An un­ex­pected ma­jor­ity of Bri­tons voted to exit the Euro­pean Union – but as Brex­i­teers come to un­der­stand the ram­i­fi­ca­tions of their de­ci­sion, con­fu­sion and Bregret loom.

The Peak (Hong Kong) - - The Brief | Letter From London - GE­ORDIE CLARKE Ge­ordie is a Lon­don­based fi­nan­cial writer who has pre­vi­ously writ­ten for the Fi­nan­cial Times and cov­ers in­vest­ments of pas­sion.

It was an out­come so un­ex­pected that not even its most ar­dent sup­port­ers thought it would hap­pen. When Bri­tons marked their bal­lot papers in the UK’S Euro­pean Union mem­ber­ship ref­er­en­dum on June 23, the odds were in favour of a Re­main vote. Opin­ion polls showed the Re­main side had a nar­row but solid lead, while bet­ting mar­kets pre­dicted an 85 per cent chance of stay­ing in the EU.

Yet in the early hours of Fri­day, June 24, it be­came clear that the poll­sters had got it wrong. When the last bal­lot was counted, 51.8 per cent of the UK elec­torate had voted to leave the EU. While Euroscep­tics were cel­e­brat­ing, the re­sponse else­where was any­thing but ju­bi­lant. Stock mar­kets ex­pe­ri­enced an in­evitable dip, but it was in bond and cur­rency mar­kets where signs of fear were brew­ing. The pound fell to its low­est level against the US dol­lar in 30 years, while UK govern­ment bond prices soared.

Be­fore the dust could set­tle, Prime Min­is­ter David Cameron, who had cam­paigned to re­main in the EU, re­signed, stat­ing: “The will of the Bri­tish peo­ple is an in­struc­tion that must be de­liv­ered,” thereby in­di­cat­ing fresh lead­er­ship was needed. Within a mat­ter of days, Jeremy Cor­byn, leader of the op­po­si­tion Labour party, saw his po­si­tion chal­lenged by his MPS on the ba­sis that he failed to shore up sup­port for the Re­main side dur­ing the cam­paign. But per­haps more im­por­tantly, the shock de­ci­sion to leave the EU set the coun­try down an un­cer­tain path of pro­found po­lit­i­cal and eco­nomic up­heaval – some­thing that many peo­ple say never needed to hap­pen.


The lead­ers of the Leave cam­paign, Boris John­son and Michael Gove, ap­peared to be caught by sur­prise fol­low­ing the ref­er­en­dum vic­tory. Dur­ing a press con­fer­ence on the morn­ing of the re­sult, their ashen faces spoke far louder than their pre­pared state­ments. Widely be­lieved to have lit­tle con­fi­dence that the Leave side would ever win, their in­volve­ment was seen to be more about ad­vanc­ing their po­lit­i­cal ca­reers than expediting a Bri­tish exit from the EU. In­deed, Boris John­son, a life­long ri­val of Cameron, had been widely tipped to move into the prime min­is­ter’s of­fice at the next elec­tion.

But any­one who thought the lead­ers of the Leave cam­paign would swiftly take over the reigns of govern­ment was mis­taken. As John­son and Gove vied to be­come leader of the Con­ser­va­tive Party, they ef­fec­tively knocked them­selves out of con­tention through a round of in­fight­ing, be­trayal and back­stab­bing that many com­pared to Shake­speare’s Mac­beth. In the end the home sec­re­tary, Theresa May, emerged as the strong­est can­di­date, hav­ing not only van­quished John­son and Gove, but also ev­ery other ri­val in what was a short and ef­fi­cient con­test. In a fi­nal and un­ex­pected plot twist, May pro­ceeded to ap­point a be­lea­guered John­son as for­eign sec­re­tary, en­sur­ing a se­ries of awk­ward – if head­line-grab­bing – meet­ings with EU lead­ers to come.


