Leader: Business as usual post Brexit? Not likely

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Call me a cynic, but I find it hard to believe some of the arguments that are surfacing that nothing much will change in the event of a Brexit. Undoubtedly, whatever happens come 23 June, the world will keep on turning.

We can even set aside the inevitable short-term fallout as markets reassess sterling and the value (or not) the UK offers as an investment opportunity.

But it is worth remembering a member state has never tried to leave the EU. This has never been done before. As star manager Richard Buxton tells Money Marketing this week, “there  is no blueprint” here.

The first thing that will need to be decided in the wake of a “leave” vote is to what degree we want to be separated from the EU. The “just a little bit separated” Norway model does not seem to address the fundamentals – if anything, we get all the cost of Europe but with less influence than we have now.

At the other end of the spectrum, there is full-blown divorce. Where the UK ends up on that range will be the starting point to determine the impact of a Brexit on UK financial services.

Unfortunately for advisers and their clients, a leave vote spells years of a deadly combination of complexity and uncertainty. The framework governing pensions and investments in both the UK and Europe would need to be redefined.

By spelling out some of the implications of a standalone UK, Money Marketing is not attempting to persuade readers to vote one way or the other. Nor should we.

But it is worth examining how advice may change in the event of a Brexit, and how regulation and financial services generally may need to adapt as a result.

Of course, if the UK votes to leave, this is by no means the end of the story. Will other member states look on enviously, and start to clamour for their own referendum?

And what of the Scots? Scottish Widows has suggested a vote against EU membership could trigger another Scottish referendum, given the country’s pro-EU stance and the fact it voted to stay part of a UK that was in turn part of a bigger European whole. There is also talk of another vote on the EU, where there is a narrow vote or low turnout for example. And all this before the actual vote itself.

No rest for the wicked, as they say.

Natalie Holt is editor of Money Marketing. Follow her on Twitter: @Natalie_Holt_MM

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. The future is uncertain that is for sure, but Government attempts to run a campaign based on unsubstantiated scare stories, will, in my opinion, make the likelihood of a no vote increase.

    Whatever is decided, life will continue, industries will adapt, and there will always be other threats to the stability of the EU.

  2. Agreed John. When Schengen implodes the EU will have more on its plate to worry about than the irritating UK issue.

  3. Prognosticating about the future will always be a nil sum game (for both sides), but we do know about the here and now.

    Sure Europe has problems, but certain things are already changing. So many member states are now closing or restricting borders that Schengen is most likely going to be substantially reviewed. De facto, it is a dead duck.

    There are plenty of states who sympathise with our views. Perhaps if we stay in we can be an influence. We certainly can’t be an influence if we leave.
    What seems constantly to be overlooked is that although Europe has its faults we are no great shakes either. (As I posted elsewhere on this site today). Our regulation (excluding EU influence) is pretty intrusive and not wholly welcome. I’m sure you all have your own examples, but the one most common on this forum is the gripes over our own financial regulation – excluding any European input.

    Much as we have cause to criticise many things from Brussels, I’m sure that those who do travel in Europe can see that even with their problems their lifestyle is often as good – if not better than ours.

    With all their faults, at least they don’t sink to our depths. We surpass Europe in numerous ways. Here are just a few examples:
    a. Lowest state pension in OECD
    b. Worst rates of cancer recovery in Europe
    c. Worst rate of child literacy and numeracy in the developed world
    d. Most obese in Europe
    e. Highest transport costs in Europe
    f. Worst productivity rate in G7
    g. Children in the UK are more likely to die before they reach their fifth birthday than in any other western European country except Malta. Almost five in every 1,000 children born in the UK die before the age of five. 3,000 children in the UK died before their first birthday in 2012. (Institute of Health Metrics and Evaluation (IHME)
    h. Highest overall debt in the World (Public & private including Private Finance Initiative, household debt and student debt – excluding mortgage,) Our Public Debt is now £1.5 trillion – this now approaches 90% of GDP. (ONS, DWP, HMRC, G20, OECD)

    And here’s one statistic to be really proud of:
    BRITAIN is the most tattooed nation in the world, with an estimated 20 million designs decorating our bodies and the number of parlours more than doubling in just three years.
    Before we can congratulate ourselves on being superior perhaps we should ruminate on the foregoing. Will it be better if we stay in? As I said, forecasting is a mugs game. But I do wonder if we could do any worse.

  4. Dare I say, is it more to do with the potential to be ‘baled out’ that dissuades many from supporting ‘BrExit’? Perhaps not dissimilar to the ‘sense of comfort’ perception in being an AR of a network. Were “absence of a blueprint” to be considered by companies or even countries embarking on innovative developments, then nothing ‘new’ would happen. The problem here is the absence of long-term recollection of the UK’s ability not just to survive, but thrive! Remember the doom mongers when we were forced to leave the ‘E.R.M’? Recall what happened afterwards, Things turned out better than might have been expected. The pound fell, but then rose again. And inflation has been rather benign since we left.
    The ERM may have helped set a low-inflation foundation for the subsequent decade, however the ERM did prolong the British slump, by preventing UK rates from being cut to the levels justified by the UK economy.
    I suspect our troubled marriage to the EU will be seen to be just that, troubled to the point of a divorce being the only solution to a worthwhile UK for our children & grandchildren!

