Brexit: The Aftermath

A British flag which was washed away by heavy rains the day before lies on the street in London, Britain, June 24, 2016 after Britain voted to leave the European Union in the EU BREXIT referendum. REUTERS/Reinhard Krause - RTX2HY27

Britain polarized, markets slide, EU holds its breath. 

Xenophobia on the rise; Cameron out

By Ben White

In the early hours of Friday morning, Britain woke up to a political and economic earthquake. Asked whether or not the country should remain a member of the European Union (EU), a majority – 52 percent – of the population chose to leave.

David Cameron had included the referendum as one of his pre-election manifesto promises, yet he – along with the leaders of all the main parties – had campaigned hard for a “remain vote.” Within hours of the result he had resigned, though will stay in office until a Conservative party leadership contest has taken place, intended to be completed by party conference in October.

But the personal and professional consequences for Cameron and others pale into insignificance compared to the wider fallout. Brexit has caused financial turmoil in markets around the world, as well as in the City of London. There is now a significant risk of a new recession in Britain, while the value of the pound against the dollar and other world currencies has taken a huge hit.

Many of the main Leave campaigners, including prominent personalities like Boris Johnson, are in no hurry to actually move forward with the formal process of exiting the EU (Britain must formally invoke Article 50 of Lisbon Treaty to begin a two-year timetable of departure).

Some have suggested that Johnson, and other Leave politicians, not only assumed their campaign would fail, but that they did not even want to win, preferring instead to be glorious losers against “the Establishment.” No such suggestion of a Pyrrhic victory for the triumphant Nigel Farage, leader of the U.K. Independence Party, whose single-issue campaigning over many years has finally borne extraordinary fruit. His anti-Brussels, anti-migrant discourse may have won the day, but it remains unclear what his next moves will be, following what he hailed as Britain’s “Independence Day.”

It has become apparent that little to no detailed thought was put in by the Leave camp into what a Brexit looks like in practice, especially with regards to the thorny questions of renegotiating trade and freedom of movement arrangements with the EU and its member states. Big headline promises are being rowed back on, or watered down, now that the reality looms.

For Labour meanwhile, the Brexit vote has prompted a renewed attempt to depose Jeremy Corbyn as party leader, with numerous shadow cabinet members resigning. While Corbyn has always been unpopular among MPs from the right of the party, there has been unhappiness at what was perceived as his lackluster support for the Remain campaign. Corbyn and his allies, meanwhile, maintain that the coup attempt is a pre-planned move by those already opposed to his leadership.

In Scotland, whose population voted by an easy majority to remain within the EU, a new referendum on independence is a strong possibility; in Northern Ireland, politicians are working out the consequences of a Brexit on the status quo, including with regards to freedom of movement across what has become practically non-existent border with the Republic of Ireland.

It is perhaps unsurprising, though no less appalling for it, that following the referendum, xenophobia and Islamophobia among right wing groups were on the rise with numerous reported cases of race hate attacks across England, including vandalism and graffiti targeting immigrants.

Leave also found considerable support in historic Labour heartlands where, in recent times, the U.K Independence Party (UKIP) has found support in areas suffering from the impact of long-standing economic decline, and more recent austerity measures. The referendum has also exposed deep divisions; younger people voted overwhelmingly to remain (73 percent of 18 to 24-year olds), while 60 percent of voters aged 65 and over chose to leave.

In the meantime, away from the day-to-day developments, it will be many months, or even years, until the dust settles and understand the full impact of the Brexit vote.

What’s next for the U.K.?

By Tom Fletcher

The British people have just been through a bruising, debilitating but necessary debate. We have had to take a long hard look at ourselves in the mirror. The argument has divided communities and parties. But as with any family argument, we are better for it. It has given the public the right to set the course for the period ahead.

This is now a moment for the people of U.K. to take a collective deep breath. Much of the campaign, on both sides, has been polarizing.

The period ahead won’t be as terrible as predicted by those who argued we should stay in the European Union. Nor as easy as claimed by those who wanted to leave the European Union. The defining moment for the UK’s place in the 21st century is not the referendum itself, but how we respond to it.

As we emerge into a new chapter in our history book, we need to reflect hard on what the British people have said. This vote is not a vote for isolationism. The British people are bigger than that.

Instead, the British public said two things. Firstly, that they are worried about the way that migration changes the character and economic prospects of the U.K.

The vast majority of Brits are not intolerant or racist. But they fear that the system is not strong enough to manage the implications of migration for our schools, health service and communities.

So government will need to think much more creatively about how we build a 21st century policy on migration that helps us benefit from our openness and diversity, but doesn’t damage our infrastructure or fracture our politics.

Secondly, the British people made clear that they don’t like decisions being taken further away from them. They have a growing distrust for authority, and a desire to claim greater influence over our lives. Power is moving towards technologically empowered individuals, and that is a good thing.

This vote is another nail in the coffin for 20th century global and national power structures
Our job now is to replace them with something that marshals our best instincts and values, and not our worst. We need to revisit how to engage the public in decisions – taking on the growing cynicism and disengagement from public life.

