BREXIT- What you should know.

Britain has voted to exit from the European Union, causing a worldwide turmoil in the market. To understand the consequences, let us first  clear some of the basics.

European Union– It is a politico-economic union of 28 member states. It has developed standardised trade laws which have to be followed by every member state to be a part of the European Union.

Britain– Often confused with England, The United Kingdom of Great Britain is a country that comprises of 4 states- England, Wales, Scotland and Northern Ireland.

Why Exit?
Britain wanted to exit EU due to following reasons.

  • Eu allowed free movement between its member states, leading to immigration from poorer countries to Britain.
  • Due to increase in terrorism, citizens feel that Britain should have control over its borders for safety purposes.
  • Due to less immigration, there will be more jobs.

Prime Minister, David Cameron was unable to bring about unity within his party regarding the decision. While he himself wanted to stay, many party members wanted to exit the EU. Hence Cameron decided to take a public vote on the issue and all the registered voters of Britain were given the opportunity to vote for the matter.

Exit won  by the ratio of 52:48  (1,74,10,742: 1,61,41,241). It wil now take two years for expulsion process to complete.

Consequences:

  • British Pound dropped to a 31 year low of $1.35 from $1.50. It has been biggest intraday fall in history.
  • Sensex opened 900 points lower from Thursday closing on Friday morning. Nifty breached the 8,000 level.
  • The Rupee plunged 96 paise to reach a 4 month low of 68.24.
  • Japan’s Nikkei falls over 7.9%, biggest dropsince 2011.
  • UK’s FTSE 250 dropped 11.4%, its worst daily fall in history.

UK’s CentralBank has injected £250 billion to ease the adverese effects on country’s Financial Markets.

Scotland wanted to remain a part of EU. However, following the vote, it has ceased to be a part of EU. It now seeks its independence from UK so that it can rejoin EU.

Prime Minister David Cameron has resigned from his position in the wake of Britain’s exit. He was of the opinion that Britain should remain a member of EU.

However, Raghuram Rajan has said that consequences of Brexit won’t be as adverse on the country’s economy and all the tension regarding Brexit is exaggerated.

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One thought on “BREXIT- What you should know.

  1. Pingback: Weekly Digest #2 | Financial Outlook

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