Brits Start to Count the Cost of Brexit
In the June referendum on whether Britain should leave the European Union, 61 percent of the voters in the city of Sunderland voted to quit. As a result, 6,700 jobs at Nissan’s factory there are now in peril as the Japanese carmaker weighs whether to build the next version of its Qashqai model in the northeast of soon-to-be-independent England. So you have to wonder whether Mackems, as the locals are called, might vote differently if they had a second chance.
The economic implications of life outside of the EU are starting to sink in. And while the official economic data since the plebiscite has been decidedly mixed, Britons are starting to get nervous, particularly as government rhetoric about a so-called hard Brexit dominates the headlines.
A poll conducted earlier this month by Ipsos MORI shows almost half of voters reckon they’ll be personally worse off after Brexit, up from less than a third before the vote:
Moreover, almost half of the respondents in the survey regard the British pound’s 17 percent slump against the dollar after the referendum as bad for the nation even if it does have the potential to boost exports:
Even the prospect of lower mortgage rates for homeowners is receding. Prices in the futures market suggest there’s just a 12 percent chance that the Bank of England will cut interest rates in December, down from 50 percent a month after the referendum. As the pound has extended its slump, concern that currency weakness will stoke inflation has replaced speculation that the central bank will ease borrowing costs.
It isn’t helpful for economic confidence when the independence of the central bank seems to be under attack. Both Prime Minister Theresa May and the former Foreign Secretary William Hague have criticized the Bank of England in recent weeks. In an article in Friday’s Times newspaper railing against “technocrats,” Michael Gove, a Conservative politician who helped lead the campaign to leave the EU, said Governor Mark Carney’s “attitudes and prejudices reflect a career in Goldman Sachs and the biases current among central bankers.”
And it can’t help that the antagonism between the British government and its spurned EU partners is rising months before Article 50, the formal treaty procedure to open divorce negotiations, has even been triggered. Theresa May’s first European summit as prime minister at the end of last week was accompanied by comments from her fellow leaders all signaling that the negotiations will be anything but simple or smooth. And in a twist worthy of a comedy scriptwriter, the EU’s lead Brexit negotiator wants the discussions to be conducted in French rather than English, Reuters reported on Friday.
So it shouldn’t be a surprise that there’s a significant portion of the commentariat still hankering for an outcome that somehow leaves Britain’s relationship with the rest of Europe unchanged.
How might that happen? Well, the courts could rule that Westminster must vote on triggering the EU exit process, and politicians could ignore the democratic niceties of the referendum and vote against departure. May could call an early election; candidates might then campaign on a platform of overturning the June decision, effectively hijacking a parliamentary election and transforming it into a second EU referendum. Both sets of negotiators might realize enlightened self-interest dictates that free trade between the U.K. and the bloc remains unhindered, with some face-saving fudge reached on immigration and the free movement of people.
None of those scenarios is very likely. What’s more probable is a continuation of the current limbo -- Anthony Browne, the head of the British Bankers’ Association, says finance chiefs have their hands “poised quivering over the relocate button” -- as companies either delay or cancel investment and spending plans. Britain might, as government ministers claim, eventually emerge as a stronger player on the global economic stage. But for the foreseeable future, Brits may have good reason for pessimism about their standard of living.
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