Brexit

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“If we are victorious in one more battle … we shall be utterly ruined.” Like the good intellectual that he’s vigorously pretended not to be of late, Boris Johnson will probably know that line. It’s from the Greek historian Plutarch’s account of the battle that gave us the phrase “pyrrhic victory”, the kind of victory won at such cost that you almost wish you’d lost. In theory, Johnson woke up on Friday morning having won the war. After David Cameron’s announcement that he would step down come October, Johnson is now the heir presumptive – albeit at this stage very presumptive – to the Tory leadership, perhaps only four months away from running the country. He has everything he ever wanted. It’s just that somehow, as he fought his way through booing crowds on his Islington doorstep before holding an uncharacteristically subdued press conference on Friday morning, it didn’t really look that way.

The deeper fear among Tory remainers now isn’t just of a recession. It’s about the rise of something new in British politics, unleashed when politicians with scant respect for truth meet desperate voters; and for the backlash to come, when it sinks in that Brexit hasn’t ended immigration overnight or magically given depressed communities their futures back. Already, one wonders what those who voted desperately for change make of being told there’s no rush to invoke article 50.

A pyrrhic victory? Boris Johnson wakes up to the costs of Brexit | Politics | The Guardian

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Fallout from trade uncertainty..

Britain must strike a trade deal with Europe as soon as possible to protect the country's multi-billion pound car industry and avoid high tariffs. David Bailey, professor of industry at Aston University, warned of a "big uncertainty" for the sector following the UK's vote to leave the EU. Without a deal, he fears a return to the days when the industry faced a 10% tariff on exports. The UK exports 77.3% of its car output, 57.5% of which goes to Europe. "What we don't want in two years' time is to go back to [World Trade Organisation] rules which involve 10% tariffs on car exports," he said.

UK car industry needs 'swift EU deal to curb high tariffs' - BBC News

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Often overlooked, but there are places that have thrived on immigration..

Supercharged by globalization, the growth of finance and technology, and the arrival of ambitious young people from all over the world, London now has far more in common with New York and Hong Kong than, say, Blackpool. In a country riven by questions of immigration and identity, it has peaceably integrated a population that’s more than one-third foreign born, including almost 1 million EU citizens -- whose future status in the U.K. is now uncertain. Its population is far younger and better educated than the British average.

Yet a place apart is what it’s become. Some 1.4 million immigrants live in inner London, according to Oxford University’s Migration Observatory, with another 1.7 million in its more distant boroughs. All of North East England, which turned out strongly for Leave, has about 132,000 migrants in total. Disposable household income per head in London is 54 percent higher than in Wales, and 52 percent higher than in Yorkshire.

Not far away, in the heart of the financial district, the mood was despairing. "Our fear is not the next days or weeks," said Tim Cuddeford, a partner at management consulting firm Crossbridge. "Our fear is for the long-term future of the city and its significance in the world." Some Londoners are wondering if they should even follow the example of Scotland, which also voted to stay in the EU. That divergence with the U.K. as a whole led Nicola Sturgeon, the leader of the ruling Scottish National Party, to all but promise a second referendum on secession.

Down and Out in London as Wealthy Capital Outvoted on Brexit - Bloomberg

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This was from before the vote, but still very much worth considering:

Britain initially stood aloof from the project but then spent a decade trying to join, as its poor economic performance became clear; between 1946 and 1965, British GDP per capita grew at half the rate of other industrialised countries. Since joining the EU, Britain’s relative economic performance has improved; GDP per capita has grown faster than France, Germany and Italy since 1973. Is this all down to the EU? Probably not. But it is hard to argue, as some do, that the EU has damaged British growth.

EU referendum: The arguments for voting Remain | The Economist

What about the Leave campaign’s arguments? The first is that Britain is overregulated because of EU membership. But that isn’t what international comparisons show (see chart). The World Bank’s survey on the ease of doing business ranks Britain sixth, one spot above the US. Nor is it clear what regulations the Leave campaigners want to scrap; a Daily Express list of the eight worst EU rules includes one on the prevention of cruelty to animals in transport and another on the elimination of excessive packaging, things most Britons would like to see controlled. When the Leave campaign talks of scrapping rules, they may well mean regulations that protect workers; something they don’t mention for fear of alienating their working-class support.

EU referendum: The arguments for voting Remain | The Economist

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Then there is the question of the EU budget contribution. Leave has used the £19 billion, or £350m a week, figure which the head of the Statistics Authority has twice slammed as “potentially misleading”. A rebate is applied before Britain sends the money to the EU and then around £5 billion comes back in the form of regional grants and industry subsidies. The remaining contribution is around 1% of government spending. And the IFS, a body that every politician has been happy to quote in support in the past, estimates that the hit to British tax revenues in the event of Brexit will be much larger than £8 billion. There will be no “extra money” to spend, on the NHS or anything else.

