Brexit, be careful what you wish for

Britons stunned the world on 23 June 2016 by voting to leave the European Union after 43 years of mostly troubled marriage.

The nation proved to be divided in the referendum, as shown in the narrow 51.9% vote to Leave against 48.1% opting to Remain. But freedom comes at a price, and the consequences were immediate. The pound fell dramatically, inflation is now rising and GDP growth is stalling, as fears mount that businesses that rely heavily on immigrant labor, such as agriculture, will suffer when migrant controls come in.

The introduction of the word ‘Brexit’ to the English lexicon isn’t the only new phrase ending in ‘-xit’. Scotland, which remains anti-Brexit, is pursuing its own ‘Scoxit’ to leave the UK, while the pro-Remain Northern Ireland may be reunited with the Republic of Ireland in a ‘Nixit’, leaving the rump-UK as England and Wales.

There are also issues for the continuing role of the City of London, creating a possible ‘Brexodus’ of financial companies relocating within the EU.
And finally, there are issues with relics of the former British Empire such as Gibraltar, territories such as the Isle of Man and far-flung former colonies such as the Chagos Islands which are staging their own independence movements.

Brexit has been the biggest political and economic decision in modern British history, and has left the country more divided than ever. Polls show that many Leave voters now regret it, and its legacy – whether a new trade deal is signed or not – look set to last for generations.

It remains quite possible for the UK to sign some sort of trade deal; most commentators are more concerned about the tight timescale in being able to find some sort of meaningful arrangement that can replace, or at least partially replicate, what was available for decades within the Single Market. That task falls to the Department for Exiting the European Union and its team of negotiators.

As far as the EU is concerned, life outside the bloc must be seen to be visibly less agreeable than being within in it. It simply isn’t in the EU’s interests to offer any kind of deal that makes it look that leaving the bloc comes without cost. As with any divorce, the spurned partner isn’t going to make concessions, and is more likely to play hard ball.

So perhaps the last word should go to the Brexit Secretary David Davis, a prominent campaigner for Leave and a long-time Euroskeptic since he was first elected to Parliament in 1987. In June 2017, on the anniversary of the Brexit referendum, he told a meeting of business leaders that negotiating an exit would be more difficult than the moon landing. “Half of my task is running a set of projects that make the NASA moon shot look quite simple,” he said.

Léon Cornelissen – Chief Economist – Robeco