Retired from investment banking and teaching, Philip has written several books on investing.
On the 23rd of June 2016, the United Kingdom voted in a referendum to decide whether to leave the European Union or to remain in it. The 'leave' vote won by a small margin of 4%, and in doing so, unleashed a juggernaut of anger by the 'remain' vote and victorious but subdued joy by the 'leave' vote. Everyone was shocked by the result as most polls had the 'remain' vote in the lead up to polling day. However, the 'remain' vote particularly the leaders of the 'remain' campaign were set back on their heels as they had not really expected to win and now had to come up with some sort of plan to lead Britain forward towards Brexit.
The referendum was called by David Cameron, and he and many of the conservative party were firmly on the 'remain' side of the fence. The labour party followed the weak lead of Jeremy Corbyn and campaigned for 'remain'; however, many labour supporters saw that Corbyn's heart wasn't in it and voted to leave. On the conservative side, both Boris Johnson and Michael Gove led the 'leave' campaign and contributed to a less-than-friendly campaign with much animosity, lies and insults flying back and forth. Once the result of the referendum had been announced, David Cameron resigned as Prime Minister, feeling he could not lead the UK out of Europe. Some say he jumped ship.
Lies and Video Tape but No Sex
The campaigning by both sides was noted not by its honesty but by the string of lies and counter-lies by both parties. To be fair, the 'leave' campaigners were most culpable when it came to lying. They even had a battle bus which stated two huge lies on its side. The first lie was the statement that the UK sends £350 million to the EU every week. Many people believed that, when in fact the UK gets over half of that money back as grants and other investments. The other lie was the one about giving the NHS the £350 million a week if the public voted for Brexit. Well, once the result was known, all the 'leave' campaigners ran for the hills, denying ever saying such a thing.
Another lie that manifested itself was the claim that all or most of the laws in the UK were forced on us by the EU. Of course, that is nonsense, as it's only 13% of the EU laws that have a direct impact on the UK, and it has to create legislation to comply. Another 50% of the EU laws are directives and not laws. The EU would like the UK to take notice of the directives, though. For example, a recent one was for greengrocers to only sell straight bananas. The UK does not have to comply with that, and indeed hasn't, because I have never seen a straight banana in a greengrocers, have you?
The interesting thing about the campaign was the emphasis on matters that were irrelevant to a logical non-emotive decision. For instance, immigration became a key debating issue with the 'leave vote' claiming that the UK could control it once outside the single market and the 'remain vote' saying that numbers would change very little. Neither side really sat down an explained from their perspectives what the economic outcomes of leaving or remaining would be. The 'remain' debate terrorised the voters with doom and gloom without explaining why and the 'leave' debate simple claimed that Britain would be great again without explaining how or when.
The Result and the Chaos That Followed
The result was a huge disappointment as well as a shock for the 'remain' vote. None had expected the 'leave' vote to win. Not the polls, not the government and not the 'leave' campaigners. Once the result was out the 'leave' vote was subdued and not ecstatic as they should have been. The 'leave' campaigners hid and fought between themselves terrified because they now had to come up with a plan for Brexit. They hadn't expected to need one. The people waited for David Cameron to speak about some sort of plan to take the UK out. But, some would say cowardly, he resigned as Prime Minister. That triggered an election for the next Tory leader and by default Prime Minister. In the meantime Jeremy Corbyn was chastised for not being enthusiastic about remaining in the EU and faced a vote of no confidence which he lost but at the time of writing he steadfastly refuses to step down in the belief that because the party members voted him in, then they should vote him out and not the parliamentary members. Not surprisingly Nigel Farage decided to resign as leader of of UKIP once again, for the third time. He didn't quite say 'I'll be back'. But I'm sure he will. The rat won't run very far.
The Tory leaders campaign started out just as chaotically with Michael Gove without hesitation stabbing his 'leave' crony in the back and saying that Boris was not Prime Ministerial material and lacking in leadership. Gove and Andrea Leadsom who were both on the leave side of the fence have put themselves up as candidates for party leader. As has Liam Fox, another on the side of the 'leave' debate and Stephen Crabb who is on the 'remain' side of the fence. The favourite at the moment is the quiet and unassuming Teresa May who has been Home Secretary for the last 6 years under Cameron. She was in the 'remain' vote but kept very quiet about her views, did not campaign for the 'remain' debate but watched as her colleagues began shooting themselves in the foot. She is the favourite for the party leadership having a lot of support in the parliamentary party and the Tory membership. The one thing that could be her downfall is that there are many who believe that the next Prime Minister should be someone from the 'leave' debate.
Although Nicola Sturgeon is not directly involved in the chaos of the Tory and Labour parties she is determined to make her voice heard in order to keep Scotland in the EU and satisfy the results that showed Scottish voters unanimously want to stay in the single market. She is also threatening to conduct another referendum on independence from the UK. She hasn't wasted much time in boarding the Eurostar to Brussels and talking to EU leaders.
The Economic Impact of Brexit
The economic impact of Brexit is already being felt, not only in the UK, but in Europe and the rest of the world too. The lunatics who were leading the leave campaign had the illusion that Britain could go it alone and become great again and somehow managed to persuade the leave voters too. What they did however was condemn Britain to being worse off in the future.
Immediately after the results of the vote were announce the pound and the stock markets plummeted with trillions of dollars being wiped off the value of companies world wide. The stock markets have come back almost to pre-Brexit levels except for the FTSe 250 which is the index with the British companies. The companies that took the biggest hits were the banks, food and construction industry. The Bank of England is set to lower interest rates to zero percent to try and stimulate the economy and stave off a recession. The U.S. has stalled on its plan to raise interest rates in July as it fears an economic backlash from Brexit.
