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James Medd
November 2016.
49
Is the activation of Article 50 likely to be as much of an economic shock as the Referendum result?
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My hunch would be no – and the reason is that it will lack the surprise element that the Referendum result had.

As with the US election, markets were a bit shocked by the result, and that triggered a response. The government has been pretty tight-lipped in commenting on the Brexit process for a variety of reasons but personally I could not foresee a situation in which Article 50 is triggered as a matter of surprise. It’s not feasible, either politically or administratively, when you need to give the European Commission and the Council proper notice.

"It’s not the activation of Article 50 itself that might trigger another economic response, but rather the actual details, such as the length of the transition period."

The likely future date of March 2017 has already been floated; whether or not that really is going to be true remains to be seen, but either way the activation of Article 50 will not be a surprise. That means it will be priced into any type of economic activity you choose to look at – stock markets, asset prices, exchange rates, whatever – because everyone whose activity is likely to be affected will already have anticipated it.

It does lead to a slightly different point, though: it’s not the activation of Article 50 itself that might trigger another economic response but rather the actual details, such as the length of the transition period, if that were to differ from the period of two years as envisaged by Article 50. Many people think that those two years is an awfully short period of time for the monumentally complicated task at hand, and it will be very difficult to pull such a complicated negotiation off that quickly. That’s more likely to cause uncertainty.