ALERT: United Kingdom: Article 50 Triggered

British Prime Minister Theresa May has triggered Article 50 of the Treaty of Lisbon this week. This move formally notifies the European Council of the United Kingdom’s intention to leave the European Union. Asinta Partner in the UK, Punter Southall, has provided us with the following information regarding this new development in the Brexit, and what happens next:

• The UK now has until April 2019 (2 years) to negotiate their withdrawal from the EU with all other member states. During this two year time period, the Treaties that govern membership in the EU will still apply to Britain, but Britain will not be able to take part in any decision-making.
• The deadline can be extended, but only with the approval of all other EU member states and the European Parlaiment.
• Britain’s exit negotiations will likely be difficult. New agreements need to be reached regarding trade relationships, tariffs, and entry barriers, amongst others. Some EU leaders predict that these complicated negotiations could draw out over the next five years.
• The UK economy has performed better than some had expected since the exit vote in June 2016. The UK exchange rate took the brunt of the negative reaction, however, with sterling still around 18% below mid-2015 levels on a trade-weighted basis. Experts expect the currency in the UK to remain at least 10% below where it was last June in the long term. This means that consumers will continue to pay more for imported goods, unless wage growth can keep pace.

Asinta Partner in the UK, Punter Southall, warns that a better-than-expected economy nine months after the Brexit vote should not be taken as a signal to become complacent. There are still many ways in which the exit negotiation process could lead to a rapid change in market sentiment at a time when rising UK inflation is likely to lead to increasing challenges from a policy perspective. Trustees and employers should give careful consideration to diversification and risk protection levels within their schemes’ investments.

Read the full text of Punter Southall’s article on Article 50.

Do you have questions regarding employee benefits or Aritcle 50’s impacts on the UK? Get in touch with Asinta Partner, Punter Southall, via their contact page.