It's the topic that is on everyones mind, from local businesses to international companies. Budget airlines are considering moving out of the UK and into Europe in order to continue their business, British companies in France are reassessing their situations post Brexit...but what next?
Our friends at Mountain Base, property agent in the French Alps, have given us a rundown of what Brexit means and how it's impacted the property market.
The UK referendum on continued membership of the European Union (EU) was held on 23 June, the result was a win for the "leave" side, who took 52% of the votes cast.
So the UK is no longer in the EU?
Not so fast. There is an official route to allow a member state to leave, which involves serving notice under Article 50 of the Lisbon Treaty. In effect, this means the UK would notify the European Council of its decision to leave, then negotiate a deal on its withdrawal and its future relationship with the EU. This agreement would then need approval from a qualified majority of member states and consent from the European Parliament.
Ok, has the notice been served?
No. The result of the referendum is not binding on the UK Parliament, rather it is regarded as advisory, so the government in the UK can decide if and when to serve the notice. There is also the issue of negotiation tactics - once you serve the notice the official process has a maximum of two years to run meaning the pressure is on for the country leaving to secure a deal which works for them. Stalling for time seems to be the preferred option right now. David Cameron has also made it clear that he doesn’t feel it is right for him to serve notice but will be something his successor will need to undertake. The successor should be in place for early September.
What deal does the UK want, surely it just wants to leave?
The vote was whether or not to leave the leave the EU, but this is only one part of a larger jigsaw. For many in the UK, especially those in business and financial circles, the key issue right now is the need to retain membership of the Single Market. This is the mechanism which allows members to trade freely with each other in goods and services. Leaving the EU doesn't necessarily mean leaving the Single Market as membership is not limited to members of the EU. The Single Market is actually delivered as part of the European Economic Area (EEA), which all members of both the EU and the European Free Trade Association (EFTA) are signed up to. In principle securing membership of EFTA would allow the UK to retain access to the Single Market.
Where do we go from here?
Well, there are no guarantees, but there is a growing acceptance that the only deal that will work for the UK will be to retain its membership of the EEA, but through the aegis of EFTA rather than the EU. The precise terms of the agreement to remain in the EEA need to be thrashed out.
How long will that take?
This is where things get a little uncertain. The more impatient among us might argue it shouldn't take more than a couple of weeks, but a number of months is the safest guess at least to secure the heads of terms, the delay caused by the need to elect a new leader of the ruling Conservative Party is also an issue. Once the terms are agreed the process would then take further time as the UK moves from the EU to EFTA. If other European countries don't agree to the terms, then we have a problem. In reality though, there is a clear economic interest for all members of the EU for the UK to continue trading with them.
Market uncertainty is here for a long time?
From the perspective of business and consumer confidence, the important point would seem to be securing the terms needed to access to the Single Market for the UK, once this is achieved and the direction of travel is known this should act to underpin confidence.
So how is the Val d'Isere property market holding up?
It is too early to be sure, but the reaction has been more benign than we might have expected. Speaking to other agents, we hear stories of a handful of deals falling out but purely related to the shift in the exchange rate between the Pound and the Euro. Once the immediate shock of the referendum had disappeared, we have seen the vast majority of sales progress as agreed.Even though the vote may not have gone the way most buyers will have wished, for the majority, buying in Val d'Isere is a dream and they are still pursuing that.
Are there any bright spots?
The currency movements always create a buying opportunity for investors from elsewhere. Val d'Isere is a truly Global marketplace and we expect to see sales to other nations where they have taken the view that they can secure good value right now. Indeed, we find that building closer ties with our Knight Frank colleagues in the USA, Asia and the Middle East as new buyers continue to be interested in buying in France.
In summary, it's business as usual. Don't panic!