The internet was awash with jokes and cheeky puns following last week’s historic Brexit vote followed by England’s defeat to minnows Iceland at the Euro 2016 football championships. “England leaves Europe twice in one week” was one popular meme. But the political and economic predicament in which the UK now finds itself is far from a laughing matter.
The Ides of June
Events have unfolded at an almost hourly pace. Prime Minister David Cameron arrived in Brussels to a frosty reception. European Union (EU) leaders made clear that formal exit talks cannot be delayed indefinitely and that the principle of free movement of people goes hand in hand with the UK’s access to the single market. The UK cannot “pick and choose”, announced European Council President Donald Tusk.
Back at home, UK politics faces unprecedented upheaval and uncertainty. The battle for the Conservative party leadership was blown open after Boris Johnson – a leading Vote Leave campaigner – shocked everyone by ruling himself out of the race. Meanwhile, Justice Secretary Michael Gove was involved in some Macbeth-style plotting, by criticising his erstwhile friend and putting himself forward for the top job. According to polls, current Home Secretary Theresa May is favourite to be the next Prime Minister.
The Tories might be divided but the Labour party is by all accounts undergoing a full-blown crisis. Almost straight from the pages of Richard II, the shadow cabinet resigned en masse in revolt at Jeremy Corbyn’s leadership. Corbyn has stood firm.
Against the turbulent backdrop, Mark Carney, Governor of the Bank of England announced that “some monetary policy easing will likely be required over the summer”. Following Carney’s statement, sterling fell sharply back towards post-referendum lows of $1.33, although stopping short of the 30-year low of $1.30, which it reached in the immediate aftermath of the Brexit vote.
Markets shrugged of fears of a potential impending recession with the FTSE 100 index ending up 6% over the week to Thursday, while the FTSE 250 index – which contains more UK-focused companies – closed 1.1% higher over the same period.
To stay or not to stay?
The uncertainties generated by Brexit led several large companies to reconsider their plans. Vodafone warned it may move its headquarters abroad depending on the outcome of the UK’s negotiations to leave the EU. The telecoms giant, which employs around 13,000 people in the UK, highlighted the importance of retaining access to the EU’s free “movement of people, capital and goods”.
Several financial services companies including Goldman Sachs, Morgan Stanley and Visa also hinted at possible future job losses, while the chief executives of Royal Bank of Scotland and Lloyds Banking Group were forced to write to employees to reassure them.
Meanwhile in the US, Deutsche Bank and Santander were the only two of 33 large banks that failed the Federal Reserve’s (Fed’s) annual stress test, designed to gauge whether banks with US operations could withstand a major economic downturn. The Fed noted that that both banks had “broad and substantial weaknesses”.
And finally…
To the average pampered pooch, treats are probably confined to a game of fetch in the park, or a pig’s ear from the pet shop. The more culturally refined canine, however, might appreciate a trip to the Park Hyatt Hotel in Vienna. There, poodles with a penchant for Puccini can mingle with Wagner-worshipping Weimaraners on an owner-free trip to the opera. Hotel staff are happy to book tickets and escort highbrow hounds to the theatre, with the concierge commenting, “If he loves Madame Butterfly, please go ahead.” Owners should beware, however – some mutts just can’t Handel it.