Un­der nor­mal cir­cum­stances, the po­lit­i­cal chaos would have been the big­gest story about Brexit. But th­ese aren’t nor­mal times and this was no nor­mal ref­er­en­dum. Less than 48 hours af­ter the re­sult was an­nounced, a stream of Leave vot­ers be­gan ex­press­ing re­gret for their de­ci­sion, ad­ding an­other di­men­sion of un­ease and cast­ing doubt on the va­lid­ity of the vote. It was of lit­tle help that the ref­er­en­dum cam­paign was bit­terly con­tested, one in which rhetoric and hy­per­bole drowned out hard facts. As a re­sult, it’s been claimed many vot­ers had lit­tle un­der­stand­ing of what they were vot­ing for – whether sovereignty, tighter con­trols on im­mi­gra­tion or some­thing else.

This lack of un­der­stand­ing has come to be as­cribed to a phe­nom­e­non known as ag­no­tol­ogy, or cul­tur­ally con­structed ig­no­rance, where in­ter­est groups cre­ate con­fu­sion and sup­press the truth around an im­por­tant is­sue. Some of the best ex­am­ples of this came from Nigel Farage, the leader of the UK In­de­pen­dence Party and a vo­cal Leave cam­paigner. The day af­ter the vote, he quickly re­tracted his as­ser­tion that leav­ing the EU would free up £350m (Hk$3.6bn) a week to spend on the Na­tional Health Ser­vice and climbed down from claims about im­mi­gra­tion that were in­tended to frighten the pub­lic. But

the dam­age had been done. When the real con­se­quences of leav­ing the EU be­gan to hit home, so nu­mer­ous were the ex­pres­sions of re­gret that a new buzz­word – Bregret – en­tered the na­tional lex­i­con.


Be­yond the po­lit­i­cal cri­sis and the deeply di­vided elec­torate, the big­gest con­cerns com­ing out of the Brexit vote are the con­se­quences for the UK econ­omy. If busi­nesses and fi­nan­cial mar­kets have a com­mon enemy, it is uncer­tainty. And Brexit cre­ated plenty of it. While fi­nan­cial mar­kets saw short-term tur­moil in the days that fol­lowed the vote, the long-term ef­fects of Bri­tain’s de­ci­sion to leave the EU have yet to be re­alised.

The ex­act eco­nomic im­pact this will have on the UK econ­omy is down to the deal that May and her new govern­ment can bro­ker with the EU and how soon this can be achieved. This will prove chal­leng­ing, given EU lead­ers are re­luc­tant to make it easy to leave the trade union. One pos­si­bil­ity that has been mooted is a quickly agreed Nor­way-style trade ar­range­ment that gives the UK un­fet­tered ac­cess in ex­change for some of the “bur­dens” that come with full EU mem­ber­ship. An­other pos­si­ble out­come is a drawn-out trade ne­go­ti­a­tion process that lacks any agree­ment on free­dom of move­ment or other el­e­ments of the EU. On the other hand, the worst pos­si­ble out­come is one where trade talks ul­ti­mately stall, dent­ing busi­ness con­fi­dence and sow­ing the seeds of anti-eu sen­ti­ment that causes in­sta­bil­ity across the con­ti­nent.

In the near-term, the uncer­tainty caused by Brexit is ex­pected to cause busi­nesses to de­fer spending and put ma­jor projects on hold. The weaker pound will cause im­ported goods to be­come more ex­pen­sive, push­ing down wages and caus­ing spending power to fall. This will have an im­me­di­ate im­pact on eco­nomic growth and many be­lieve it will lead to a re­ces­sion and the longer the mat­ter re­mains un­cer­tain, the more dam­age it will cause. The long-term con­se­quences of leav­ing are now for the politi­cians to de­cide. While the new prime min­is­ter can push the ref­er­en­dum re­sult into the long grass and main­tain sta­tus quo, she has made a point of say­ing that she will hon­our the will of the peo­ple and take the UK out of the EU – along with all that comes with re­newed iso­la­tion.

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