Waking up to Brexit

As someone living in a timezone seven hours ahead of the UK, I didn’t wake up to news that the United Kingdom have voted to leave the European Union. I sat and listened to hour after excruciating hour of results, predictions, comments and market reaction.

UK in the EU comes to an end

It was clear, however, at around 3am BST (10am Chinese time) that the nation was deeply divided, and leave had an ever growing edge. Areas expected to call for leave and remain were both recording larger differences in votes than expected – a polarisation. However, in the former, turnout was exceeding expectations and in the latter underperforming them. Full results here.

In Scotland in particular, where every counting area eventually recorded a majority for remain, turnout was only 67%. In England and Wales, both overall supporting leave, turnout was 73 and 72 percent respectively. In London, England’s most solidly pro-remain area, turnout averaged in the mid to high 60s. Leavers were much more engaged with this decision.

It’s been raining solidly in Nanjing all day, but I haven’t wanted to leave my apartment regardless. I feel numb and glued to the radio 4 broadcast from my phone, online news and Facebook feed. I write here simply my initial reactions.

Personal

After the movement of polls over the last few day back towards remain, and both polls on the day indicating a roughly 52 remain 48 leave result, and markets pushing the pound up to $1.50, and bookmaker odds still seeing remain as 1.2-1.4 favourite, I woke up at 10pm UK time (5am local time) feeling buoyant, relieved and complacent. I went back to sleep.

When I awoke again at 9:30 (2:30am British time) it was like the general election all over again. Big Ben chiming in the background as David Dimbleby, unable to hide the incredulity in his voice, stated the BBC’s official prediction – Conservative majority.

This time there was no official prediction until the result was all but sealed in, but the trajectory was too far off expectations. Numbness.

As I sit here and write now, it’s about 5pm. It so happens that last night I watched a couple of lectures by Yanis Varoufakis, the once Greek finance minister who the EU and ECB crushed like the Death Star obliterated Alderann. As a result, I went to sleep feeling fairly pessimistic about 21st century capitalism, and Eurosceptic. Thus today is not the crushing of my hopes and dreams for world peace and prosperity for all. It’s a blow, but the EU was a long way from perfect.

On a very personal note, my savings are mostly in Chinese Renminbi, which has strengthened against the pound just like every other currency. In the 12 hours since 10pm BST last night, when the market was all but certain of remain, and 10am BST today, now we know it’s leave, I’ve made about £600. Cheers Farage!

I would encourage those fearing that this result is the end of the world to sit back with an open mind and remain hopeful. I was encouraged by the words of Martin Schulz, President of the European Parliament, who noted that Europe need to listen to the British and consider seriously their reasons for leaving. He has acknowledged the need to Europe to address income inequality. I would feel immensely proud if our nation’s protest out of Brussels led to the salvation of the southern European economies, or the democratic overhaul of lawmaking in the EU.

Brexit clearly brings with it upsides and opportunities and we must remain hopeful that they will be born out, at least until shown otherwise. Maybe it’s just my fatter wallet talking…

Leadership

David Cameron resigned.

I really really disliked his decision to go into a general election saying he won’t go into another, but this… Why David? Stability is the enemy of political opportunity, and political opportunity is valuable, interesting and potentially marvellous. But I think that the UK leaving the EU without any verbal or written plan as to exactly how this will occur or what comes next is quite enough instability for one nation.

The irresponsibility of his decision is compounded by the fact that he signed in the Fixed-term Parliaments Act in 2011. Unlike in the past when Cameron could have called a general election and then stepped down as leader of his party, he no longer has that right. Whoever the Conservative party choose as their next leader will be Prime Minister and it would be unlikely that anyone could or would be willing to call a general election before 2020.

Parliament would either have to agree to a vote of no confidence (why on earth would a Conservative Parliament pass a vote of no confidence in themselves?), or a two-thirds majority on a vote to call an early general election. Why would eurosceptic Conservatives, or any of the party, who in 2015 finally won a majority government after 18 long years without, jeopardise that by dissolving Parliament?

This situation – leaving the EU (democratically dubious I’ll grant you) to be ruled for almost four years by an unelected Prime Minister – grates. David, it really grates.

