It looks as though the UK – or at least England – might be leaving the European Union. Brexit (as the act of Britain leaving the EU is commonly referred) is non-binding, so some people are pushing for a second referendum. If Britain does leave the EU, the decision would affect more than just the people living in the country. In fact, Brexit could have long-term consequences for everyone.
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1. It Could Hurt the Biotech Industry
Whenever there’s financial upheaval, biotech and pharmaceutical companies usually aren’t as vulnerable to market troubles as other kinds of industries are. But while their stocks might be relatively safe in the short-term, Brexit could be problematic for biotech companies over time.
So far, biotech and pharmaceutical stocks have been under performing in 2016. Much of their revenue comes from the United States, so economic problems in the EU could eventually spell trouble for drug companies, particularly if the U.S. dollar becomes too strong.
According to Forbes, pharmaceutical companies in the UK and the EU now worry that Brexit could have an impact on things like regulations, trade and taxes.
2. The EU and the UK Might Lose Countries
The EU could lose additional countries and some losses could be more problematic than others. If Greece left, fears that it might default on its debt could lead to bank runs and other financial problems. And some French politicians are pushing for a “Frexit,” according to news sites like The Guardian and Foreign Policy.
Of course, the UK might also lose a country – Scotland. Scotland overwhelmingly voted in favor of staying in the EU, and it already had a referendum on leaving the UK. Although the country voted against becoming an independent nation, it looks as though Scotland could leave the UK if the UK leaves the EU. In addition, Northern Ireland might want to break off in order to remain a part of the EU.
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3. It Could Have a Negative Economic Impact on the U.S.
If other countries leave and the EU begins to weaken or even fall apart, that could cause problems in U.S. financial markets. While market conditions seem to be turning around, additional fluctuations caused by Brexit could hurt consumer confidence and ultimately reduce spending and economic growth.
Right now, the value of the dollar is appreciating because it’s viewed as a safe haven in a time of financial instability caused by the Brexit referendum. But a strong dollar can hurt U.S. businesses that trade with other countries. U.S. products could become too expensive for other countries to buy, leading to lower profits for U.S. companies.
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The Bottom Line
The Brexit vote took many people by surprise. Some people never imagined that Britain would vote to leave the EU and a lot of folks are still trying to figure out how to handle the results from the referendum. Eventually, things will fall into place. But there may be many unfortunate ramifications for countries, investors and industries outside of the UK and Europe.
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