The global financial system in particular has been closely following the British referendum dubbed “Brexit”, which was meant to decide on whether the United Kingdom (UK) should continue in the European Union (EU) or not.
Given the importance of the EU and the UK to the global economy, the June 23 referendum was closely watched all over the world.
And in a rather stunning move, voters in the United Kingdom through a slender majority opted to leave the European Union, making the UK the first country to voluntarily withdraw from the 28-member political and economic bloc.
Obviously, many have lined up on both sides – the “Remain” and the “Leave” campaign, but the results of the referendum teach us one very important thing- not just in politics, but in all areas - we should not be overconfident. One should not discount surprises.
As the referendum has shown, sometimes people’s perception may be against you, no matter how you feel or think about it.
Leading up to the vote, polls suggested voters would likely stay in the EU, but in a huge upset on June 23 night, “Leave the European Union” scored a narrow victory- 52 to 48%.
Another important thing to consider is that no matter what you do, the risks are always there.
In life, we face two kinds of risks – risks right in front of you or foreseen risks and risks you cannot see- hidden risks or unforeseen risks.
This referendum, I believe, is a good lesson for everyone - politicians, economists and policymakers on the risks involved in taking things very casually.
Overconfidence lands one in trouble, as the results of the referendum have shown.
There are many who think this referendum was not required in the first place.
There is a perception that some of the British leaders have put their own eye out.
That said, the fact remains that the UK is a wonderful and great country.
Great Britain accounts for nearly 4% of the world’s output and London is a major financial centre of the world. The UK has survived before the EU and may be able to do without it.
While there will be a fallout on the UK’s move to leave the EU, the fact, however, remains that the United Kingdom was never fully integrated with the European Union. The British always had their own currency and their visa processes are totally different from that of the EU. They always wanted to carry their own identity. This, we must take into account.
And then, there are many, particularly in Europe, who believe that “Brexit” will indeed, do good to the EU. They hold the view that Great Britain is an obstacle to their decision-taking capabilities. On many issues, the EU and UK had divergent views.
So, while there may be some negatives in the process, there could be some positives as well, if only those concerned can leverage on that.
Brexit’s impact on the world economy is quite palpable. In the short-term, people may panic. But what we see right now is not the “real impact”, but only a “reaction” to the unexpected results of the referendum.
But a closer look at the global markets in the days following the referendum, gives an impression that it is a “clear over-reaction”. But as in the case of any transition, “Brexit” will certainly pose challenges to policymakers and financial authorities, both in the UK and European Union.
People who held divergent views in the referendum, both within and outside of the UK, must be carried along. Any differences of opinion must be sorted out amicably. In that way, the process can be made smoother in the best interest of the British, European and global economy.
Because of its sound economy and robustness, the UK has been a favoured destination for discerning investors. The high-profile investors in the UK include many from the GCC region including Qatar.
In the post-Brexit period, investors must consider a “basket of investments” like the “basket of currencies”, which many countries have for their own currencies. This way, the investment-related risks can be mitigated to a large extent.
Many analysts are also concerned about currency and market volatility in the days and weeks ahead.
Volatility in the market is part of a cycle. Clearly, it is a cyclical process.
Volatility is not always bad; with volatility, opportunities come…if the market is flat, there will be fewer opportunities.
- Abdulbasit A al-Shaibei is a prominent Qatari banker and is the chief executive officer of Qatar International Islamic Bank
Abdulbasit A al-Shaibei
