June 2016

By James LeGrice, Insight Consulting Group

It was the best of times; it was the worst of times. Such is the polarized atmosphere in Britain following the EU referendum. The 51.9 percent of Britons who voted to leave the EU see June 23rd as Independence Day and the start of a Great British renaissance. The other 48.1 percent see it as Doomsday and the beginning of irreversible ruin. More accurately, the referendum has brought the UK to a crossroads where either direction is equally possible at this stage. Which way the country goes largely depends on the steps that David Cameron’s successor takes before the exit negotiations begin.

In his resignation announcement, David Cameron said he did not think it would be right for him “to try to be the captain that steers our country to its next destination”. The governing Conservative Party must now elect a new leader by September. Boris Johnson, former Mayor of London and leading Brexit campaigner, is widely tipped to win, though he faces a strong challenge from Theresa May, the Home Secretary, who, supporters argue, would reduce the likelihood of an early general election.

Whoever wins, and the “Brexit Government” they form, will have to trigger Article 50 of the Lisbon Treaty, which will initiate the two-year EU exit procedure.  However, there is no set timeline for this. Priorities are for a tiered and managed exit, and it is possible that Article 50 will not even be triggered this year.

This will buy the Brexit Government time to tackle the crucial tasks at hand that will determine the direction the country takes. First and foremost, this means restoring confidence in the British economy.

The economic shocks that followed the referendum results – a 30 year low for the pound, stock indices hemorrhaging value, and a downgraded credit rating – were to be expected, given the way referendum campaigning was conducted. Both the Remain and Leave campaigns are equally to blame.

Remain resorted to increasingly extraordinary scare tactics to persuade the public that leaving the EU was too risky. Its opponents labeled this “Project Fear” and its proponents are now back-peddling on a number of claims including the need for an emergency Budget with new austerity measures. Leave is guilty for its failure to explain what would happen after a vote for Brexit, including how economic set-backs would be mitigated. This has led to perceptions that they never expected to win and as a result, have no plan.

It will be David Cameron’s final job to “steady the ship” and prevent these economic shocks from spiraling out of control over the next two months. His successor will then have the challenge of setting out a clear, coherent and positive vision for post-Brexit Britain, in order to reverse the market trends in Britain’s favor.

The biggest coup that the Brexit Government could pull off to restore confidence is to announce an in principle trade agreement with a major economy before it triggers Article 50.  At the least, the Brexit Government will need to secure expressions of interest for future trade that it can readily quote. Having a positive and credible vision to sell to trade partners is a prerequisite to making this possible.

It is also a prerequisite to reconciling what is now a Disunited Kingdom. The EU referendum has re-awakened many historic divisions including those between socio-economic classes, town and country, London and the regions, and between nationalities. A new Scottish independence referendum is back on the cards, and Sinn Fein has reissued its call for a united Ireland.

The Brexit Government will need to take ownership of the post-referendum narrative to heal these rifts. There is a widely-held misconception that the Brexit vote was simply a vote on immigration. Immigration was undeniably a rallying point for many, but the vote for Brexit reflects a very diverse range of views from across the political spectrum.

For some, it was a vote in defense of national sovereignty and democracy. For others, it was a libertarian vote for free markets. For others still, it was a vote to be global-facing rather than Euro-centric. And for some, it was a vote to protect the welfare state.

However, those for whom it was a vote on immigration were the most vocal, and this has led to damaging perceptions that Brexit was a victory for xenophobia. The Brexit Government will face the challenge of moving the narrative along from immigration, whilst carefully managing the expectations of those for whom this was the primary selling point, towards more positive points that can enthuse the broadest section of the public.

The Brexit Government will also have to decide quickly on how Britain should react to the international repercussions of its referendum. Many EU leaders fear that Brexit is the beginning of the end for the EU, and it is possible that the union could start unravelling before Article 50 is triggered.

In the final televised debate ahead of the referendum, Boris Johnson said, “If we stand up for democracy, we will be speaking for hundreds of millions of people around Europe who agree with us but currently have no voice.”

This is already coming true as politicians in Italy, France, Holland and Denmark have all called for their own EU referenda in the wake of Britain’s vote. The question is whether the Brexit Government should actively encourage the policies that Britain is passively inspiring.

Doing so will undoubtedly jeopardize Britain’s ability to exit the EU on favorable terms. However, if the break-up of the EU looks more certain, Britain could yet find itself at the head of an all new European alliance.

Beyond Europe, other groups seeking self-determination may cite Brexit as their inspiration. Massoud Barzani, British ally and President of the Kurdistan Regional Government in Iraq, has previously said that he wants a Kurdish independence referendum this year. Brexit could be the catalyst for this, which will put Britain on the spot over which of its regional allies to side with.

These challenges, and the way that Britain’s new leadership responds to them will determine whether the events of June 23rd have heralded the “best of times” or the “worst of times”. What is certain though is that this has been a revolution for British democracy. With voter turnout of 72%, the highest level in two decades, the referendum has reversed the recent trend of voter apathy. It has also shaken the political establishment on both the right and the left, who found their policies to be out of touch with the majority view. The Brexit Government will have major challenges to tackle, but also an invigorated electorate holding them to account to deliver the best results. That in itself should be cause for hope.