of constituencies voted for Brexit. (Jemima Kelly & Patrick Graham, Reuters, 11/3/16) Likely, only foolhardy Commons Members will defy their powerful party whips to vote against their constituencies and the general electorate so soon after a referendum. This will be true especially if May adds more pressure by making it a vote of confidence which, if lost, would trigger an immediate general election. As for the Lords, May can threaten to reduce further their already limited undemocratic powers. Therefore, May likely will sign the EU’s Article 50, triggering Brexit, at the end of March, setting in motion negotiations that could last up to two years.
During this extended period of uncertainty in the UK, investors could expect considerable turbulence in almost all asset classes. But if a soft Brexit can be achieved, and should a U.S.-UK trade agreement follow soon afterwards, UK equities, especially those involved in U.S., Japanese and Chinese trade, could rise. Investors should start having their advisors research which companies may stand to benefit, particularly in the fields of finance, agriculture and defense.
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