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Wednesday, 12 October 2016

What does Brexit mean for South Africa?

The pound is trading at record lows as uncertainty over the financial future of the United Kingdom is spreading across the continent and around the world. Theresa May has indicated that she will trigger Article 50 by March 2017, after which the UK will have two years to officially exit the European Union. So what does it all mean and why has the pound suffered such big losses since June? What does it mean to South Africans? The UK central bank has indicated that they are ready to act and lower interest rates should Brexit cause the economy to slow down. Expectations of lower rates have resulted in a weaker currency, with money leaving the UK for emerging markets such as South Africa, India, Brazil and other countries which have “yield”. Another factor that has caused the pound to fall is that when a country leaves a trade block like the EU, capital and goods can’t flow freely across the border. This places pressure on the UK to re-negotiate separate trade relations with each of its trading partners. Much of the pound's weakness is due to the uncertainty over whether the UK will be able to successfully re-negotiate all of its trade agreements and whether or not London will remain the financial hub of Europe.

Source: freshplaza.com