EU Referendum

What happens after Brexit?

UK votes to leave the EU, Cameron resigns as PM.

June 29th 2016 | London | Francisco Morales & Bartu Kaleagasi

Photograph by Reuters

In the aftermath of the EU referendum that shocked the world, many are left wondering how it happened, and what will come of it.

The UK had been a leading member of the European Union since 1973, bringing both economic prosperity and global influence to the country. So how did almost 52% of British voters end up supporting Brexit, and what are the future economic and political implications?


A demographic divide

As the polls had suggested before, there was a large difference in voting patterns by age. Whilst almost 75% of young people voted to Remain, 60% of the elderly voted to Leave.

On social media, millennials have been voicing out their qualms with the way the results went down, and especially with regards to the older generation. As young voters are the ones who will face the long term consequences of this historic vote, for better or worse, they feel understandably let down by the outcome.

Diagram by BBC

However, youth turnout was also much lower than that of older age groups. Although this is not a surprising trend as far as elections are concerned, a referendum with repercussions of this magnitude should have as much informed input as possible in order for direct democracy to serve its intended purpose.

On the other hand, overall participation was much higher than in last year’s General Election, with 72% of the nation casting their vote. This was one of the highest turnouts in recent years.


United Kingdom or Kingdom of England & Wales?

Another notable difference was between the United Kingdom’s various countries and regions. Whilst England (53.2%) and Wales (51.7%) voted to Leave, Scotland (62%) overwhelmingly voted to Remain, as did Northern Ireland (55.7%).

In England, many cities including London, Oxford, Cambridge, Bristol, Manchester, Liverpool, and Brighton voted to Remain, whereas less urban regions were mostly in support of Leave.

EU membership was one of the most important parts of Scotland’s vote to stay in the UK in 2014, and the Better Together campaign had even used it as their main argument against Yes Scotland. Our previous analysis on the issue can be found here.

Diagram by The Telegraph

In fact, just today, Scottish MEP Alyn Smith demanded that Scotland be given the right to remain a member of the EU, parting ways with its southern neighbours in disagreement over their future. Likewise, SNP MP Angus Robertson told Parliament that they have “absolutely no intention whatsoever of seeing Scotland taken out of Europe” and that they refuse to be part of a “diminished little Britain”.

Indeed, since the UK outside of the EU is not the same country as Scotland voted to stay in, it is likely that they will get another independence referendum in the next few years. On top of this, the prospect of Irish unification has also been gaining momentum, with Sinn Fein calling for a national poll on the day of Brexit.

It seems then that the EU referendum was fundamentally a choice between (a) the United Kingdom as a leading member of the EU, and (b) the Kingdom of England & Wales. Perhaps such a constitutionally significant decision should have required a super-majority of 60%, rather than having been decided by a simple majority margin of 3-4%, vulnerable to the whim of public opinion.


The immigration question

Immigration was perhaps the most contentious and important factor for voters heading into the referendum, and one in which both campaigns intentionally misinformed the public.

Many voters, particularly in the lower-income areas, appeared to believe that a vote for Leave was actually a vote for less immigration, rather than anything to do with the EU. Yet, the actual position that the UK will take with regards to immigration is uncertain at this moment.

Boris Johnson, likely to become the next Prime Minister, suggested that Britain would only make changes in its laws and taxation, claiming that immigration would actually be left untouched. Tory MEP and Leave campaigner Daniel Hannan also echoed similar sentiments, stating that free movement of labour between the UK and the EU would be likely to remain.

Photograph by Alamy

This strikes an odd chord among both Leave and Remain voters, as it seems almost impossible that the EU would agree to give UK the benefits of staying in, without any of the obligations that come with it. Britain would be enjoying an incredibly luxurious position within Europe, without having to take on many of the burdens that other EU nations do.

It is certainly regrettable that a lot of misinformation seems to have been bred by both campaigns, and it is even more regrettable that the picture on immigration is no clearer than before. The tensions that come from immigration in the UK seem to have been rising ever since 2004 saw the enlargement of the EU, whereby many Eastern European countries joined and were thus given the opportunity to move into Europe.

This growing resentment for immigration was then substantially amplified by the Syrian refugee crisis, and many people could not agree on the difference between war refugees and economic migrants. As it stands, the statistics suggest that there has been very little correlation, if any at all, between British wages and higher levels of immigration.

However, for many, the issue is also a matter of cultural clash between western values and foreigners, which is an argument with somewhat more merit than the economic one.


Trade and finance

One of the key concerns from people in the Remain camp was how trade would continue to prosper in a post-Brexit economy.

Leaving the EU would affect trade substantially, and that was one of the main reasons why Scotland voted to remain. Excluding trade with England, the EU is one of Scotland’s two largest trading partners, the other one being the US.

Now, with Brexit being a reality, Scotland will not only call for independence, but also seek to remove itself from the arrangement of leaving the EU. Nicola Sturgeon has already entertained the idea of the former, and she has confirmed that the latter will happen in whatever way possible.

If it invokes Article 50, the UK will have to seek the advice of its best legal and financial experts in negotiations with the EU. The clause, which finds its origin in the Lisbon Treaty, triggers a 2 year period in which the member state must negotiate its deal to leave the union.