The internet needs to strengthen our collective creativity and community, not undermine it.

For Britain, the key now is to put aside the rancor of the last few months, and pull together—wherever we stood on the referendum—to ensure that the negative predictions about leaving Europe are proved wrong.

One positive about the campaign has been individuals putting aside party affiliations and arguing (hard) about issues. The referendum did not divide us on out of date party lines. And neither must the response.

We will now renegotiate our relationship with our European friends and partners.

Meanwhile, the fundamentals of our relationship with the rest of the world will not change. We will remain a humanitarian and creative industries superpower; a major economy, military and political player; a global trading nation; a strong brand based on innovation and quality; and the world’s capital.

Ambassador Tom Fletcher CMG is an adviser at the Emirates Diplomatic Academy, a Visiting Professor at New York University and a former UK Ambassador.

BREXIT aftermath

The European Union is at risk – something that no one ever imagined

By Noureldeen Hammoury

The U.K. surprised the world with its referendum results on June 24, voting to leave the European Union and consequently leaving a negative impact on global markets.

This result was also considered a shock to the world’s economy, especially for the U.K. and the EU.
As a result, there are huge circumstances stemming from this decision on the U.K., which are set to have a continuous impact on the markets in the coming weeks.

There are several notes to keep in mind after this referendum that opened the door for possible further referendums within the EU itself. These notes include:

1- The U.K. is at risk of falling into recession and losing its credit rating.
2- Exit Polls Are Wrong Again, after the media hyped out news that the British were in favor of staying within the EU.
3- Scotland voted to stay in the EU and is now threatening to leave the U.K. in favor of the union next door.
4- Who’s next?
5- Global central banks’ role is back in the limelight as they attempting to stabilize the markets.

U.K.’s Credit Rating
After the referendum results were announced on June 22, several credit rating agencies warned the U.K. that it is at risk of losing its credit rating any time after the fateful decision.
Some of the agencies already put the U.K. on “Credit Watch Negative,” which is one step before the initial downgrade.

Such a decision by credit rating services agencies would put the U.K. in a difficult situation to borrow from regional and international markets.

But of course this is still not the end of the world. This is still the U.K.

Exit Polls Are Wrong Again
This is not the first time that exit polls, especially in the U.K., have misled the public and the markets alike.

A previous poll on Scotland’s possible exit from the U.K. showed a very high possibility that Scotland “will leave” the U.K. and will vote in favor of its independence.

Yet, the final decision was quite the opposite and Scotland voted in favor of staying united as ever with its English, Welsh and Northern Irish neighbors.

And in the recent elections, the exit polls showed a likelihood of a hung parliament. However, the final decision was surprising as the conservatives won the majority.

Finally, with polls suggesting that the U.K. will stay within the EU, with more than 55 percent in favor of the union, it was again shocking to see the final decision contradicting the polls.

That means that in the three events, the markets moved in favor of the exit polls, and then moved the other way around impacted by shocking results, which, needless to say, has led to a significant amount of financial losses over the past few days.

Scotland Votes To Stay In The EU
Looking at the referendum results, Scotland voted to stay within the EU with a majority exceeding 60 percent of the voters.

Scotland’s First Minister made it clear that another Scottish Referendum is on the table now after Friday’s results.

This means that Scotland may possibly be voting on its independence from the U.K. again, but this time it is in order to remain part of the EU.

Should this manifest, then it would be another negative factor for the global markets and the U.K.’s economy.

Who’s Next?
With the U.K. now out of the EU, there are many politicians in the bloc who are asking their own governments to hold a referendum as well.

This includes opposition leaders in France, Spain and Germany.

If the exit referendum fever finds its way to the EU, then this might be the beginning to what we may call Europe Version 2.0.

If the economic situation in the EU persists, with lower economic growth rates and higher unemployment, then holding another referendum should not be a surprise.

Global Central Banks’ Role
After the U.K. referendum results, if there was a 1 percent chance for any of the global central banks to raise rates anytime soon, including the U.S. Fed, then this chance has gone to zero.

This is mainly because global growth is now at risk of further slowing down.

Why? Because what might come out next from the U.K. may likely affect everyone across the world, especially given that the U.K. is considered as the world’s financial center.

Businesses are thinking about moving abroad or already started shifting their locations to somewhere more competitive.

If so, then the central banks across the world might have to cut rates even further to support growth and also to try and stabilize the markets, especially if volatility continued climbing up.

The Brexit Shockwave:
What Happened on June 22?

• Global equities as a whole lost more than $2 trillion in few hours.
• British stocks lost £125 billion ($165 billion) after Brexit—or 15-year worth of EU
contributions
• The banking sector in the U.K. lost an average of 30 percent of share
price in the market.
• GBP/USD posted its biggest one day decline on a record, dropping
by 8.05 percent.
• GBP reached its lowest exchange rate against the U.S. Dollar since
1985.
• UK 10 Year Yield dropped to record low at 0.95 percent, posting the
biggest one day decline on a record, lost -20 percent.

