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A CEO checklist for navigating Brexit: Brexit "uncertainty" map


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A CEO checklist for navigating Brexit: Brexit "uncertainty" map

  1. 1. uncertainty map.pptx 0Draft—for discussion only Copyright©2016byTheBostonConsultingGroup,Inc.Allrightsreserved. Brexit "uncertainty map" Starting point is to structure the multiple and intersecting uncertainties triggered by Brexit TRADE REGIMES EU Global New trade agreements on par with current EU ones Progress with 25 core non- EU trade partners Trade under WTO rules; many slow renegotiations Equivalent access to 27 EU markets achievable Largely favorable, but lengthy negotiations UK "punishment" & open- ended trade disruption POLITICAL PROCESS Domestic EU Muddling through Prolonged power struggle Constitutional crisis / UK break-up EU renewal – crisis as opportunity Multi-speed & disorderly EU Further EU break-up Exit from Brexit REAL ECONOMY Growth Deep structural recession, lower trend growth Multi -period GDP contraction / stagnation Limited and short-term impact on growth Investment & spending Structural re-direction outside of the UK Cancelled investment as uncertainty persists Some delays but structurally unchanged Labor market Reduced labor mobility drives up wages and reduces quantity, quality, availability Wages, quantity and quality of labor supply only moderately affected Exports/imports Rising import costs outweigh competitiveness gains Impact, but net trade position broadly unchanged Small impact, even in medium & long term UnfavorableFavorable FINANCIAL ECONOMY Interest rates Currency Equity prices Volatility moderates and losses gradually recovered Structural departure from long-term trend Policy rates broadly unchanged; UK borrowing costs remain at current levels Policy rate cut, UK adopts zero or negative interest rate policy (NIRP) GBP recovers from post-Brexit "floor" GBP fall contained but structurally lower Currency crisis leading to government intervention Crash DIMENSIONS OF UNCERTAINTY InputsOutcomes Source: BCG Center for Macroeconomics