Sunday, 3 July 2016

Brexit, one week later.

1. Initial signs of Economic Chaos were overblown.

As of now the FTSE 100 has more than recovered all its losses, and the smaller FTSE 250 is only down 3.5% on pre-Brexit, taking it back to where it was in March 2015. The Pound is down against the Euro, but only to where it was in early 2014; it is historically down against the Dollar, but this should help boost UK competitiveness for exports. We will not know for months what impact it is having in underlying UK growth though. We could already be in (moderate) recession.

2. Political Chaos continues at full force though.

The Tories and Labour are both effectively leaderless, the government has temporarily ceased functioning, and the SNP are trying to destabilise things further. It is possible that Theresa May will be crowned PM within a week, but more likely the Conservative leadership election will go on until September. Democratically speaking, the Tories and Labour should both sort out their leadership problems, and then a General Election should be fought on different visions for Brexit. Economically this just risks eking out complete uncertainty until Christmas, with further negative economic effects. Economically we want to trigger Article 50 and get some things decided as soon as possible.

3. Obvious first steps.

It seems to me the following should be announced ASAP to reduce uncertainty now. Firstly, EU citizens currently in Britain should be guaranteed 'permanent leave to remain' post-Brexit, contingent on an equivalent guarantee from EU states for our citizens. Anything else is just playing games with people's lives. Secondly, the British government should promise to replace all EU funding on current projects in Britain with British money from our EU contributions. This will mostly be academic grants, infrastructure projects and agricultural subsidies. Thirdly, the government should announce all EU laws will be retained in UK law immediately post-Brexit, though after that they may be changed by the usual UK mechanisms. (Obviously not including those laws about our relation to EU institutions).

4. Our Further Negotiating Position

Given the state of the vote, I believe it is clear we should be pursuing the highest degree of economic links and co-operation in areas of law & order, science, environmental measures, visa-free travel, etc consistent with severing constitutional links and ending the total right of free-movement and settlement. If there was no right of unlimited immigration into the UK the Remain side would've won by a landslide. If the only issue was Free Movement then Leave would've won by a landslide. The only decent democratic thing to do seems to be to maximise and balance these truths. Given we already completely comply with EU law it should not be beyond the EU or the UK to reach a full agreement within the two years (though it will certainly be difficult). Brexit threatens the EU economy almost as much as it threatens ours, and the Eurozone is arguably in a worse position to deal with it.

Positively in the wider world there have already been expressions of interest in closer trade links with the UK from Australia, New Zealand, the US, and Iceland (assuming I haven't missed any). Negotiations with these states should start immediately. Someone suggested that there just aren't enough staff in Whitehall to do this, compared to in the EU. Hire some more then. Wider trade relations was meant to be one of the key advantages of Brexit. We can't afford not to at least try to make a strong effort at this.

Overall Brexit may turn out alright. But it certainly can be botched. As with many political choices how it's carried out and how other countries respond will be crucial to success. Our overall fate for better or worse was not simply determined on the 23rd June.

Oh, and please, for the love of God, no more Br-exit puns. No Bremain, No Bregret, No Scexit (Scottish, you get the idea).  Just stop it, stop it now. Thank you.      

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