  5. I am unconvinced that the reassurance “…not attempting to persuade readers to vote one way or the other” is entirely compatible with the emotive phrase: ” …a leave vote spells years of a deadly combination of complexity and uncertainty.”
    These fatal facts might be counter-balanced by the knowledge that the World Trade Organisation (WTO) rules make it difficult to impose a tariff where none previously applied. Besides the fact that WTO tariffs have been falling, why would the EU want to apply tariffs to the UK when it runs a large trade surplus with us?
    Further, the argument that, through adopting the Norwegian model, “we get all the cost of Europe, but with less influence than we have now” is, to say the least, debatable. Apart from the UK representing only one of 28 votes, with the same weighting as, say, Latvia, Norway`s annual per capita contribution to the EU is 107 euros. These figures include a contribution to the running of the Schengen Area, which we would be most unlikely to sign up to. The UK`s current per capita annual payment, by the same methodology, is 229 euros (Source: Brussels Free University).
    It`s also interesting to note the Swiss have decided to abandon their 24 year application to the EU today, this on top of Iceland`s withdrawn application in 2015. As the saying goes, you wouldn`t start from here.
    Certainty is not necessarily a good thing: we are all certain we won`t be around one day. Now that is deadly.

  6. Nowhere in this debate have I seen a rational point of view from the people supporting the out campaign. I’ve heard them say that of course Europe will trade with us and nothing much will change but is that really reality.

    We only have to look at how Europe treats Africa, Turkey and even Norway to see that countries that don’t wish to be fully integrated into Europe lose out big time. I was a child during the 1970s and remember my parents always worrying about mass unemployment and high inflation, would I really would not want to see a return to those times?

    It should not be forgotten that we begged to join the common market and personally I believe that the out campaign is more based on extremely rich individuals wanting to turn this country into a tax haven for their own personal use. Free trade is given this country a massive economic benefit and when you factor in our rebate the actual cost as a percentage of GDP was 0.6%, so I read in the Guardian. If somebody was to offer you the chance of paying 0.6% of your turnover for massive profit would you take up the offer, I suspect the answer that is yes.

    Are we really expecting Germany France Spain and other countries in Europe to treat us fairly after we’ve just caused a major problem look how they treated Greece? If there is an out vote, then the likelihood of us being Great Britain for very much longer a slim as the Scots would campaign for another independence vote which they would probably win.

    The naiveté of people like Gove, Duncan Smith and Boris is simply unbelievable, they seem to hark back to a time when we ran an empire, well it’s time for them to get themselves into the 21st-century. It’s like watching Confederate supporters in the deep south of America campaigning for an independent southern states.

    The other factor that I would like to say is that the EU has given and now at least three generations the chance to live in peace without having to fight a European war like World War I and World War II. Far better to trade than fight wars.

    Don’t get me wrong I don’t want to be run by Europe or join the single currency but I do think the deal that with got is worth having so my vote is in.

  7. As a post script, Harry: (e) “Highest transport costs in Europe” is a very interesting one. I have just finished reading an interesting piece by a writer based in France (Walter Ellis), which included the following:
    “Did Keolis, owned 70 per cent by the French state and 30 per cent by a pension fund vested in the Government of French-speaking Quebec, buy up a number of UK rail franchises out of a sense that hard-pressed British commuters could benefit from an injection of SNCF élan? Did Dutch State Railways buy Scotrail to show the Scots that not everything worth having depended on the link with England? Hardly. Each of these concerns could see a golden opportunity to make money – an opportunity that, in typical fashion, escaped all but a handful of their British counterparts.”
    With friends like that ……

  8. Mr Herd, of course the EU would trade with the UK. They trade with the rest of the world don’t they? Will much change? Possibly/probably. Whether that will be for the better or worse will have to be seen.

    Nonetheless, I would also like to address 3 areas of your comments.

    Firstly, being part of the EU isn’t just about trade. Even if it was, if you think the EU treats Turkey, Africa, Norway and Greece badly, why would you want to be a member of a group of countries that elicits, condones and supports such negative behaviour? If that’s the type of “free trade” that has “given this country a massive economic benefit” then there may be some moral questions to answer.

    Secondly, yes, I would expect Germany and France to treat us fairly if the UK left. If they don’t, that says a lot about the mentality of the EU.

    Thirdly, Europe benefitting from peace isn’t because of the EU. It is because of the development of nuclear weapons and the commencement of NATO.

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