"Whe're out", well sort of

On the economic front, for some months, sterling is likely to remain weak. The UK runs a substantial current account deficit (it buys more from abroad than it sells). Yet it seems that for now many forecasters are treating the Brexit vote as a regional economic event, rather than a global one. Britain accounts for a bit less than 4% of world GDP; it is not big enough to make the global economic weather as America or China can. Even so, there are worries that the Brexit vote might disturb some existing fault lines in the world economy in a way that amplifies its impact. Three concerns in particular are Italy, China and world trade.

The political turmoil however might be worse. In fact the fallout was immediate. Prime Minster David Cameron, who just over 12 months earlier, had secured the Conservatives first outright majority at a British general election in 23 years, resigned almost immediately. And the leader of the mainstream opposition Labour party, Jeremy Corbyn, accused throughout the Referendum campaign of being at best a lukewarm support of continued EU membership, faced a backlash.

 

It was never a tight love affair anyway

Urging to not delay triggering the two-year process of negotiations envisaged by Article 50 European Commission president Jean-Claude Juncker added sharply that "it was never a tight love affair anyway."

The travails of the UK’s relations with Europe since accession in 1973 have indeed been well documented with the UK’s perception as an ‘awkward partner’ bearing reality even in the post-Thatcher era. Former Prime Minister John Major’s successful opt-outs and policy of ‘non-cooperation’ took place during an era of increasing public Euroscepticism and deep intra-party divisions. Whilst the Conservative legacy of semi-detachment was somewhat offset by the Blair’s government to place Britain at the centre of Europe, the strategy of reducing the salience of the EU issue had longer term consequences. The Blair government’s reluctance to address growing distrust in European institutions, the implications for national sovereignty and the ‘democratic deficit’ allowed key political groups and a public Eurosceptic consensus to become entrenched.

Distrust in politicians and mainstream parties began to grow and the sense of disconnect between political elites and their electorates widened. Many began to see their voice being expressed by the Euro-sceptic populist radical right party, UKIP. Led by the charismatic Nigel Farage, UKIP successfully sought to paint Europe as the "source of the problem" by pooling long term concerns about the loss of sovereignty to powerful European institutions and hostility to unrestricted migration primarily from the poorer post-Communist A8 accession countries. UKIP, born out of hostility to an ‘ever closer European union’ were able to use the European issue as a legitimization tool. By establishing this anti-European Union stance among the electorate, UKIP were able to broaden their populist appeal, particularly their immigration stance, while retaining mainstream political legitimacy.

Finally the 2014 European Elections was a watershed moment when the longstanding political map in the UK began to change decisively. After winning the election decisively, UKIP began to cement itself in the polls and despite only winning one Parliamentary seat in the 2015 General Election, in terms of wider support, it became the third party of British politics. Meanwhile, the longstanding Euro-sceptic fault line within the Conservative party began to reassert itself as support for UKIP grew. Parliamentary and Councillor defections to UKIP from the Conservatives post 2014 and continued Conservative grassroots support for loosening the UK’s political ties with Europe led to mounting pressure on the Conservative leadership to act. Faced with this political backdrop, Prime Minister David Cameron committed the Conservatives to a referendum on the European Union in their 2015 General Election manifesto. After securing a parliamentary majority in the 2015 British General Election, Cameron vowed to honor this pledge but sought to dissipate wider Euro-sceptic feeling in his own party and among core sections of the electorate by renegotiating an EU reform deal for the UK. He argued that the new deal would give the UK ‘special status’ in tackling concerns about migration through reforms to the benefit system, amending treaties that exempted the UK from ‘ever closer union’ and ‘emergency safeguard’ for the City of London, and for UK business generally to ensure they wouldn’t face discrimination from being outside the Euro-zone area.

