Wider Brexit fallout remains limited…so far
Recently published confidence indicators suggest that the Brexit fallout on the Eurozone economy and the rest of the world remains contained. This signal is certainly encouraging. At the same time, however, it’s too soon to state that the Eurozone will continue to shrug off the consequences of the Brexit vote. Economic activity in the UK takes a significant hit and this may still impact some of its main trade partners across the Channel.
That said, a catastrophic scenario looks set to be avoided. The GBP acts as a shock absorber for the UK in this respect. Uncertainty might still persist over the coming years given that the negotiation process between the EU and the UK is complex. This still has the potential to impact sentiment in a negative way with wider economic repercussions. But eventually, whatever the decision, once more clarity on the future situation is present, delayed spending will kick in again. This means that the direct economic impact of the Brexit vote should be manageable over time. Of course, regardless of the Brexit vote, Europe still faces existential challenges as explained here.