Britain leaves | The World Weekly
Fifty-five years in the making, the UK’s commitment to the European Union was undone on one night. Suggestions that voters would ultimately stick with the safety of the status quo were dashed as Leave won 51.9%, ahead of Remain on 48.1%, in the unprecedented referendum on EU membership.
The decision plunged the country into immediate constitutional turmoil, sent markets into a freefall, revealed deep rifts in British society and dealt a grievous blow to the European project first conceived in the aftermath of World War II to ensure the bloodbath would never be repeated.
The EU and its forebears have never shed a fully-fledged member state, yet alone one as rich and influential as the UK. Last year the prospect Grexit posed an existential threat to the eurozone; Brexit strikes at the heart of the Union itself.
The morning after the night before
Prime Minister David Cameron, who called the referendum and spearheaded attempts to keep Britain within the EU, soon stepped outside his residence at Number 10 Downing Street to announce that he would resign by the autumn. He promised to “steady the ship” but added: “I do not think it would be right for me to be the captain who steers the country to its next destination”.
The man who urged the Conservative Party to “stop banging on about Europe” on taking charge 10 years ago has lost his job over Europe in a political gamble that massively backfired.
Markets exuded confidence on Thursday, with sterling hitting a 2016 high. But as the count tilted towards Leave investors hit the panic button. The pound entered its steepest decline on record, falling from $1.50 to $1.33, its lowest level since 1985. It fell 16% against the yen, a classic bolthole asset, and 7.2% against the euro.
Equities also slumped. Britain’s FTSE 100 dropped 8.7% at its opening, America’s S&P 500 tumbled 5.1%, the maximum allowed, and Japan’s Topix index fell over 7%. Gold reached its highest price in two years as investors fled to safe havens.
"Sterling will continue to suffer heavily, as well as UK equities, key stocks in the financial services sector (which are basically a UK proxy, and probably the euro too," said David Lea, senior analyst for Western Europe at consultancy Control Risks. "Those graphics of red trading screens are going to be useful for a while yet."
Mark Carney, governor of the Bank of England, gave a televised address to reassure investors. “Some market and economic volatility can be expected as this process unfolds,” he said. “But we are well prepared for this.” He confirmed that the Bank and the Treasury had “engaged in extensive contingency planning” and that the former would “not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward”.
Ratings agency Standard & Poor's said Britain would lose its triple A rating nonetheless.
A day is a long time in finance and politics. Less than 12 hours before Mr. Cameron’s resignation, UK Independence Party leader and Brexit campaigner Nigel Farage appeared to concede defeat and allege foul play when polls closed.
But at one minute to midnight Remain took supposedly europhilic Newcastle by just 1.4 percentage points and soon afterwards Leave scored a large majority in Sunderland. The mood in both camps changed palpably and the pound began its precipitous descent.
The UK’s EU Referendum was not a triumph for democracy. Democracy was deceived, the public duped, the facts and expert analysis simply rejected as ‘the politics of fear’." - Professor Matthew Flinders, Director of the Sir Bernard Crick Centre for the Public Understanding of Politics
The pattern that started in the northeast repeated itself throughout the night, with Leave notching up larger than expected victories in eurosceptic heartlands and Remain failing to rally enough voters in its own strongholds. Overall, 72% of the electorate voted, the highest turnout in a nationwide ballot since the 1992 general election.
“This is a crushing, crushing decision. It’s a terrible day for Britain and a terrible day for Europe, with enormous consequences,” Keith Vaz, a Labour Party MP, told the BBC with tears in his eyes as the result became clear.
“God help our country,” tweeted Paddy Ashdown, former head of the Liberal Democrats.
No such desolation for Daniel Hannan, a member of the European Parliament and senior figure in Vote Leave, the official pro-Brexit organisation. “I can't say how proud I am of the Vote Leave staff,” he tweeted. “What they've just achieved is miraculous.”
Mr. Farage was jubilant, his 25-year endeavour to extract Britain from the EU almost complete. “If the predictions now are right this will be a victory for real people, a victory for ordinary people, a victory for decent people,” he declared in the early hours of the morning.
