The immediate impact of this upheaval aside, Brexit is one of the most significant social events in Europe of the post-war era – a wholesale rejection of the European project – which will present both challenges and opportunities, if indeed it happens at all.
One must wonder: what does the EU without the UK look like? Even though the island nation has resisted ‘continentalisation’ and has not been assimilated into the continental way of life, there is a complex web of issues to unpick and the fallout from this crisis that is yet to reveal itself.
This vote does spell some trouble for the validity of the EU’s political union, not only for the lack of one of Europe’s headlining acts in the shape of the UK but also for the strength of that union going forward. Indeed, differing objectives within different member states could see a divergence in not only political but practical implications.
In the medium to short term, we can expect to see uncertainty and volatility in:
- Markets – in between the immediate aftermath of the referendum vote and likely until sometime next year, volatility (whether in markets or in the real economy or indeed politics) will characterize the next few years as numerous administrations in Europe change hands and new decision-makers settle in.
- Cross-Border Investment – in the wake of the 12% collapse in the value of the pound sterling against the euro, we might see increased investment in the UK from the Eurozone, however, tempered by the likelihood of an economic recession and possible deflationary pressures. Ultimately, however, should the UK leave the EU, it is possible that the investment from the EU and vice versa will be reduced.
With that, the UK has always been a trading nation and has sought to defend the free market economy from excesses of EU socialism, and whilst it integrated ever closer into the European machine, it maintained a dialogue with its ex-colonial subjects and its friends in the New World.
Indeed, if one considers London’s position as the financial capital of the world and the UK’s more ‘special’ relationship with the United States and other non-EU trading partners, the UK is certainly the more obvious entry point for firms from those countries to have a place at the world’s financial table – access to the EU’s single market is but a happy coincidence, if not a fortuitous one.