Analysis for BREXIT
Yesterday we received the news that was perceived by many to be an unexpected outcome. The British electorate decided to defy the entire British establishment by voting to leave the EU against the will of the leaders of all main political parties, all living former prime ministers, most CEOs of FTSE 100 companies and the UK’s academic and scientific communities. They also turned down recommendations and warnings from the Bank of England, the IMF, the G7 and almost every reputable economic entity that can issue a recommendation. A lesson to learn here is to listen to people and adapt. Accordingly I will make the rest of this article. in points format to avoid the traditional paragraph styled articles that some readers view as boring.
A) what happened?
- The In/Out referendum was simply a bet by David Cameron to maintain unity of the Conservative Party and avoid defection of MPs and supporters to the rising UK Independence PartyYesterday we received the news that was perceived by many to be an unexpected outcome. The British electorate decided to defy the entire British establishment by voting to leave the EU against the will of the leaders of all main political parties, all living former prime ministers, most CEOs of FTSE 100 companies and the UK’s academic and scientific communities. They also turned down recommendations and warnings from the Bank of England, the IMF, the G7 and almost every reputable economic entity that can issue a recommendation. A lesson to learn here is to listen to people and adapt. Accordingly I will make the rest of this article. in points format to avoid the traditional paragraph styled articles that some readers view as boring.
A) what happened?
- The In/Out referendum was simply a bet by David Cameron to maintain unity of the Conservative Party and avoid defection of MPs and supporters to the rising UK Independence Party Yesterday we received the news that was perceived by many to be an unexpected outcome. The British electorate decided to defy the entire British establishment by voting to leave the EU against the will of the leaders of all main political parties, all living former prime ministers, most CEOs of FTSE 100 companies and the UK’s academic and scientific communities. They also turned down recommendations and warnings from the Bank of England, the IMF, the G7 and almost every reputable economic entity that can issue a recommendation. A lesson to learn here is to listen to people and adapt. Accordingly I will make the rest of this article. in points format to avoid the traditional paragraph styled articles that some readers view as boring.
A) what happened?
- The In/Out referendum was simply a bet by David Cameron to maintain unity of the Conservative Party and avoid defection of MPs and supporters to the rising UK Independence Party (UKIP). It paid off in 2015's election and secured a slim majority for Conservatives
2. Wrong calculations: Cameron assumed that that unanimous support among all other main parties means that the referendum will be a safe bet.
3. Labour’s failure: The Labour Party has significantly failed to mobilize its supporters in the North East of England where Remain did better than expected
4. Overall BREXIT was not only about Europe. It’s a revolt vote against marginalization and austerity by the underprivileged and the have nots.
B) Why does it matter?
- The EU is largest global economic block with 7% of Global population who generate 24% of global GDP.
2. The UK is the fifth largest economyThe UK is the fifth largest economy globally and Europe’s second largest economy. It has less than 1% of Global population yet it accounts for barely less than 4% of global GDP and more than 15% of European GDP
3. Interdependence: Almost 45% of British exports go the the EU while 11% of EU exports go to the UK. BREXIT may mean imposition of 10% tariffs on both sides which will suppress exports and accordingly jobs and growth.
4. The rise of far right politics and xenophobia is global concern especially at a time of Trump’s republican nomination for presidency in the USA
C) Results and implications
- The UK is now divided by age, class and nationality. It faces an existential threat to its existence as a country.
2. The UK’s economy will The UK is the fifth largest economy globally and Europe’s second largest economy. It has less than 1% of Global population yet it accounts for barely less than 4% of global GDP and more than 15% of European GDP
3. Interdependence: Almost 45% of British exports go the the EU while 11% of EU exports go to the UK. BREXIT may mean imposition of 10% tariffs on both sides which will suppress exports and accordingly jobs and growth.
4. The rise of far right politics and xenophobia is global concern especially at a time of Trump’s republican nomination for presidency in the USA
C) Results and implications
- The UK is now divided by age, class and nationality. It faces an existential threat to its existence as a country.
2. The UK’s economy will suffer from reduced growth levels in the short to medium term. Jobs will also be impacted as multinationals may start moving their European HQs from London. Sterling and British shares will go down.
3. Scotland which has 8% of the UK’s population and contributes almost a similar percentage to its GDP may choose to go for independence. There will also be troubles in Northern Ireland
4. Boris Johnson will most probably become the next UK prime minister. He is an Oxford graduate yet Trump style demagogue. Johnson will try to delay the activation of article 50 for leaving the EU until negotiating an exit deal with EU countries
5. The EU which is already emerging at a slow pace from the financial crisis will also suffer but to a lesser extent. Germany will be left alone in its efforts to introduce structural reforms and austerity in EU countries
6. Far right movements in Europe will get a boost.
7. France will call for a hardline with the UK to avoid a domino effect and will push for deeper European integration. Germany will show a more friendly attitude and will call for patience until conducting. constructive. negotiations with the U.K. The UK is the third global destination for German exports after the USA and France
8. Economic slowdown in the Europe is a bad news for exporters in the USA, China and Japan. It’s an apparent risk for global growth. This is also a bad news for oil prices
9. The USA will find the UK as a less reliable special ally in Europe
10. London’s booming housing market may suffer from recession and decline in prices which will impact Arabian Gulf investors
The UK’s ability to project military power globally will be further diminished and Gulf Arab countries will be even more skeptical to consider it their second ally after the USA
12. Given that BREXIT was a revolt vote people will fear that it maybe repeated in the USA against the US establishment candidate who is Hilary Clinton leading to Trump’s victory
13 Yes, the idea of a second referendum exist but definitely not now. It needs a lot of backstage preparations.