If no deal is reached within that time frame, the UK must leave the EU without any trade agreements, reverting back to WTO standard tariffs. Essentially, the economy would collapse. However, this period can be extended upon mutual agreement between the UK and the EU, so that scenario would be unlikely.

Photograph by Georg von Wedel-Goedens

Evidently, striking a deal with the EU which will please the general public is going to be a difficult task, and particularly so in a time frame of just 2 years. It is likely that the UK will negotiate to stay in the single market, much like Norway, accepting all of the EU obligations that come with it.

The United States, who had previously claimed that Britain would be at the “back of the queue” to strike a trade deal with them if they chose to leave the EU, has now softened their stance and expressed eagerness to co-operate. With trade partners like China, Britain is not limited to trading within the EU, but it is almost certain that both the EU and the UK will still need each other for economic prosperity.

Another worrying issue with the post-Brexit economy is that of the financial services industry – banks, accountants, corporate lawyers, and investment managers – all of which will be unable to provide their services to the EU without the UK’s membership. London could risk seeing its status as Europe’s financial centre be taken away by others like Frankfurt, and its global reputation be taken over by others.

Unless some sort of exemption is granted to London, Brexit presents a huge risk and danger for the same industry that provides 12% of Britain’s GDP. To that end, it is certainly no surprise that London voted emphatically to remain.


Economic depression?

It is worth noting, however, that Britain’s trading power is certainly not a small one. The aftermath of Brexit only gives evidence to such, as financial and trade markets crashed all over the world.

Most notably, the Pound reached its lowest value in over 30 years, France overtook the UK as the world’s 5th largest economy, and S&P downgraded its credit rating from AAA to AA.

Since Monday morning, the pound has continued to fall, despite assurances by George Osbourne, the Chancellor, that the economy would stabilise. The level of fear and uncertainty prevailing over financial markets has given Leave supporters further cause to pause their celebrations in the meantime. A country in isolation, in a world of increasing globalisation, may indeed find itself struggling to keep afloat.

Photograph by Reuters

Yet, some economists have spoken out against these observations and suggested that the economic effects will not be as drastic as the Remain camp makes it sound. In their view, the British economy has faced far worse in the past, and so has the Pound itself, as seen in the 1970s when it fell to a third of its value.

Reassuringly, a multitude of large firms have remained resilient in continuing to do business in the UK and braving out the effects of Brexit. This comes after a period where even HSBC, one of the UK’s most prominent banks, were in talks to move their headquarters to Hong Kong.

As it appears, the economic future of the UK and the EU may not be as bleak as some regard it, but there is no conclusive answer at this moment in time. It will depend largely on what sort of deals are negotiated, and how much international business the UK can continue to attract.


Political turmoil

Over the weekend, several anti-Brexit protests took place, with millions voicing a strong sense of dissatisfaction at the Leave campaign’s misinformation, at tabloids for their highly anti-EU and dishonest approach towards the referendum, and at the false promises of prominent campaigners.

For instance, the Leave campaign’s pledge to spend Britain’s weekly EU payments on the NHS was refuted by Nigel Farage, sparking public outcry at the perceived change of position.

Whilst it is worth noting there were very realistic and noble reasons to vote Leave, it appears that a large amount of the public were grossly misinformed on issues like immigration. Both the UK and Europe are seeing an increase in xenophobia, racism, and populism, and Brexit appears to have only exacerbated this hostility. As of last Wednesday, the police and media have reported a large spike in the number of hate crimes targeted at foreigners living in the UK, particularly in England.

Whose fault is it, however? As Krugman pointed out, it appears “the big mistakes were the adoption of the Euro without careful thought about how a single currency would work without a unified government, the disastrous framing of the Euro crisis as a morality play brought on by irresponsible southerners, and the establishment of free labour mobility among culturally diverse countries with very different income levels, without careful thought about how that would work”.

Photograph by Jeff J Mitchell

Perhaps a Remain win would have dampened criticism of the EU, but not for long. It appears that some of the long-term issues which exist as a result of the European project have far-reaching consequences that Brexit only brought to the forefront of discussion.

Inside Britain, political turmoil is afoot. Among the Conservatives and Labour, campaigning for either side of the referendum has divided the parties in two. This was clearly evidenced by David Cameron’s resignation as Prime Minister, as well as the Labour Party’s coup against Jeremy Corbyn, which saw over 25 resignations and a vote of no confidence by a margin of 172 to 40 MPs.

Politicians from both camps are now treating each other as traitors to the British public, at a time when unity is most essential. As support for the two main political parties continue to dwindle in the face of modern challenges, a worrying cloud is cast over Europe.

Perhaps a new form of politics is necessary to see this wave of nationalism and rejection of globalisation through. The solution may in fact come from Britain’s youth, who have shown interest in leading a unified Europe.


Future scenarios

Since the fallout of Brexit, despite Cameron’s statement that there would be no such thing, a second referendum has been petitioned by those unsatisfied with the result, reaching over 3 million signatures over the weekend.

