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IBS Journal August 2016


EDITOR’S NOTE CUTTING THROUGH THE BREXIT BLUSTER


THE FALLOUT FROM AN HISTORIC REFERENDUM, IN WHICH BRITS VOTED TO LEAVE THE EU BY 52% TO 48%, CONTINUES TO DOMINATE THE BANKING TECHNOLOGY NEWS AGENDA


05


Senior Editor Scott Thompson Scott.Thompson@ibsintelligence.com


sounding off on passporting rights, various EU directives and whether British FinTechs will now find it more difficult than their US counterparts to attract venture capital. Depending on who you believe, Brexit is either a recipe for disaster or a chance to dismantle a broken system and create a brave new world.


T


My sense is that it’s all academic. Prime Minister David Cameron, who resigned after backing the Remain campaign, has been clever in not triggering Article 50. I think that, given Leave’s narrow victory, there will be a second referendum. If that fails to materialise, the next PM could be faced with pushing Brexit through a Parliament that can delay the process at every turn, sort of a “reverse Maastricht” (when Eurosceptics infuriated John Major by blocking passage of the Maastricht treaty into UK law). Note that a group of unnamed business people and academics, represented by the law firm Mishcon de Reya, has launched a legal challenge to require the approval of Parliament before triggering Article 50.


Bear in mind also that, without the UK’s $2.8 trillion economy, the EU will no longer rival the US in size for the foreseeable future. So I believe that the next PM will go to Brussels, get some concessions, call a second referendum and Remain will win out. Ultimately, many people were protesting against political and economic institutions that


here has been no shortage of people


have left them feeling disenfranchised; I’m not sure they thought Leave would win.


There’s also the ‘Brexit Lite’ scenario. Andrea Leadsom’s decision to quit the Conservative party leadership battle means that Theresa May has become PM. A Remain supporter, she will not be as aggressive in Brexit negotiations as Leadsom would undoubtedly have been. She also has a working majority of just 18, which caused David Cameron to ditch many of his plans. May could kick triggering Article 50 into touch, or go for the Norwegian model and allow free movement in exchange for access to the single market. As one of my fellow tweeters recently commented: ‘Prepare for the UK doing a reverse Turkey. We’ve politically quit Europe but will spend the next 35 years not leaving’.


In the here and now, meanwhile, we have, according to Leave poster boy Boris Johnson, “a kind of hysteria, a contagious mourning” among part of the population. All of which is sparking uncertainty and that is feeding through to the markets and exchange rates and business morale, in turn affecting jobs, savings and the housing market. This is why I suspect a full blown Brexit won’t come to pass; most voters can’t afford it in the short-term, whatever the longer term advantages might be. As Bill Clinton famously said, it’s the economy stupid.


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