Into the abyss

Someone needs to press the reset button on Brexsh1t and fast.

Today’s bad news brought you multiple downgrades from credit rating agencies, making it more expensive to borrow money. The pound and shares in key companies (airlines, house builders and banks) declined precipitously. The FTSE 250 (which better reflects the UK economy than the FTSE 100 which is loaded with non-UK companies) is down 15%. 15%!

The same time, Boris Johnson produced a laughable prospectus that seemed to suggest a Norwegian model of access to the single market, with free movement and without EU law. Not what leave voted for and a significantly worse position than actually being in the EU (because we would have to accept EU law without being in the EU and paying the same for membership). It was quickly rejected by the EU.

David Cameron is focused on an attempt to stitch up Boris by endlessly saying he “accepts the will of the people”, which is frankly a bit selfish. He also said Scotland should try to stay in two single markets, the UK and the EU, which seems like nonsense (and a recipe for financial services to move to Edinburgh). Farcically, Boris has been struggling to get out of his own road, being subject to a silent protest from local people who are offended by his lies.

George Osborne said little more than he was postponing the “punishment” budget until the autumn and repeating a little of what Mark Carney had said more convincingly.

The opposition has spectacularly imploded. It’s clear that the parliamentary party hate Corbyn because they believe he sabotaged the remain campaign. Equally, Corbyn commands the support of the unions and has huge support in the labour membership. It’s a mess and I cannot see how Corbyn can continue – I’m not sure he can really do the desperately needed job of challenging the non-government. That isn’t about his politics (frankly a new leader could be from the left or the right) but his credibility. Like Cameron, Corbyn is a face of the failed remain campaign. Everyone knows the PLP doesn’t support him, so it makes it harder to take him seriously.

The EU and European leaders said no negotiations without invoking Article 50 (which gives all the bargaining power to the EU). It’s clear that the UK’s only remaining allies are Germany and perhaps Poland. Perhaps someone is speaking to the German government, but it needs to be more than George Osborne talking about swap lines to Wolfgang Schäuble.

When will the key politicians grow some big ones and actually admit that the EU is at the heart of our economy? You might not realise that, because the money might reach you indirectly. But it reaches everyone in this country one way or another. You might think the price for all that money is rule by Brussels, but you would be wrong. Brussels couldn’t rule its way out of a paper bag. The true power in Europe is the nation states themselves (it’s just that the British press liked to blame the EU for stuff it was convenient to blame them for). Britain needs Europe. As Fitch Ratings stated:

“The UK vote to leave the European Union in the referendum on 23 June will have a negative impact on the UK economy, public finances and political continuity.

Fitch believes that uncertainty following the referendum outcome will induce an abrupt slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment. … Fitch has revised down its forecast for real GDP growth to … a cumulative 2.3% lower in 2018 than in its prior ‘Remain’ base case.

Medium-term growth will also likely be weaker due to less favourable terms for exports to the EU, lower immigration and a reduction in foreign direct investment. An adjustment in the value of sterling … could also affect growth.

The extent of the medium-term economic shock will mainly depend on the nature of any future trade agreement with the EU, by far the UK’s largest export market. … Prime Minister David Cameron has indicated that negotiations with the EU will not begin in earnest until 4Q16, and the final position may well not be known for several years.

Weaker economic growth will adversely affect tax revenue and the budget deficit and require the government to implement additional fiscal consolidation measures … ”

Chris Grayling and other Leavers can look sweaty and terrified on Newsnight in asserting brexit will definitely happen as much as they like, but sadly, Project Fear is now everyone’s Project Farce. Unfortunately it’s also Project Reality for everyone in the UK (and the rest of the EU too, which might be why they seem so angry with us).

We don’t have time to wait until September for a new prime minister. Time is running out for the UK. There’s no time to make “Leave” work, as pied pipers like Digby Jones have claimed. Tim Farron of the Liberal Democrats has already said he will campaign on a platform of staying in the EU. Nicola Sturgeon wants to keep EU membership, but only for Scotland. The whole country needs a leader big enough to put the option of staying in the EU on the table again, and fast. Unfortunately, I can’t see where that leadership can come from.

One thought

  1. Pingback: Financial mishmash | Marcus Ampe's Space

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