1. MAPI BREXIT BRIEFING: A FIRST LOOK August 5, 2016
Presented by:
Cliff Waldman
Director of Economic Studies

2. An Early Look at the Post-Brexit Dynamic
Perspective: Size and Scope of the Event
Post-Event Signals: Currencies
Post Event Signals: Company Reactions
Implications for the Short-term Growth Picture
Trade and Direct Investment Relationships As One of Many….
….Drivers of Long-Term Outcomes

3. Manufacturers, Pay Attention! A Dramatic Shift in the Western Order
Large Risks and Interesting Possibilities Abound As the Relationships Between the U.K., the E.U., and the U.S. Will Clearly Change.
A Large Measure of Economic Uncertainty Has Been Thrown Into a Global Economy that Already Has Lots of It.
Already Weak Capital Spending Will Be Further Hampered, Impacting Manufacturing Demand.
Questions Will Arise About the Integrity of Both the U.K. and the E.U.
A Complex Story: Not Just Cross-Border Flows of Goods But of Supply Chains.

4. The Event: Sharp Reaction By the Pound, Muted Reaction in the Euro
U.S. Dollars per Euro and Per Pound Sterling
Source(s): IHS Global Insight

5. Moderate Dollar Reaction From Brexit
The U.S. Dollar
Source(s): Federal Reserve Board

6. Company Reactions: How Worried Are You That Your Company Will Be Negatively Impacted by Great Britain's Impending Exit From the European Union (Brexit)?
Based on 96 responses.
Source(s): MAPI Foundation

7. For the Remainder of 2016, Due to Brexit, What Do You Expect to Be the Net Financial Impact on Your Organization?
Source(s): Institute for Supply Management

8. Other Outcomes From The Institute for Supply Management Survey
For those respondents who did predict a net negative financial outcome from Brexit, most said that it would come from dollar fluctuations, with global demand changes being second. U.K. demand was a distant third.
Slightly more than one-quarter of respondents (27%) were very concerned about the impact of Brexit on financial market uncertainty with just under one quarter (23%) being very concerned about the impact on currency movements.
The impact on global growth and trade links with the U.K. and the E.U. were smaller concerns for the population of respondents.
Only 15 percent of respondents indicated any Brexit-related impact on hiring for the rest of 2016

9. Do You Expect Your Exports To the U.K. To Be Negatively Impacted?
Based on 95 responses.
Source(s): MAPI Foundation

10. Does Your Company Have Manufacturing Operations in The U.K.?
Based on 96 Responses.
Source(s): MAPI Foundation

11. How Would You Characterize the Impact of Brexit On Your Company's Investment Plans in The U.K.?
Based on 94 responses.
Source(s): MAPI Foundation

12. Short-Term Outlook: The Brexit Shock Comes On Top of An Already Weak Picture for U.S. Manufacturing
U.S. Manufacturing Production Growth, Seasonally Adjusted at Annual Rate
Source(s): Federal Reserve Board

13. While Survey Data Point to An Improving Picture, Will Brexit Alter This Trajectory?
Purchasing Managers’ Index for U.S., Manufacturing
Source(s): Institute for Supply Management

14. A Consistent Pull of Weakness in the Eurozone
Eurozone, Manufacturing Production Growth, Three-Month Moving Average
Source(s): Eurostat and MAPI Foundation

15. Slowing in the Eurozone and the U.K. Prior to Brexit
Eurozone and United Kingdom Real GDP Growth, Seasonally Adjusted at Annual
Rate
Source(s): United Kingdom Central Statistical Office and Eurostat

16. Are Forecasters Being Too Sanguine About Eurozone Growth in The Wake of Brexit?
U.K. and Eurozone 2017 Forecast for GDP Growth, June 2016 and July 2016
Source(s): Consensus Forecast, July 2016

17. Are Forecasters Being Too Sanguine About Eurozone Manufacturing in The Wake of Brexit?
U.K. and Eurozone 2017 Forecast for Manufacturing Growth, June 2016 and July 2016
Source(s): Consensus Forecast, July 2016

18. A Key Question for the Outlook: Will Aggressive Bank of England Action Neutralize Brexit Uncertainty?
Official Bank Rate, Bank of England
Source(s): Bank of England

19. Key Element of the Long-Term Picture: Trade and Investment Relationships: U.S-U.K.
The U.S. Ran a Trade Deficit of 3 Billion Dollars With the U.K. in 2015.
Total Trade in Goods With the U.K. Contributed 3 Percent to U.S. Two-Way Merchandise Trade With Global Markets
The U.K. Was the 7th Largest Trading Partner With the U.S. During 2015.
The U.S. Was a Net Exporter of Machinery and Transport Equipment to the U.K.
The U.K. Has Been a Major Destination of U.S. Foreign Direct Investment (FDI) as well as a Key Source of FDI in the U.S.
U.S. Direct Investment Stock in the U.K. Accounted for a Sizable 12 Percent of U.S. Outward FDI. Direct Investment by U.K. Companies in the U.S. represented 15 Percent of U.S. total Inward FDI Stock.
U.K. Companies Largely Invested in the U.S. Manufacturing Sector and Somewhat Less in Depository Institutions.
Source(s): Peterson Institute

20. Trade and Investment Relationships: U.K.-E.U.
The U.K. Ran a Merchandise Trade Deficit of 135 Billion Dollars with the E.U. in 2015
The E.U. is the U.K.’s largest Trading Partner, Accounting for Nearly 50 Percent of U.K. Two-Way Merchandise Trade in Global Markets
In 2015 the U.K.’s Top Exports to the E.U. included Machinery, Transport Equipment, and Chemicals
The E.U. is Both a Major Destination and an Essential Source of U.K. FDI Total UK FDI Stock in the EU During 2014 Accounted for 40 Percent of UK Outward FDI Stock to the World
The E.U. Accounted for Almost Half of FDI Stock in the U.K.
Source(s): Peterson Institute

21. Drivers of Long-Term, Brexit-Related Economic Outcomes
What Will the Model Be for the New U.K.-E.U. Relationship? Norway? WTO?
What Will be the Nature of the “Divorce”? Short and Smooth? Long and Protracted?
Will the “Special Relationship” Between the U.S. and the U.K. Fray? Or Will There Be an Economic Melding Between the U.K. and the U.S.?
Will Central Banks Fully Account for Brexit in Their Policy Decisions?