Brexit: What does it mean for the advanced bioeconomy?

June 24, 2016 |

BD TS Brexit smIn the UK, the British people voted to exit the European Union in a historic vote which was announced in the early Friday hours. Following the vote, UK Prime Minister David Cameron said he would resign, and Scottish First Minister Nicola Sturgeon said it was “highly likely” that the SNP would seek a referendum on leaving the United Kingdom after Scotland voted strongly to “Remain”.

UK markets were roiling this morning, with the pound off more than 10% initially to its lowest point against the US dollar since 1985, while the FTSE 100 index took a huge hit in early trading before trimming losses to the 8% mark. German Chancellor Angela Merkel termed the result a “terrible disappointment” and called for a meeting with the heads of the French and Italian governments on Monday to discuss next steps.

The US Federal Reserve, in a statement, announced that it is “prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the US economy.”

In the advanced bioeconomy sector, the Biofuels Digest Index was off 2.46 percent to 53.46 in early Friday trading, as declines led advances 8 to 1. Ethanol equities were off 4.81%.

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What are the immediate impact and areas of uncertainty for the Advanced Bioeconomy?

First, take a breath, nothing’s falling off a cliff except confidence

Sure, currency and stock traders are in a blind panic, as most of them bet against Brexit and are covering short positions with whatever cash they can raise from friends, supporters, and perhaps even busking in the London Underground or asking for spare change in Hyde Park.

But really, it will take years for the UK to get out. First, someone is going to have to invoke the European Union’s Article 50 to do it — that’ll be on the UK side, and outgoing PM David Cameron is going to leave that to his successor. Bets are on former London Mayor Boris Johnson. Of course, bets last night were on Remain over Brexit.

Next, there’s a two-year (maximum) negotiating period on withdrawal. And, a number of the UK’s engagements with the Continent are under the aegis of the 47-member Council of Europe, not the EU itself. So some of the legal framework will remain. And the UK will have opportunities for the kind of “associate” status that Switzerland and Norway, for example, use to access the “single market” of the EU.

And, ultimately the British referendum has no precise legal standing and that actual withdrawal must be voted by a UK parliament that, based on estimates, has a majority in the Remain camp. So, an election may come out of all this if Parliament balks on implementation.

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