If he honestly feels responsibility towards his country, he will stay in his job and at least oversee the first half of our journey beyond the EU. David has been the great arbiter and moderator of the Conservative party. I’m also convinced that he genuinely believes in his compassionate, one-nation, Big Society conservatism, which can’t be said for many in his party. Alas, he’s said it now.

I wrote a few days ago about how I don’t hold any trust in the main Brexiters to lead us in a direction of economic rejuvenation and social justice. Voting patterns and roadside vox pops (such as this sobering journey by John Harris and John Domokos for the Guardian) indicate that younger, poorer voters who chose leave did so primarily because they have been gross losers under globalisation.

They have been led to believe that the negatives of globalisation – loss of skilled, well paid jobs for non-university graduates in industrial heartlands, lack of funding to rejuvenate isolated, decaying housing estates, lack of political voice and power over the trajectory of their lives, stagnation of wages, decision making made ‘over there’ behind closed doors by technocrats and the privileged elite – are the fault of the EU and can be solved by pulling out.

I think that this just isn’t true. The EU must answer to all of these things, especially to the countries of Southern Europe, but here in the UK domestic politics is to blame to a much greater extent. More importantly, those campaigning for leave are among the most right-wing, entitled, neoliberalist and incoherent politicians of our time. They’ve just been given a tremendous amount of power.

We may take small hope that Nigel Farage isn’t an MP or a Conservative. His voice in the future direction of our country will be limited. Now I’m going to write a sentence I hope I will never live to see happen.

Prime Minister Boris Johnson.

Economy

One of the most prominent headlines is that the value of British pound sterling has fallen 10% against the US Dollar overnight. Asian markets have seen steep falls too. The picture is extremely bleak but not exactly accurate.

As this bbc article notes, “clients had priced in a Remain vote, and were pretty complacent about the results”. Exchange rates between the pound and most other currencies had been rising throughout Thursday in strong anticipation for a remain vote. By 10pm, pound sterling reached a value of $1.50.

Thus the correction, once it became clear that leave had won the vote, was going to be large and severe. The markets weren’t just reacting to negative news, but correcting down from their inflated position first. The May and June average has been something like £1 = $1.45, which compared to today’s price of £1 = 1.35 is a fall of *just* 6.9%. Substantial, but not quite so earth-shattering.

This event also highlights the fact that financial markets in the 21st century operate less and less as organisations to efficiently distribute capital based on concrete economic facts and more and more as gambling houses, fuelled only by individual rapacious greed to get as rich as possible as quickly as possible by pulling a fast one. When their prediction is off, the whole house of cards comes tumbling spectacularly down.

In terms of the economic future, I believe the best hope for the UK is the collapse of the Euro and EU. Those who campaigned and eventually voted for Brexit are totally divided as to their opinion on the free movement of labour. Thus I think it’s extremely unlikely that the UK could sign a deal similar to Norway allowing free access to the common market in exchange for a membership fee and accepting the free movement of people.

If the common market persists, a UK lacking access to it will really really struggle to attract overseas investment. Why would a company invest in the UK when they could set up in the Netherlands, Denmark or Germany? Very similar rules to incorporate a business, similar business culture and laws, but access to hundreds of millions more suppliers and consumers without barriers.

This is particularly salient to the financial services sector. Not a sector I believe needs any help, and one that has skewed the UK economy toward excessive reliance on a few highly educated, highly paid ‘money masters’ in the City of London and Canary Wharf. However it has skewed the UK economy. We are extremely dependant on big international banks and investment firms choosing London for their headquarters outside their home territory, in no small part because they gain the UK market in addition to the larger, more lucrative European market. This sector and all the growth and tax revenue it drives will surely suffer immensely at the hands of a full Brexit.

The potential economic upsides to the Brexit are slim. They largely revolve around increased deregulation and more ‘competitive’ trade deals with other important trading partners like the US and China. As I wrote about on Wednesday, dismantling EU worker and environmental rights would help certain kinds of business. If we signed a trade deal even more liberalising and economically welcoming than TTIP with the USA, which is by the way not the intention of any Brexiter I’ve heard, I suppose we could attract some investment that way.