“I hope this victory brings down this failed project and brings us to a Europe of sovereign nation states trading together. Let’s make June 23 go down in our history as our independence day.”
Lord Bilimoria, founder of Cobra beer and a crossbench peer, was infuriated by this statement. “I’m incredibly saddened for Britain,” he told The World Weekly. “It’s a sad day in our history. Yesterday wasn’t independence day. It was the day Britain shot itself in the foot.”
A nation divided
The results revealed a country divided along geographical, social, generational and cultural lines. Remain won 62% of the vote in Scotland and 55.8% in Northern Ireland, whereas Leave scored 52.5% in Wales and 53.4% in England. London, the country’s economic powerhouse, voted emphatically against Brexit.
Comparing local results with the demographic characteristics of each voting area, the Guardian confirmed what many already suspected: that the Leave campaigns drew disproportionately on poor, working-class voters with few academic qualifications as well as older people. They did so by appealing to widespread concerns about the economic and social impact of immigration and to resentment against the perceived detachment of cosmopolitan elites.
Remain’s dire warnings about the economic consequences of leaving the EU failed to compete with this anger, nor did the overwhelming opposition to Brexit within the political, business, academic and international establishment. It may even have played into Leave’s hands. “People in this country have had enough of experts,” Justice Secretary Michael Gove said on June 10 - a claim pilloried by the experts themselves, but one that with hindsight rings true.
As in the US, therefore, a new faultline appears to run through British society: between liberal supporters of the status quo, on the one hand, and conservative opponents of the establishment, on the other.
“We have to face the fact that half the people in the country felt the system didn’t work for them, and Europe was seen as part of that system,” shadow Defence Secretary Emily Thornberry lamented. “It was a kickback at the establishment, and the EU was part of that.”
Kate Hoey, a Labour MP and Leave campaigner, told the BBC “project fear was ignored by huge numbers of people, especially out of London. Once you got out of London… it was so different, and the leadership of all the parties didn’t seem to be listening to that.”
Throughout the night, politicians on either side of the debate stressed the need for the country to reunite. But the divides exposed and inflamed over the past few months will be hard to dispel.
These are uncharted waters, both for the UK and EU.
Westminster is reeling and will remain unstable for some time. The Conservative Party will struggle to stitch itself back together given the vitriolic ‘blue on blue’ attacks of recent weeks, and ministers will jostle to succeed Mr. Cameron.
The opposition Labour Party is also in crisis. A no confidence motion has already been filed against leader Jeremy Corbyn, a eurosceptic many accuse of failing to commit wholeheartedly to the Remain campaign despite the party’s official anti-Brexit stance.
“Regardless of how the leadership election in the Conservative Party plays out, an autumn general election looks increasingly likely,” Camilla Hagelund, senior European analyst at risk consultancy Verisk Maplecroft, told The World Weekly. “Given the narrow margin in favour of Leave, the legitimacy of the next prime minister’s negotiating position will otherwise easily be called into question.”
Lord Bilimoria suggests that in the event of an election, the wafer-thin majority means a new government might decide not to secede after all if markets continue to lay siege and the economy is tanking. Though Mr. Cameron and Mr. Corbyn have said they will abide by the referendum, it is non-binding and neither are likely to be prime minister.
Another source of uncertainty is the future of the United Kingdom itself. First Minister Nicola Sturgeon has announced Scotland will probably press ahead with a second independence referendum. And despite Leave’s protestations to the contrary, border checks would almost certainly be reinstated along Northern Ireland’s border with its southern counterpart, raising tensions in a historically conflict-prone region.
“Nobody in Ireland will be happy,” said Mr. Lea. “The prospect of a hard border being re-established (a logical extension of the Leave campaign’s desire to ‘Control our Borders’) is bad for the functioning of business in Ireland (can the customs union with the UK survive?) and bad for security - how will republicans (already hinting at a referendum of their own) react to rebuilt walls and patrolling troops? How will the ‘secure our borders’ campaigners accept anything else?”
