December 15th, 2015

FTSE 100 moves lower as businesses face challenges ahead of Brexit

By: Invezz
FTSE 100

FTSE 100 opened the week lower amid the surging number of new cases and fears of Brexit effects. Companies in the U.K. are set to face extraordinary challenges when Brexit comes into effect on January 1, the industry experts warn.

Fundamental analysis: Prepare for queues

Once a new era begins for Britain and it deserts the European Union, companies in the U.K. that together drive almost $1 trillion in annual trade will have to operate in compliance with a set of new rules and deal with increased costs, all that while coronavirus continues to batter global economies. 

EU members are able to navigate the European market with free trade flows but from January 1, the British companies will have to handle a set of paperwork on each export including customs and safety declarations and cope with various IT systems to obtain entry to Europe.

Furthermore, it is still unknown how the new IT systems operate, with custom brokers still being without training and without knowing the rules. 

Even the U.K. government said that as many as 7,000 trucks could be waiting in 100 kilometres long queues in Kent, England.

“It’s going to be carnage,” Tony Shally, managing director of international freight forwarder Espace Europe said.

“We’ll be fire-fighting from the 1st of January.”

Exporters that operate outside that single market will have to handle the paperwork and submit products for random checks to gain entry, significantly raising both expenses and the amount of time needed to conduct business.

In order to export goods from January 1, the U.K. government has issued a new 271-page Border Operating Model, that includes everything from trading diamonds to molluscs, chemicals and cultural goods.

Technical analysis: The bearishness continues

The FTSE 100 index closed 1.17% in the red as it continues the series of the lower highs which is likely to result in the new short-term bottom. Any move below 5716 will automatically translate into the fresh 5-month low for the index. 

FTSE 100 index daily chart (TradingView)

The price action is currently trapped within the descending wedge. As the space between two converging lines gets narrower, the sellers look in control of the price movements. A zone around 5660 offers nearby support. 

Summary

British exporters will have to prepare for a series of new rules when the country leaves the European Union and Brexit takes effect on January 1. In the meantime, FTSE 100 has continued to move lower as sellers stay in control. 

The post FTSE 100 moves lower as businesses face challenges ahead of Brexit appeared first on Invezz.

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