Britain has voted to leave the EU and the pound has taken the first of what is likely to be a series of nosedives, as the implications of the vote and the political fallout play through the stock markets.
Economic uncertainty is now a major talking point and consumer confidence has been hit, with a couple of Porsche dealers I spoke to on Friday reporting cancelled deals in the Brexit vote aftermath. Buying a £70k Porsche for weekends seems superfluous for some given the unknown future that British workers are facing, not to mention the enhanced investment oportunities that became available on the FTSE 100 after the vote, where shares in banks, airlines and UK housebuilders fell by up to 40%.
The strongest enquiries on Friday came from buyers with Euros to spend. Some dealers had stockpiled LHD Porsches ready to list, which may have been a canny play, most effective on rarer Porsche models with a high ticket price: GT3 RS 4.0s, Carrera GTs and the like. But cheaper classic Porsches also look slighty better value, with a £50k Porsche costing $68,520 or €61,919 on June 26 compared to $73,463 or €65,110 on June 22nd, the day before the UK referendum*.
(Update July 1: £50k has now slipped to $67,162/€60,496)
Porsche prices down 7% (for US buyers)
Falls of 7% in the dollar price or 5% in euros over four days may be just the start. At the time of the referendum, many dealers had still not corrected asking prices for softening classic car sentiment seen since the start of 2016, so that has yet to be implemented. Dealers now also face falling domestic demand from uncertain consumers, who will likely avoid big-ticket purchases until they know what the future of UK plc holds for them.
What could happen next? One scenario (and one that played out in the 2008 crash) is that, as the consequences of the referendum vote and EU exit begin to take hold and luxury car sales tail off, there will be casualties. Traders holding stock by means of a bank stocking loan or private investment will come under pressure should they be unable to make their repayment schedules. Repossessed stock would likely end up at auction, selling for knock-down prices, which will further undermine public confidence. This is not going to happen immediately, but the likelihood of recession grows with every day there is instability at the top of UK governance.
Alternative scenarios currently doing the rounds include the possibility of a second referendum to head off the disintegration of the United Kingdom, as Scotland voted to stay in the EU and the winning margin for Leave was less than 2% on a turnout of less than 75%. A second referendum seems unlikely at the minute, but as the original referendum was not legally binding and an online petition called for a second vote captured 3 million signatures in less than three days, who knows what might happen next.
Another possibility is that it will all be fine, with the UK economy entering a period of prolonged expansion, jobs for all and revitalised public services. However likely one feels this may be, it’s not going to happen next week, so the short term outlook is less positive. Prices will feel some effect.