Brexit vote: Britain votes to leave the European Union

Brexit flags

Source: EPA/HAYOUNG JEON

Britain looks set to leave the European Union, in a referendum vote that could have significant implications for the Australian economy.

While opinion polls prior to the so-called “Brexit” vote had the “Leave” and “Remain” camps in neck-and-neck, live voting results from The Guardian show 52% of voters have backed the campaign to break legal and economic ties with the European Union.

Close to 16 million votes had been cast for Britain to leave the EU, compared to more than 14.5 million cast for the nation to remain. However, counting of votes is still underway.

The Guardian reports voters in London and Scotland overwhelmingly voted for Britain to remain part of the EU.

The shock outcome of the referendum will have important ramifications for the British political system and its leaders, as well as the British economy and the countries it trades with, including Australia.

The value of the British pound against the US dollar has already dropped, falling to its lowest level since 1985. At the time of publication, the Pound was buying US$1.32 and AUD$1.80.

Writing for SmartCompany, William Shepherd, treasury manager for the global OFX group, said a Brexit could affect the Australian economy in two major ways, the first of which is on the flow of money in and out of the local economy.

“Should a Brexit occur, businesses and investors will grow less confident of a good return in Britain,” Shepherd said.

“Expect a move from high-yield to low-yield investments, which will put deflationary pressure on the Australian economy and pave the way for lower interest rates.”

Shepherd said SMEs that trade with Britain should also be prepared.

“Britain isn’t Australia’s largest trading partner, but it’s a significant one, and business decisions made by British businesses could have consequences for local companies, both big and small,” he said.

“In this case, businesses need to consider on an individual basis how much risk they’re willing to hold when it comes to their British trading partners.”

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