EU referendum: The arguments for voting Remain | The Economist

Finally, we come to immigration, which may be swaying the most votes. It is sad that immigrants who play such a positive role in the Britain are being so derided; especially when they make a net positive contribution to public finances. (That is quite a feat when Britain has a big deficit; the rest of us take out more than we put in.) Yes, there are local problems when services get stretched but that is something the British government should be tackling with more resources. Nations that welcome immigrants have prospered; in the early modern era, the British economy took in Huguenots and others fleeing persecution to help establish the textiles industry.  This is perhaps the most dishonest part of the whole Leave campaign. Here are a bunch of largely free-market Tories arguing that governments should decide which workers companies should employ. Instead of sweeping away regulations, a points system would involve the imposition of new ones. In any case, last year slightly more people came to the United Kingdom from outside the EU than from within it. Eliminating all EU migration will not get the total down to the “tens of thousands”.

EU referendum: The arguments for voting Remain | The Economist

With 72% of investors citing access to the European single market as important to the UK’s attractiveness, the referendum has the potential to change perceptions of the UK dramatically, posing a major risk to FDI. Our survey indicates that 31% of investors will either freeze or reduce investment until the outcome is known.

EU referendum: The arguments for voting Remain | The Economist

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It already getting to be a fantastic mess

• British politics in disarray; Conservatives having a leadership contest, Labor party leadership imploding
• Brexit campaign leaders nowhere to be seen or heard, did they actually expect to win? Do they have a plan
• Scotland threatening to block Brexit
• Significant economic slowdown looming

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Unfortunately, this discounting process may not be finished. Our FX strategists believe that GBP will ultimately fall to 1.25-1.30. Our equity strategists believe that European and UK stocks may need to correct a further 7-10% over the next several months. While these adjustments may seem harsh in light of Friday's moves, we think they're consistent with the uncertainty this vote has created. 1.25-1.30 for GBP would only begin to make the currency look cheap on a trade-weighted basis. A further 7-10% fall in UK and European stocks would simply bring forward multiples down to the long-run average. Both seem reasonable in light of increased uncertainty. And that uncertainty is high and extended, given that leaving the EU is a two-year process under the Treaty of Lisbon. This is likely to delay investment, and will hit consumption if consumers feel less confident about the economic situation or the value of their home.

While the size of the economic impact depends on the political steps taken from here, our economists estimate that it could knock 1.5pp off UK GDP over the next 18 months. This impact is not limited to the UK. After considering the impacts to trade, confidence and investment, they see a potential cost of 0.8pp to euro area GDP. For the global economy, there could be a cumulative hit of ~0.5pp from our baseline between now and the end of 2017. This weakening of the global environment would likely weigh on the Fed's thinking. Our US economists no longer expect the Federal Reserve to raise rates this year, keeping G4 yields lower for longer."

Morgan Stanley says Brexit knock-on effect could take 0.5 points off global GDP - Business Insider

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The "Leave" campaign won an unexpectedly decisive majority in Thursday's referendum on Britain's EU membership. So why do Brexit's biggest backers already seem so discombobulated? Commenters described "Leave" icon and possible next prime minister Boris Johnson as "rather pale" and "uncharacteristically subdued" the morning after. Nigel Farage, the leader of the U.K. Independence Party, spent Friday morning distancing himself from the "Leave" campaign's promise that Britain's EU funds would be redirected to the National Health Service; and Tory European Parliament member Daniel Hannan admitted that renegotiating Britain's relationship with the EU wouldn't actually decrease immigration. Sorry, "Leave" voters who wanted to either curb immigration or fund the NHS! (That's pretty much all of them.) Across social media were reports of "Leave" voters waking up with buyer's remorse. Some were counting on a "Remain" victory and wanted only to "send a message" or press the EU for reforms-a bit like playing a game of chicken with 64 million people's hands on the steering wheel.

The Brexit may not even ever happen - Business Insider

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“I’ve never known a weekend like it,” said Tim Bale, professor of politics at Queen Mary University of London. “A time when the stakes are incredibly high and those people charged with handling them are either absent without leave or tearing lumps out of each other.”

Cameron to Face Lawmakers as U.K. Drifts Aimlessly to Brexit - Bloomberg

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When David Cameron delivered his resignation speech outside No 10 on Friday, he said he would leave the task of triggering article 50 of the Lisbon treaty – the untested procedure governing how an EU member state leaves the bloc – to his successor. This has prompted much speculation – and a glimmer of hope for those who want Britain to remain in the European Union. Cameron, they argue, had repeatedly said during the campaign that article 50 would be triggered immediately if Vote Leave were to win the Brexit referendum.

By not doing so, the theory is, and by bequeathing the responsibility to whoever succeeds him, Cameron has handed the next prime minister a poisoned chalice. Given the dramatic reaction to Brexit – on world stock markets, on the foreign exchanges, in Scotland, across Europe – and with the enormity of the consequences of leaving the EU now plain, who will dare pull the trigger? One consequence of this, as a below-the-line commenter argued on the Guardian website, is that Cameron has effectively snookered the Brexit camp: they may have won the referendum, but they cannot use the mandate they have been given because if they do so they will be seen to be knowingly condemning the UK to recession, breakup and years of pain.

Will article 50 ever be triggered? | Politics | The Guardian