Armed with this new deal, Cameron fired the starting gun for the EU Referendum debate on the 20thFebruary 2016. With support from a majority of Conservative and Labour MPs, the Nationalist parties in Scotland, Wales and Northern Ireland, the Liberal Democrats, Greens, many of the trade unions and top business leaders and former Prime Ministers, John Major, Tony Blair and Gordon Brown, there was a general expectation that when arguments were put forward for remaining in the European Union that these would win the day. Early splits in the ‘Leave’ camp also seemed to reinforce this view. On the one side, Nigel Farage and most but not all UKIP senior figures and others such as George Galloway (leader of the left wing Respect Party) formed a grassroots movement ‘Leave.EU’ while the official ‘Vote Leave’ campaign was headed by Conservative heavyweights including the former London Mayor Boris Johnson, Justice Secretary Michael Gove and former cabinet minister and leader of the Conservative Party Ian Duncan-Smith as well as Labour Euro-sceptics Gisela Stuart and Kate Hoey. The campaign itself was a bitter, and at times, a personal one; with 'Remain' accused of "Project Fear" by the ‘Leave’ camp over their claims of economic meltdown if the UK left the European Union while prominent ‘Leave’ campaigners sought to question the legitimacy of ‘experts’ who backed staying in. And ‘Leave’ were accused of peddling lies on the amount of money saved by non-membership and stoking immigration fears about the accession of Turkey and increasing numbers of people coming to Britain from East and Central Europe if Britain remained in the EU. Initially, the official ‘Vote Leave’ group were half-hearted on the immigration question but with early polls suggesting that the UK were going to remain in the European Union, Nigel Farage urged the spokespersons of ‘Vote Leave’ to go on the offensive on the issue. This moment proved pivotal although it was evident even at that stage that support for ‘Leave’ was gathering momentum. Not only did immigration begin to dominate the campaign but the tone of the debate noticeably changed. And with growing skepticism towards the economic claims made by Cameron, his chancellor George Osborne and other expert bodies and businesses beginning to gain traction among sections of the electorate, polls began to show that the contest was really on a knife-edge.

 

The Results

The decision by UK voters to leave the EU was decisive. More than 17.5 million people vote to leave, just under 52% of all voters. England voted decisively to leave, as did Wales. All 32 local areas in Scotland voted to remain in the European Union, with 62% of all Scots supporting to stay. The margin was slightly less in Northern Ireland, but 55% voted to remain. Gibraltar also strongly supported remaining in the European Union. All regions in England voted to leave, apart from London where more than two-thirds opted to stay in. Turnout was 72.2%, the largest for 20 years. But it varied considerably across the country. Although support for remaining in the European Union was strong in Scotland and London, turnout was not as high as anticipated. For instance, more Scots voted in the EU referendum than the 2015 General Election, but the turnout was much lower than in the 2014 Scottish Independence Referendum. Within England and Wales, there was a clear geographical divide and not just by urban and rural. A number of Northern cities, Manchester, Liverpool, Leeds and Newcastle voted for to stay in the European Union, but their wider conurbations incorporating large population centers came to the opposite view. Elsewhere in England, remain hot spots included socially liberal, cosmopolitan cities such as Bristol, Oxford, Cambridge and Brighton, while Wales’s diverse capital city Cardiff also voted to stay in. But England’s second most populated city, Birmingham, narrowly voted to leave reflecting wider skepticism across the Midlands region. The more rural parts of England and Wales were also largely uniform in their rejection of European Union membership.

But geography is just one indicator of the entrenched differences in outlook and values. A Lord Ashcroft poll of 12,369 voters surveyed on Referendum day, found that those who voted to leave were more likely to be older, school leavers or those with few or no educational qualifications, from the lower C2 and DE social grades and council and housing association tenants, while ‘Remain’ supporters were disproportionately younger (nearly three-quarters) and more generally under 45 and university educated. Indeed the best predictor of a vote for remain by area was the proportion of residents who had a degree. Also those with higher managerial and professional occupations, with younger families and individuals from an ethnic minority background were far more likely to support staying in the European Union. Identity also seems to have been a factor with leave voters twice as likely to regard themselves as English not/more than British than those who voted to remain in the EU. Lord Ashcroft’s poll also shines a line on the fault line in UK social attitudes. Among those who wanted to leave in the EU, large numbers expressed that multiculturalism, globalization and immigration were forces of social ills. A majority of leave voters also expressed the opinion that Britain is worse today than it was 30 years ago.

