How did we get here and where are we going?—A Brexit update

June 6, 2019

The victory of the “Leave” advocates in the June 2016 referendum on the United Kingdom’s (UK) participation in the European Union (EU) initiated the complicated process of disentangling the UK from the EU.

After activating Article 50 of the Lisbon Treaty on March 29, 2017, the UK had two years to negotiate the terms of the exit deal with the EU. The official exit, commonly referred to as “Brexit”, was scheduled to occur on March 29, 2019. However, a very divided British parliament repeatedly rejected the exit deal negotiated by Prime Minister Theresa May, leading to a postponement of Brexit to mid-April and then most recently to the end of October 2019. Foreign exchange and stock markets showed a muted response to the latest delay, indicating that it was largely expected. Broadly, the seven-month delay means that uncertainty will continue in the months ahead, likely costing the UK more jobs and investments, as a “no-deal Brexit” scenario, in which the UK leaves the EU without any form of negotiated trade and investment relations, remains on the table. Against this background, our newsletter provides an overview of Brexit, possible scenarios going forward, as well as their implications for the UK, the EU, and financial markets.