British voters took a major leap into the unknown by voting to leave the European Union by the narrowest of margins...
British voters took a major leap into the unknown by voting to leave the European Union by the narrowest of margins – 51.9% in favour against 48.1% against, after a bitter referendum that has sharply divided the UK along class, age, regional and economic lines. Concern over immigration was the deciding factor with older and working class voters voting overwhelmingly to Leave.
This is most dramatic upheaval in British and European politics in decades. Prime Minister David Cameron says he will step down by October, casting his Conservative government into a difficult leadership election. Nicola Sturgeon, leader of the Scottish Nationalist government in Scotland, says a second referendum on independence will now take place because Scots voted overwhelmingly to remain in the EU. Northern Ireland’s future as part of UK is also in doubt; nationalist party Sinn Fein says there are now real worries peace process in the province and has called for an all-Ireland referendum.
“We now have uncertainty on all fronts. Markets are likely to remain volatile even after sizeable initial reactions. The uncertainty is greatest in the UK and Europe where the longer term economic and political relationship will take years to resolve,” says Edward Coley, a portfolio director at Cazenove Capital, part of the Schroders Group, in a note to clients.
So what now?
Britain now faces a long period of introspection as its governing class and voters come to terms with the enormity of the vote. The upwardly mobile – in London and in some of the larger cities, who voted overwhelmingly to remain – will be very angry, and may leave for a new life elsewhere. Politics on all sides face upheaval with Labour leader Jeremy Corbyn – ostensibly a Remain supporter – under fire for his low-voltage performance during the campaign.
The EU itself faces an existential crisis. Far right and populist leaders in France, the Netherlands and elsewhere are now calling for their own referendums. The challenge for the beleaguered authorities in Brussels and other key European capitals will be how to handle Brexit in a calm and dispassionate way. Russia’s President Putin will be delighted at the departure from the EU of one of his fiercest critics; handling a jubilant Moscow will be just one of the EU pressing foreign policy priorities.
But the biggest question-marks are economic. The vote will knock at least 1% off the UK’s GDP growth this year but no one knows how long or how deep the fallout could go.
All eyes will be on the international banks and companies with a big presence in the UK, and what steps they take. The EU’s already anaemic growth will take a battering and global growth will be impacted, as investors grow concerned at the rise of the populism that can now manifest, it would seem, anywhere.
The future isn’t what it used to be, that’s for sure. The outlook – for investors, consumers, companies and banks, in the UK and across Europe – has just gotten a good deal darker than anyone would have imagined 24 hours ago.