The pre-hype to the EU referendum caused the people of Britain (myself excluded) to vote for a British exit, or Brexit, from the EU in a historic referendum on Thursday June 23, 2016.
I personally attended several high profile events before the EU referendum vote to hear senior Fortune chairman’s and ministers of government provide their expert predictions and visions on the likely probability of the vote and the outcome for the UK economy.
The London-economy for small businesses, investment and growth, was put into hold, postponement or cancellation, which effected many businesses and the economy: in August the FTSE 100 hit a two-week low as investors withdraw a record £3.5bn from UK investment funds, the retail price war emerged with sales for the company Asda falling by 7.5 per cent in the three months to 30 June – its worst quarterly performance on record and noticeable recorded as the worst ever month for billings in the software, media, support services and engineering sectors.
The outcome of the BREXIT’ prompted jubilant celebrations among Eurosceptics around the Continent and sent shockwaves through the global economy.
Up until June 23, London was pretty sure of its place in the world. Building on its centuries-old position as a trading hub, it had become increasingly confident as a cultural centre as well as, in recent years, a hotbed of technological innovation.
The referendum vote in favour of Britain’s exit from the EU pulled the rug from beneath the feet of the city, one of the few parts of the UK that had voted definitively (60 vs. 40 per cent) in favour of remaining part of the bloc.
Though it will take years to discover and negotiate exactly what Brexit means in practice, many Londoners felt an instant instability, both personally and professionally and on two fronts: the uncertain outlook for Britain’s ability to sell unrestricted into the EU-wide single market; and the even bleaker prognosis for so-called freedom of movement.
For businesses, though, the bigger concern is about market access and the extent to which exporters will be able to retain anything of the seamless single-market access they currently enjoy. Nowhere is that more crucial than in London, where the dominant financial services industry and the ancillary sectors of law, accountancy and other professional services have ballooned over the past 30 years, in large part because of the capital’s status as Europe’s dominant financial hub.
Nonetheless, there are plenty of voices arguing that London’s role as one of the world’s main financial hubs will not be threatened fundamentally. That is partly because rival European centres have their drawbacks — being too small, with restrictive labour laws or lacking the stability of English law — but also because of an underlying confidence that London will adapt even if it does lose some business.
But as stated in my recent blog ‘The future of fintech and why London is the capital of the fintech universe’, London does possess other areas of growth: start-up financial technology, for example, which should be relatively unaffected by Brexit. London is the world’s most vibrant fintech hub. TheCityUK which continues to highlight the sector as a priority for expansion.
The mood in the City, as across the UK business environment, has undeniably been knocked by Brexit and the pervasive uncertainty on rules and regulations that will now follow, potentially for years to come. A weaker economic environment will make life tougher for many financial services operators, which is bound in turn to trickle down to the broader London economy.
Another consideration is an Asian intervention: the unusual publication by Japan’s foreign ministry of a Brexit paper. Japanese companies, it said, were huge employers in Britain, which took almost half of Japan’s investment in the EU last year. Most of that came because Britain is a gateway to Europe. The paper advised Mrs May to try to retain full access to the single market, to avoid customs controls on exports, to preserve the “passport” that allows banks based in London to trade across Europe and to let employers freely hire EU nationals.
These interventions worry Tory Brexiteers, who fret that having won a famous victory in June, they could lose the war. Their fear is that, given the choice, Mrs May and Mr Hammond will lean more to staying in the single market than to taking back full control of migration, money and laws. Mr Davis said this week that having access to the single market was not the same as being a member of it, and added that giving up border control to secure membership was an “improbable” outcome. But he was slapped down when Mrs May’s spokeswoman said the remark was only Mr Davis’s personal opinion. He also talked of retaining as much of the status quo as possible, not least in areas like security and foreign-policy co-operation.
The case for staying in the single market is simple: economists say this will minimise the economic damage from Brexit. A “hard” Brexit that involves leaving the single market without comprehensive free-trade deals with the EU and third countries would mean a bigger drop in investment and output. Brexiteers claim that many countries want free-trade deals and the economy is proving more robust than Remainers forecast. Michael Gove, a leading Brexiteer and former justice secretary, scoffed that soi-disant experts predicting economic doom had “oeuf on their face”.
Yet Mrs May is less complacent, acknowledging that it will not be “plain sailing” for the economy. Domestic business and financial lobbies are pressing to stay in the single market. As for trade deals, although she won warm words at the G20 summit from Australia’s prime minister, Malcolm Turnbull, she was told firmly by Barack Obama and others that bilateral deals with Britain would not be a priority. The climate for free-trade deals is not propitious these days, and Mr Fox’s department is bereft of experienced trade negotiators.
Mrs May has ruled out an early election and a second referendum. She refuses to provide a “running commentary” on her Brexit plans. And she insists she can invoke Article 50 without a parliamentary vote. Yet she is being urged by some to delay, since it would set a two-year deadline for Brexit that can be extended only by unanimity among EU leaders. In a thoughtful paper for the think-tank Open Europe, Andrew Tyrie, chairman of the Treasury committee, says the government should first decide what sort of Brexit it wants, adding that its leverage is greater before it pulls the trigger. He suggests waiting until the French election in the spring or even the German one in September.
Yet Mrs May might not be allowed to wait by her own party, let alone by fellow EU leaders eager to get Brexit out of the way before the European elections in mid-2019. The phoney war may soon turn hotter.
The Trillion dollar question is: is the UK now up for grabs?
I believe firmly that Brexit vote will fuel concerns in Westminster that the future of the United Kingdom is now in serious doubt.
The SNP warned during the campaign that if – as has happened – the UK overall voted to leave the EU but Scots voted to remain, Scotland would be taken out of the EU “against its will” and this could be the trigger for another independence vote.
There are also concerns in Northern Ireland about the implications of the Brexit vote for its relationship with the Republic of Ireland. Remain campaigners warned that a Brexit vote could herald the return of “hard” border controls between the North and South. The Irish government has said the future of the border is one of a number of priority issues in its contingency planning. Sinn Fein has called for a vote on the reunification of Ireland but this has been rejected by the UK government.
A final thought: Don Tapscott once said:
“Collaboration is important not just because it’s a better way to learn. The spirit of collaboration is penetrating every institution and all of our lives. So learning to collaborate is part of equipping yourself for effectiveness, problem solving, innovation and life-long learning in an ever-changing networked economy”.