So what does Britain need to do to salvage some of the mess the 'leave' vote has left them in. Firstly, they have to safeguard their export markets in the EU. The UK exports 44% of its total exports to the EU so it is essential they negotiate continued access to the single market. Unfortunately that is not going to be easy because Brussels has categorically stated that if the UK wants free movement of trade in the single markets it has to accept free movement of human capital too. This could be a huge sticking point as curbing immigration was one of the key corner stones of the 'leave' campaign.
Interestly over a quarter of the workforce in the British food industry are workers from European countries and this industry faces immense challenges as its main export market is the EU. Limited product shelf life limits the new markets the industry could try and enter as well as differing tastes to the EU. To remain competitive it has to have access to a free market that doesn't impose tariffs. Somehow the UK has to negotiate having access to a free market without being within the EU and not having to comply to free transfer of human capital. In my opinion this is impossible.
Another important issue is that of the financial services industry. Many financial institutions are now considering moving people and premises into Europe. Most likely Ireland which is the nearest EU border. They are worried that their passporting rights will disappear after Brexit. This would also be the case for insurance companies and hedge funds.
What about EU nationals already living in Britain? Are they safe? No-one has yet said that they will be protected. What about the UK nationals living in the EU? What will happen to them. What about the minority of 'leave' voters who think that they now have a right to be racist. There have been many racist acts against EU and non-EU immigrants since the result of the vote was announced.
Of course there is a way back if whoever is voted in as Prime Minister in September. Simply don't trigger Article 50 for once triggered we are forced to enter negotiations for Brexit and these will take 2 years. It's also possible that another referendum or general election is called to ratify the results of initial negotiations prior to triggering Article 50. The Brexit referendum was an advisory one, therefore it could be taken that the misinformation banded about during the campaign confused the voters or mis-informed the voters into the wrong vote.
If Brexit goes ahead then Britain faces a challenging future and an economic outlook which will leave the UK a lot weaker than before the misguided referendum.
Since the referendum three and a half years ago, the negotiation of the withdrawal agreement has been protracted and caused considerable collateral damage to main protagonists. David Davis and Teresa May are now both backbenchers, the labour party shot itself in the foot, as did the Lib Dems, and could not recover, whereas the conservatives also shot themselves in the foot several times but somehow managed to win a general election with a thumping majority. Boris Johnson and the EU fudged a withdrawal agreement which looked very much like Teresa May's, only worse, because it had a convoluted replacement for the Irish backstop which had Northern Ireland half in Europe's customs union and half in the UK's customs union.
Since the referendum, the UK economy has been gradually slowing down and currently just a few weeks before we leave the EU it has flatlined. The Tories will tell you that unemployment is at its highest level ever but they fail to mention that because of a decade of austerity many people need to work two or three jobs to make ends meet. They still blame the labour party for the country running out of money back in 2009 hence that reason for austerity and the massive public spending cuts. However, they fail to mention that the global financial crisis in 2008, which was no fault of the labour party meant that labour had to bail out the banks to the tune of 141 trillion pounds. Austerity has left the country with an even larger gulf between the have and the have nots, and none of the public services is not fit for purpose.
So what lies ahead? Already the financial markets are jittery because Boris Johnson is insisting that the transition period will end on December 31, 2020, whether we have a comprehensive trade deal or not. He foolishly believes that this deal can be done in a year and even more foolish is his claim that the UK can diverge from the EU and still get a comprehensive free trade deal. He is, of course, in fantasy land, particularly as his adversary in the EU Ursula von der Leyen is a very smart and strong-willed woman. What will probably happen is that two major issues, fisheries and the level playing field, will consume all the time between now and December. In July, Boris Johnson has to decide whether to extend the transition period or not, and so will be forced against his promises to do just that and extend.
Fisheries are a very small percentage of GDP but politically high profile, and my guess is that Boris will have to give ground on that to the EU because the EU is in a stronger position and will use it as a bargaining chip for something else. So bang goes another Boris promise. As for the level playing field, the EU will never give ground and that will leave Johnson with a choice: a soft or a hard Brexit. If he chooses soft he will have to extend the transition period but if he chooses hard the UK will crash out on December 31st, with maybe a few side deals to avoid too large a fall.
Without an effective opposition, Boris Johnson can do more or less whatever he likes, but whatever he does there will be a substantial hit to the UK economy, and the UK will become a poorer country. The government should have realised that you can't leave a club and still retain the same benefits. And they should have pointed out to the people that when the UK joined the EU it was the poor man of Europe but before the referendum, it was the fastest-growing economy. That fact alone says a great deal. So all the evidence points to the fact that the UK has indeed committed hari-kari.
How well do you know Brexit?
For each question, choose the best answer. The answer key is below.
- Which age group predominantly voted to leave the EU?
- over 60's
- under 60's
- Which part of Britain had a predominant leave vote?
- The North
- The South
- How did Wales vote?
- to leave
- to remain
- How did Scotland vote?
- to leave
- to remain
- How did Northern Ireland vote?
- to leave
- to remain
- By how much did the leave vote win?
- over 60's
- The North
- to leave
- to remain
- to remain
Interpreting Your Score
If you got between 0 and 1 correct answer: Obviously you don't read newspapers
If you got between 2 and 3 correct answers: Not bad
If you got 4 correct answers: Good score
If you got 5 correct answers: Very Good
If you got 6 correct answers: Excellent you know your stuff