HOW UK (& SA) GOT PUNK'D BREXIT
The Brexit vote caused a global economic earthquake, wiping R777bn off the JSE in just two days. So with British politics coming apart at the seams, will an exit from the EU ever actually happen, asks Peter Bruce
Outside of the bright lights of London, there’s a bleakness to British life that you don’t appreciate until you’ve walked high streets in the towns and villages around places like Newcastle or Sunderland in the northeast or Birmingham in the Midlands. People battle.
They’re not the quietly successful advertising copywriters from the southeast, with neat houses and gardens in the Home Counties around London, perhaps fixing up a retirement dream recently bought on the side in the French Pyrenees. Take a ferry or the Eurostar fast train from London and you’re in France before you get drunk. They barely look at your passport.
Last Thursday, June 23, however, the miserable Brits got one over the happy ones and in the process set off a chain of events that could utterly change the world as it has been reconstructed since 1945 and the end of World War 2.
Driven by a swell of working-class English voters, a referendum on Britain’s future in the European Union shocked almost everyone in the country by deciding, by a narrow margin, to Leave.
Markets panicked. Sterling collapsed to a 30-year low against the US dollar. Equity markets around the world fell back sharply. On Monday in London, trading in some major stocks — Barclays and RBS banks included — was suspended as the steepness of the fall in their share price rattled the market. Sober economists said a recession
was certain. And in the middle of this crisis, there is no political leadership in place after the resignation of prime minister David Cameron in the aftermath.
You may be tempted to think that, rather like football hooliganism and xenophobia against the Polish, this is just a British problem. You’d be wrong: global markets have haemorrhaged, losing US$3 trillion altogether in what S&P Global says is the largest two-day loss in market history — even worse than in 2008, after Lehman Brothers collapsed.
In SA, the JSE’s value fell by 5.4%, a total loss of more than R777bn, within two days — value which is being shaved off the savings of millions of South Africans whose pensions are tied up in the market.
Remgro chairman Johann Rupert dubbed it “bad for Great Britain, horrendous for Europe”, while SA’s wealthiest individual, Christo Wiese, said the vote showed that “no country has a monopoly on stupidity”.
The gold price surged 8% immediately to $1,358/ounce, touching its highest level in two years. AngloGold Ashanti and Gold Fields surged, adding 18%-19% on Friday morning, before paring back gains.
“We expect to see strong and sustained inflows into the gold market, driven by the staggering level of protracted uncertainty that investors now face,” the World Gold Council said.
Even the “winners” of the referendum, the so-called Brexit (Britain exit) campaign, seemed paralysed by their own unexpected victory, to the extent that no-one had anything authentically calming to say. Even Cameron’s decision to fall on his own sword (in the time-honoured British way), after he campaigned vociferously to remain in the EU, seems to have left the opposition uncharacteristically short of words.
Now, Cameron will stay on as caretaker until a new Conservative Party leader is chosen (because the Tory party has a parliamentary majority his successor as leader would automatically become prime minister) but there are few signs the Tories can install a replacement any time soon.
The upshot is more policy uncertainty and more misery for the markets and the British themselves. So volatile was the pound in the wake of the vote that UK holidaymakers abroad were having trouble converting their currency.
Brexit, far from providing the certainty its leaders had been promised, has done just the opposite: it is an unholy mess at almost every level in British and European politics.
In the UK the supporters of Brexit, a mixture of Eurosceptic Tories and the rightwing UK Independence Party (Ukip), are themselves at war. It was because of the rise of Ukip, which threatened to split the Conservative Party, that Cameron, ahead of last year’s general election, promised to hold the referendum. That catastrophic miscalculation will make him arguably the least successful British prime minister in history.
It opens the way for his replacement to come out of the Brexit campaign, and the focus is principally on former journalist and mayor of London, Boris Johnson. Johnson, educated in the classics and with a flair for popular politicking, is no crass Donald Trump but he has been able cynically to position himself as the best Tory answer to the discontent over immigration so effectively pounced on by Nigel Farage’s Ukip.
Johnson and Farage campaigned for