Uncertainty was probably the biggest “winner” coming out of Britain’s vote to leave the European Union (EU). As anticipated, the immediate financial and related tumult – with the pound losing ground.
But it is the uncertainty on so many fronts of what will follow over the longer term that has everyone playing the guessing game and keeping their fingers crossed. It is the unintended and unforeseen consequences that have yet to play out, as well as any possible prolonged currency and market volatility resulting, that are of most concern.
The entire exit process to renegotiate trade, business and political links between the UK and the soon-to-be 27-nation EU bloc, could take a decade or more to complete. It is going to be a bureaucratic nightmare at high direct financial cost to both the UK and the EU, let alone all the many other issues involved.
The longer the exit process draws out, the greater the uncertainty is likely to be. This raises questions about Prime Minister David Cameron’s announcement that he will leave that process to a successor to be chosen at the Conservative Party’s convention in October.
Not only does it delay the mandatory 2-year Article 50 exit process, but succession has already caused instability in the governing party as Tory MPs jostle to take over from Cameron. It also means the incoming Tory leader and government will have little time to first familiarise themselves with all the complexities and will immediately be thrown into the fire regarding exit negotiations with Brussels and implementing the process.
The political fallout in Britain is set to continue. It has already led to the fall of Cameron, the sacking of Labour’s shadow foreign secretary Hilary Benn, and the resignation of Britain’s European commissioner for financial services, Jonathan Hill. More are likely to follow. Cameron’s biggest political legacy may yet be that he presided over the breakup of not one, but two unions. But as The Wall Street Journal points out, Cameron served his country well, and in the end his successes sowed the seeds of his ultimate demise.
Meanwhile, tellingly, both the City of London and Gibraltar – key financial centres – voted overwhelmingly in favour of remaining in the EU, 59.9% and 95.9% respectively. Bankers, financial experts and other professionals in The City share the concerns of institutions such as the IMF, World Bank and the US Federal Reserve over the vote result, while the Bank of England has warned it will adversely impact a world economy that is only just beginning to recover from the global economic crisis.
The Brexit vote has also brought home in no uncertain terms the need for EU reform, as has already been called for by leaders such as those of France, Germany and Italy among others. The problem with the EU is that it has created a huge bureaucracy with little scope for democratic participation or decision-making, or the unique interests of member states being dealt with on an individual basis. This has at times caused a sense of exclusion and loss of control in member states and was a decisive factor in the British vote.
Be that as it may, prophets of doom there will always be, and the world has previously demonstrated its resilience in the face of great adversity. It is rather the uncertainty, as we have pointed out, and the possibility of a drawn-out process that could result in lingering volatility, that will have the worst impacts.