 

The Implications

As indicated, the UK’s decision to leave the EU has led to dramatic political events. Despite a number of Conservative ‘Leave’ MPs sending David Cameron a letter to register their support for him to remain Prime Minister, Cameron resigned shortly after the result was known. Cameron was reluctant to lead exit negotiations and instead decided to trigger a Conservative leadership contest. One of the implications of this is that the new leader might seek a mandate from the people making a British General Election more likely sooner rather than later. Whether the new Prime Minister will use the EU referendum result as a mandate to begin negotiations for the UK’s exit is unclear and possibly depends on whether the new incumbent elected was a prominent member of the ‘Leave’ campaign or not. Part of the problem is the lack of a coherent Brexit plan. In the days after the EU referendum result, ‘Leave’ campaigners gave mixed messages over whether the UK would seek a ‘Norway plus’ option of single market access but having restrictions on free movement of labour, or whether some migration would be accepted in return for use of the single market. Of course, there remains the possibility of a second EU referendum on the UK’s negotiating position or once a deal is reached with the European Union. Alternatively, such a mandate may be achieved through an early British General Election than a second referendum.

The avoidance of any contagion following the UK’s exit and the need to buttress support for the European project drives the EU’s hardening stance of no negotiations with Britain until Article 50 is enacted. At the same time, the EU referendum result could precipitate a new constitutional crisis in the UK. Firstly, Scotland, Gibraltar and possibly Northern Ireland are seeking ways to remain part of the EU when the UK, in this case, England and Wales leave. Given concerns from some countries, particularly Spain and the possible precedent it sets for Catalonia, such a move is unlikely to succeed but in such changing times nothing can be ruled out. Secondly, the likelihood of a second Independence referendum in Scotland has now got closer following the UK’s decision to leave. If continued EU membership cannot be guaranteed, then such a referendum is extremely likely in the near future. And with current polls showing a healthy lead for Independence, the future of the UK in its present guise must be in doubt. Thirdly, there is growing calls from the new Mayor for the city of London to have more autonomy following the Brexit vote. Again this could have implications for how power is devolved in England.

Another possible consequence of Britain leaving the EU is a political realignment in British politics. This may also have secondary implications for the European project. Across Conservative strongholds, voters rejected the directive to stay in the EU from the Conservative Prime Minster by a margin of 55% to 45%. Outside of London, voters in Labour heartlands ignored the appeals of the prominent Labour figures even more convincingly by 56% to 44%. Both parties face the prospect of appealing to empowered voters in future elections whose attitudes are wildly different from those incumbents who currently represent them. The problem is most acute for Labour who face a visible threat from the populist radical right. Evidence from recent elections suggest that UKIP is making considerable ground although it is possible that UKIPs success in mobilising traditional Labour voters’ to support the vote ‘Leave’ message may further bolster their standing in these areas. Moreover, if Nigel Farage and UKIP are excluded from any Brexit negotiations this could fuel resentment among certain sections of the electorate particularly if the new Conservative PM ‘waters down’ his or her stance on the free movement of labour. UKIP will be able to play on a ‘broken promises’, distrust of the political establishment narrative to bolster support among those who voted for tougher immigration controls. And a strong UKIP with Parliamentary representation may be a source of support and inspiration for other European Euro-sceptic radical right parties seeking their own country referendums on continued membership of the European Union. As such, growing UKIP support may have wider political implications beyond that of the UK.

 

Germany's nightmare

The United Kingdom's departure is Germany's nightmare. Members from every corner of the Continental bloc will submit proposals on how to re-engineer the European Union according to their respective interests. Southern European countries will increase spending and push for deeper financial integration to nurse their structural wounds. Poland and Hungary will lead an eastern bloc of countries trying to repatriate their rights from Brussels. Germany will try to focus its proposals on the uncontroversial aspects of integration, such as security and job creation, to at least give the impression that the union is still in fact a union, but the government in Berlin will be pressured to place tighter limits on financial assistance to the European Union's more profligate members. As divisions deepen and economic panic rises, the Netherlands will gradually nudge Germany away from France and the southern belt.

Russia is one of the few countries that can take delight in Europe's fragmentation. After all, Moscow can more effectively ease the financial pressure against it, advance economic deals and limit Western encroachment on its periphery when Europe is divided and distracted.

 

 

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