Brexpectations

• Bank of England to inject 250 billion pounds in additional liquidity.
• Some banks may move 1,000 to 4,000 jobs abroad.
• Brexit may impact the livelihood and residency of 3 million EU
nationals living in the U.K
• There are around 1.2 million U.K. nationals who are living and
working in Europe. Their ability to continue living in other European
countries has now come into question.
• U.K. AAA rating is at risk. Many credit rating agencies have put the
U.K. on watch negative list.
• Three percent of U.K.’s overall exports goes to the EU. The EU
exports 30 percent of goods to the U.K. This will widen the U.K.
deficit to 7-10 percent of the GDP by 2017.

Noureldeen Hammoury is the Chief Market Strategist at ADS Securities.

Parties taking the game of politics too far

By Bilal Aziz

As Britain wakes up in shock from a historical weekend, the nation is divided. The events that unfolded – after 51.9 percent, a slender majority of the nation voted out of the European Union (EU)—has led to a shake-up in Westminster.

Following a tumultuous last few days in the United Kingdon (UK), longstanding Labour MP Khalid Mahmood of Perry Barr, Birmingham was quick to point out the divisive nature of the leave campaign that led to Britain’s departure from the EU – a campaign that has increasingly vilified the divisions in the Labour Party throughout the lead-up to the referendum.

The divisions were not only evident at constituency level, but they seemed to have stemmed from politicians who “took the game of politics too far,” according to Mahmood.

“We have been given a mandate that wasn’t binding to a singular party. The reason why it got so much coverage was the fact that it divided people within parties and we saw that translate at community level.”
In this lead-up, Mahmood claims that “both campaigns were hampered by negative language that was used to distance specific people, especially people of color.”

In an emotive interview with Newsweek Middle East, he emphasizes a need for unity and “social cohesion” within the United Kingdom to combat the split in the country in the wake of the referendum result. He further believes the only way for this to be achieved is by “addressing matters that affect all citizens and not just a minority.”

As the results were finalized, British Prime Minister David Cameron announced his resignation, the currency markets took a tumble and a petition created to overturn the decision, currently has over three million signatures.

Additionally, over the last couple of days the Labour Party has endured a significant blow to its shadow cabinet where 11 ministers resigned and one was dismissed after an alleged attempt at a ‘party coup.’
The party now has a self-proclaimed task on its hands to reassure party members and loyal voters that their best interests are being kept in mind.

“The Labour Party is going to try to combat the hate that the leave campaign fueled, through acceptance of people in society and not through judgments based on religion and skin tone,” Mahmood adds.

As a consequence of the negative and xenophobic language used by the Leave campaign to pull at the heartstrings of the far right, Mahmood switched from backing the Leave campaign to distancing himself from it completely.

The focus on immigration, highlighting the refugee crisis and the supposed threat Muslims posed to the United Kingdom, diverted from the real issues that were debated and discussed.

According to Mahmood, his campaign for Leave “was based on the economy but in terms of immigration, the way people were coming across, I felt that was very negative and that wasn’t a place where I wanted to be so that’s why I moved [changed].”

This decision came at the heels of Baroness Sayeeda Warsi’s decision to also switch from Leave to Remain.

These two MPs, at the forefront of the ethnic minority representation in Parliament, are strong examples of the effects the Brexit campaigns have had on their communities.

But what is of great interest is the way in which heavily minority-populated areas voted.

In Mahmood’s own constituency in Perry Bar, where a third of the population is made up of Arab and Asian minorities, the vote was to leave the European Union. In addition to this, well known minority areas such as Bradford and Sheffield also voted out.

When asked about the reasons for this, Mahmood answers: “People were fearful of the way the influx in the European communities in Britain were affecting them personally and nobody was addressing the issue, they believed they’d be at risk because of high European migration.”

The results in these ethnic areas were widely influenced by Nigel Farage, the leader of the United Kingdom Independence Party (UKIP), who cleverly stated that immigrants from Commonwealth countries should be given more priority over asylum seekers from Eastern Europe.

Even though many were aware this was a tool to get ethnic minorities to feel comfortable with the Leave campaign, it still distanced a certain demographic of people quite significantly.

So where does this newly divided Britain stand now as a result of this referendum?

Mahmood echoes Farage in wanting relations with the Commonwealth to be built as quickly as possible.
The Queen is the head of those countries so “coming to agreements with those countries would be in the best interests of the United Kingdom.”

He also further highlights the need for unity within the Islamic community.

When asked about his ideas to combat xenophobia and Islamophobia, he replies: “Working together for a united objective will help us move forward socially and economically and cater to the people and the real concerns they have about facing xenophobia after leaving the EU.”

Britain faces a tough few years ahead where its economic legalities may have to be readjusted and where outsiders are already skeptical of the direction in which the country is moving. What people can be sure of is that politicians such as Mahmood will have to attempt to mend a disconnected Britain.

 

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