BREXIT is a step into the unknown, writes Jeffrey Ball, assistant director at Brewin Dolphin in Newcastle.

At this stage the longer-term consequences for the markets, economy and British and European politics are difficult to predict.

In the shorter-term we can expect share, bond and currency markets to be extremely volatile – not just in the UK but globally. In the days leading up to the referendum, sterling and global stock markets strengthened in the mistaken belief that the UK would opt to remain in the EU. Now, as markets re-adjust to the new reality we have had a turbulent few days.

At Brewin Dolphin we recognise this might be a cause of concern, though it is important to appreciate that the volatility will not last and markets will find their feet again.

Tuesday’s upward surge reminds us volatility goes both ways and the FTSE 100 Index of our largest international companies is in fact higher than it was two weeks ago today, thanks in part to the fact only 20 per cent of its revenue is derived from these shores.

What happens next? While the time frame for triggering Article 50 of the Lisbon Treaty is determined and for our withdrawal in the next two years, the UK will still be a member of the EU and bound by its rules and treaties. David Cameron’s resignation has moved the onus of pulling the trigger on to his successor, delaying the process, much to the consternation of the EU.

Before the referendum even the most enthusiastic exit campaigners admitted that a Leave vote would have a short-term negative impact on UK economic growth. As a result, UK interest rates are likely to remain on hold for longer than previously expected. No change before 2020 is not an unreasonable estimate. The Bank of England could even cut rates if the impact on the economy warrants it, so there are measures available to shore up the economy.

Lower interest rates for longer will discourage investors from holding the pound so we can expect sterling to remain in a weakened state. What this means for forecasts for the longer-term economic consequences are complicated by the lack of clarity about the UK’s future trading arrangements and while the UK’s position in the world remains unclear, foreign investment into the UK is likely to be delayed or reduced. If this is prolonged, this could lead to higher unemployment, lower consumer confidence and a longer-term economic shock.

Uncertainty is the wound that needs healed before investors can feel confident enough to get back on the bike but like with any significant bruise, patience is needed. Investors must be prepared for volatility in UK and global financial markets in the short-term and hold fast.

A silver lining is that UK shares will offer some protection against any exit convulsions. “There will, undoubtedly be winners and losers, but the international nature of the UK market should have its own reward.” says Guy Foster, head of research at Brewin Dolphin.

“After all, companies such as Diageo, Unilever and Royal Dutch Shell are not governed by whether the UK remains inside or outside of the European Union. Indeed, any weakness in sterling is likely to see the reported profits of these companies increase and, equally importantly, their dividends.”

There remains little reason for international growth to fundamentally suffer as a result of Britain’s decision, unless the issue begins to impact the eurozone recovery. Other global factors, such as the Chinese economy, the direction of US interest rates and commodity prices, are likely to be more significant drivers of financial markets in the year ahead. Many investors have assets diversified internationally and this too will soothe the nerves and oscillations.

The potential impact of this decision has not prompted us to change our investment strategy in isolation. A focus on quality, international companies should allow investors to weather market volatility over the medium-term.

For now, investors should remain alert to any opportunities arising from the volatility while trying not to catch any falling knives.

THE opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.