Above all, investors are concerned about the long and torturous separation process. For one thing, it is unclear when it will begin. Mr. Cameron has swallowed his campaign pledge to invoke Article 50 of the Lisbon Treaty, which triggers the official withdrawal, immediately, saying he will bestow that duty to his successor. Yet the EU presidents are urging the government “to give effect to this decision of the British people as soon as possible, however painful that process may be. Any delay would unnecessarily prolong uncertainty.”
For another, Article 50 gives only two years to reach and enforce a withdrawal treaty, unless every member state agrees to extend this timeframe. If not, and negotiations overrun, then a messy divorce would take place automatically. Given the complexity of extricating a member state from European law, this is highly likely.
Finally, no one knows what kind of post-Brexit agreement London and Brussels will reach. Will the EU try to punish the UK for its deviance? Will a pro-Brexit prime minister push for secession from the single market as well as the EU in order to clamp down on immigration?
Whether or not certain members of the Leave campaign claim a mandate for this “hard version of Brexit" raises "one of the most problematic of the issues relating to the referendum,” Mark Elliott, professor of public law at the University of Cambridge, told The World Weekly before the referendum. “Namely, that it is not entirely clear exactly what people will be voting for when they vote Leave, given that within the Leave campaign(s) there are different visions of what the UK's future relationship with the EU ought to be.”
In the meantime, business confidence will remain moribund. “It could easily be 2019 before we know what kind of country will we be investing in,” Mr. Lea said. “If business, as we always hear, hates uncertainty, the uncertainty just got magnified tenfold.”
‘If a clod be washed away by the sea, Europe is the less’
The EU may stand a better chance of remaining intact than the UK itself. Having joined late and opted out of the eurozone, Britain does not undergird the entire project as France and Germany do. The EU’s knee-jerk reaction to adversity is to integrate further, and some commentators argue that the removal of a persistently awkward member might even strengthen the bloc in the long run.
Yet EU officials are clearly rattled. “I am fully aware of how serious or even dramatic this moment is politically, and there is no way of predicting all the political consequences of this event, especially for the UK,” European Council President Donald Tusk said in a statement.
When member states were granted the right to withdraw in 2007, few could have predicted that the bloc would soon lose one of its most prosperous, populous and powerful constituents.
One concern is that Germany will reluctantly find itself in a position it has steadfastly sought to avoid since World War II: Europe’s undisputed hegemon.
But the chief worry in Brussels is that Brexit will trigger a chain reaction by inspiring nationalist movements elsewhere to push for withdrawal. Fuelled by economic malaise and the migration crisis, euroscepticism is rising around the bloc. In the 10 states surveyed by Pew Research Centre for a recent study, just 51% of people had a favourable view of the EU and 42% wanted some powers repatriated. Only 27% favoured the status quo. The UK did not even rank as the most eurosceptic member state.
Europe’s far-right groups were euphoric as the results filtered through. “Like a lot of French people, I’m very happy that the British people held on and made the right choice,” Marine Le Pen, head of the Front National in France, told RTL radio. Freedom Party leader Geert Wilders declared that it was the Netherlands’ turn next.
The EU's presidents were determined to present a brave face. “This is an unprecedented situation but we are united in our response. We will stand strong and uphold the EU's core values of promoting peace and the well-being of its peoples. The Union of 27 member states will continue.”
But there were signs, both before and after the plebiscite, that Brussels was profoundly chastened by the experience and had acknowledged the danger of forging ahead with ever closer union despite deep-rooted popular opposition. “Whatever the UK vote is, we must take long hard look on the future of the Union,” Mr. Tusk tweeted last week. “[It] would be foolish to ignore such a warning signal.”
He repeated this sentiment on Friday morning: “I will… propose to the leaders that we start a wider reflection about the future of our Union".
Drawing hope from paternal wisdom, he added: “It is true that the past years have been the most difficult ones in the history of our Union. But I always remember what my father used to tell me. Whatever doesn’t kill you, makes you stronger.”