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Brexit’s Effect On The Special Relationship.

August 30, 2017 by  
Filed under Money/Business, Politics, Weekly Columns

(Akiit.comAlmost a year after the narrow victory of the Leave campaign, Article 50 has finally been triggered and negotiations have officially begun for Britain to leave the EU. Although this is taking place across the Atlantic, Americans should be paying close attention to the negotiations. Britain and the United States have always had a special relationship, and it is likely that the UK will reach out during the Brexit crisis. Any agreements made by the UK will likely have a domino effect on the rest of the world.

In the immediate aftermath of the Brexit result, the pound sterling dropped to a 31 year low, and in March 2017 Deutsche Bank warned that it could still drop by a further 15 percent by the end of this year. Lots of U.S. companies invest in the UK as a gateway to the rest Europe’s market, so they might also have to renegotiate their trade deals with Britain, and find new footholds into the EU. Some banks are also looking into establishing hubs Europe to maintain a foothold in the European Market. Lloyd’s bank, led by CEO Antonio Osorio, has chosen Berlin as its European hub, despite Osorio’s belief that the UK economy will remain strong after the negotiations are complete. However, companies like Rolls Royce and JPMorgan warned that the migration of banks and big companies from the UK to Europe would lead to increased unemployment in Britain, pushing the country into a recession and taking America down with them.

Although financial markets have since recovered, stocks and global growth prospects could fall again if the markets see too many economic downsides from Brexit. The London banking industry is heavily dependent on Europe, and there are genuine fears that a bad deal would see it sink. In August 2017, the pound sterling fell yet again to an eight-year low against the euro – analysts have said that sterling could fall to parity against the European single currency if the likelihood of a bad Brexit deal increases.

Another troubling side effect of Brexit, was the fear that it would lead to a less stable Europe. Greece and France talked about leaving once it was proved that it could be done, and the United Kingdom looked like it might also fall apart with Scotland overwhelmingly voting to stay in the EU. None of these things came it pass, and Osorio believes that “there are fledgling signs that the economic situation in the euro-zone is turning, with much needed growth returning, which will help to dampen the impact of any further external shocks should they occur.”

Nevertheless, this might mean that the US and the UK might experience a more special relationship, as Prime Minister Theresa May and President Donald Trump have talked about negotiating a new trade deal that benefits both countries. In addition, Britain, a key U.S. military partner, may be more eager to team up with American forces to deal with conflict zones once it is free of the EU.

Staff Writer; Greg Carter

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