Devolution

Regional voting behaviour presents clear problems to the issue of Scottish devolution and peace and stability in Northern Ireland.

Sinn Féin leaders Martin McGuinness and Gerry Adams have already called for a referendum on reunification with the Republic of Ireland. I don’t expect that to go ahead, but NI is a volatile area and the Good Friday agreement is based on the continuation of an open border with the south. Something that has been left in serious doubt.

Alex Salmond has already made it clear that he expects a second Scottish Independence referendum to follow before the UK formerly severs ties with the EU, nominally in two years time. Later on Friday, Scottish First Minister Nicole Sturgeon seconded the idea.

Conclusion

As I’ve already somehow written almost 1900 words. I’ll leave it here for now. There’ll be no conclusion to the saga of the UK Brexit for many years to come, so don’t hold your breath.

(This post was updated on Saturday 25th June 2016 to correct one inaccuracy and expand upon a couple of ideas)

2 thoughts on “Waking up to Brexit”

  1. A post that I can agree with.

    It looks rather ominously like the biggest lesson from this whole sorry incident still hasn’t been learned, judging by the endless baffled angry posts on FB today. For more than a decade, the wealthier and more highly-educated middle class essentially ignored and disenfranchised the voices of the poorer and worse-educated; any concerns these people had about the benefits of the EU to their lives were sneered away as stupidity or racism. Well, now this demographic have had a say; they are disenfranchising the middle class, and suddenly the middle class don’t seem so keen on it. Shame they had to cripple the global economy and perhaps destroy the United Kingdom to do it.

    What are the positives from this? Maybe, at last, politics will have to start listening to the complaints of working class voters in the north. Perhaps this will inspire reform in the EU itself; by the far the best outcome in my view would be that that EU structurally reforms, allowing much looser levels of political affiliation where different nations can pick and choose what they take part in; we could sit on the outskirts, basically giving up political power in exchange for just treating it as a trading bloc, while Germany, Belgium etc. can press on with the unification they seem to want. This is probably just the utopianism I voted against, though. Possibly, after the incredibly stark demographic differences in vote were made clear, UK political parties – and particularly Labour, who should know better – will start to make some efforts to include voices from all across the social spectrum.

    What are the threats? Well, we did just rather throw our economy into the dustbin, along with the economies of all our closest allies. I thought the UK did better than it probably deserved – the FTSE 100 basically just had a bad day’s trading, the FTSE 250 is still technically alive, and the pound is down a mere ~8 %, rather than just ceasing to exist as looked likely at about 4 am. We’ll find out the true damage over the next few weeks. Perhaps much more concerning is the impact we’ve had on the stock exchanges of all our closest neighbours, many of whom fared far worse than we did. This might not be forgotten when it comes to negotiating trade deals.

    The negotiation of trade deals looks worryingly like it might descend into recrimination rather than pragmatism, with the EU making a lot of loud (and understandable) noises about how it wants to annihilate the UK economically in punishment, rather than constructively working with the mess that we have to build a trade pact that benefits everyone. A workable solution might look something like the Norway approach without (all of) the free movement of people – we get to drop the part of the EU that seems to be causing us problems, e.g. by treating EU migrants as Tier 3 visa applicants but committing to take (say) 100,00 per year, and we get out of ever closer union, but in exchange we have given up all power on deciding the future of the EU, and also pay them a shitload of money (possibly as much or more than we pay now). Whether the EU has any interest in such a deal seems doubtful at the moment; it seems hard to believe it would cut off its nose to spite its face, but then, Juncker.

    More worrying is the total lack of political vision and guidance in the UK. With Cameron’ ill-advised resignation, and a possible vote of no confidence in Corbyn (why do this now?), it seems possible we could go into critical trade negotiations with ex-allies whose economies we just trashed for seemingly almost no reason while both political parties are engaged in internecine warfare, a prospect surely too idiotic to imagine. The sort of statesmen needed to lead us through this are looking pretty thin on the ground on all sides of the political spectrum.

    Anyway, we broke it; now we’ll have to start trying to fix it.

Leave a Reply

Your email address will not be published.