Why Brexit fun is over

With vote just days away, it’s all very serious

The political, economic and social stakes have always been high in the run- up to Britain’s June 23 referendum on whether to leave the European Union. Yet the murder of MP Jo Cox, by a lunatic who seems motivated by the most- loathsome arguments of t he Leave campaign, has now made the debate personal, tragic and sad. Brexit isn’t fun anymore. It’s time, perhaps, to pull back and maintain some perspective. And without minimizing the heinousness of Cox’s murder — or implying that the fate of the markets compares with the gravity of that crime and what it says about the overheated tone of the Brexit debate — one group that also needs to maintain perspective is investors.

We have all followed for weeks now as the Remain side — from Bank of England governor Mark Carney and Prime Minister David Cameron to Goldman Sachs and Canadian finance minister Bill Morn ea u—offered gloom-and-doom scenarios about Brexit. It will create hyperinflation, a run on the pound, the exit of financial institutions from the U. K ., mass unemployment in Britain and lost jobs overseas, higher business costs and tariffs, and so on.

Stock markets have risen and fallen as poll numbers make these nightmare scenarios seem more or less likely. Last week, when polls suggested Leave was building momentum and running ahead of Remain, the FTSE 100 plummeted and the pound sharply declined. The latest polls (taken before Cox’s murder) suggest that Remain is rebuilding support, and perhaps is now ahead of Leave. We can expect markets this week to respond accordingly.

This is what markets do, of course: they respond to risks. Often, however, they overreact to those risks.

And that could well be happening with the response, both in the markets and among Remain supporters, right now.

For the record, were I voting on Thursday — and, since I’m Canadian, I’m not — I’d probably vote with Remain. I find Leave’s arguments neither justified nor compelling. But I am not convinced that this week’s referendum spells either the end of the world or the end of opportunities in Europe and the U.K. for investors.

Why? Well, for one thing, the polls might well be poor indicators of the referendum’s outcome.

They were wrong in the lead-up to the 2015 general election, when almost all of them suggested the contest was too close to call. David Cameron’s Conservatives won with a clear majority of seats and a plurality in the popular vote.

The polls were also wrong on the 2014 Scottish independence vote. Going into it, they consistently showed a close race. In the end, No (a vote to remain in the United Kingdom) won by a far wider margin than the polls suggested.

That’s one of the reasons bookmakers in England continue to give Leave about half the chances of winning as Remain. The bookies got burned in the general election, when their odds on offer followed polls that suggested a hung parliament. And bookies don’t like to get burned twice.

Of course, the bookies could be wrong, too. But even if they are and Leave wins, the challenges presented by Brexit hardly seem insurmountable.

No doubt, it will be disruptive. Britain is tightly integrated with Europe economically and politically. New laws would have to be written. New economic arrangements would have to be negotiated. So would the rules on labour mobility and immigration.

But Britain and its EU counterparts would hardly be operating in the dark.

For one thing, the U. K. already has its own currency and its own monetary policy body while being inside the union. It will still have them if it exits the EU. Since it’s not a member of the Eurosystem (the monetary policy-maker of the eurozone), it won’t be starting from scratch — like, say, Greece would. And since it already has “special status” within the EU ( status it shares with the likes of Sweden, Poland and Czech Republic), its de- parture would be, well, less special.

As well, other European countries that are not part of the EU — but get along just fine, thank you — will provide models for a new relationship for Britain.

Norway, for instance, pays to be part of the European Economic Area, which gives it access to most of the integrated market. It has a seat at the table, but doesn’t get to vote.

Another option would be a customs union, which would grant British manufactured goods freemarket access to the EU — although financial services, an important part of the U. K. economy, would not enjoy such privileges. This could be similar to what Turkey currently has.

Or Britain could follow Iceland’s lead ( admittedly, that might not be such a tantalizing notion) and negotiate a free trade agreement with the EU. Or it could negotiate a bunch of FTAs with certain regions in certain sectors, like Switzerland has done.

In short, there are options that would minimize the impact on the British and European economies and their businesses.

No doubt, none of this will be easy. Europe will be a tough negotiator, given the snub a Leave vote would represent. Cameron, if he remains PM, will be forced into the uncomfortable situation of having to come up with a workable response to a decision he opposed. So will Carney, who has several years remaining on his tenure as the U.K.’s central bank chief.

But difficult is not impossible. There are plenty of cool heads in Britain, on both sides of the current debate, who can work earnestly on a new relationship with Europe. That process will take years. There will be uncertainty. There will be disagreements and bumps along the way. There will be costs. But Britain and Europe will get there.

As fraught as the Brexit issue has now become, life will go on.