In media, several reports have surfaced of Leave voters who seem to be regretting their decision, many of whom voted out of protest, rather than actually expecting to win the referendum. Once again, there comes the argument that constitutional decisions should require a qualified majority of at least 60%.

Parliament is sure to be discussing these matters shortly, but developments on this front seem unlikely. As Cameron is set to step down in October, whoever steps into his shoes will seek to invoke Article 50 and start negotiations with the EU. If Boris Johnson is indeed the next Prime Minister, his over-optimism about the future, as evidenced by his latest column on the referendum, is bound to hit the brick wall of reality.

Photograph by European Parliament

On the other hand, many commentators suggest that Brexit will never actually happen, despite the referendum’s result. In that view, both the UK and the EU have simply too much to lose, and the margin was too tight for such a drastic outcome.

This points towards several possible scenarios: (a) Parliament simply votes against invoking Article 50, (b) Parliament calls for an early General Election, giving Labour and Liberal Democrats a chance to reject the referendum, or (c) Parliament negotiates with the EU, and then announces a second referendum on the precise terms of exit. In the latter case, it is likely that Remain would win by a substantial margin.

Unfortunately, direct democracy only works if everyone is well-informed and rhetoric is shot down by facts. For now, one thing is certain: the EU will continue its project to improve the lives of 400m+ people, regardless of the UK’s outcome.

Scottish Independence Referendum

The United Kingdom’s uncertain future

Scotland prepares to vote on national independence

September 7th 2014 | Brussels | Bartu Kaleagasi

Photo by Stuart Forster

Photograph by Stuart Forster (REX)

In 1707, the Kingdom of Scotland joined the Kingdom of England to form one country: the United Kingdom.

In 2014, this 300-year old union as we know it could come to an end. On September 18th, Scottish residents – including those who only hold EU citizenship – will be voting on a referendum with the question “Should Scotland be an independent country?”.

If over 50% of people vote ‘YES’, the UK government has stated that Scotland would “become an independent country after a process of negotiations”. The campaign in favour of Scottish independence has been led by “Yes Scotland“, whilst those who are against the idea of dismantling the UK have been represented by “Better Together“.

Today, for the first time ever, an opinion poll by YouGov predicted that 51% of the electorate would vote ‘YES’, with only 49% voting against Scotland’s secession. However, the latest average of all polls, issued by Professor John Curtice of Strathclyde University, still suggests that only 45% of people would vote in favour of Scottish independence, with over 55% voting ‘NO’.

Although many Scots are keen to enjoy greater national sovereignty, the question of independence is marred with several issues such as currency adoption, EU membership, oil reserves, and university fees. Yet, Scottish independence has grown to become more than just an economic debate; it represents Scotland’s desire to break free from the influence of Westminster and obtain greater democratic power.


Currency

Pound sterling, the official currency of the United Kingdom, is used in England, Scotland, Wales, and Northern Ireland. This begs the question: what will Scotland use if it declares independence?

At the parliament in Westminster, New Labour, Lib Dems, and Conservatives have all agreed not to allow Scotland’s continued use of the pound if it decides to leaves the UK. Whilst most unionists support this decision, separatists are in complete disagreement. According to renowned economist Joseph Stiglitz, Westminster is simply bluffing its opposition to economic union with an independent Scotland. He argues that, given how intertwined the English and Scottish economies are, the UK will allow Scotland to continue using the pound regardless of the referendum’s outcome.

Another option, known as ‘sterlingisation’, would be for Scotland to continue using the pound without any explicit permission from the UK. Advocates of this approach, such as the Adam Smith Institute, have cited  the ‘dollarisation’ of nations such as Panama as successful examples of this method. However, unionists have pointed out that the lack of a Central Bank would limit Scotland’s ability to bail-out its financial sector and would also be problematic with regards to EU membership.

As a last resort, Scotland could also either join the euro, or establish its own new currency. Yet, both of these propositions are relatively risky. Adopting the euro, despite its many benefits and historical legitimacy, is not a popular policy in Scotland – mainly due to fears arising from the recent Eurozone crisis. As to the prospect of floating a new currency, it would lead to higher transaction costs with England – Scotland’s largest trading partner – as well as substantial transitional costs in the short-run.


The European Union

EU membership is another area of concern for Scotland’s independence, and several conflicting statements have been made on the issue so far.

Vivian Reding, Vice-President of the European Commission, stated that “EU treaties would no longer apply to a territory when it secedes from a member state”. Furthermore, Jose Manuel Barroso, President of the European Commission, announced that “an independent Scotland would have to apply for membership, while the rest of the UK would continue to be a member”, and reiterated that Scotland joining the EU would be “extremely difficult, if not impossible“. According to this view, if Scotland declares independence, it will have to go through a lengthy and complicated process of accession into the EU.

However, EU court judges and legal scholars have disagreed. Given that there is no case precedent for partial secession of an EU member-state’s territory, it has been argued that EU law takes a pragmatic and purposive approach and would thus amend its treaties to accommodate Scotland’s unique circumstances. According to this view, EU nations would make sure that Scotland retains membership even if it does separate from the UK.


Devolution

Even if average poll predictions are correct and a majority of Scotland votes ‘NO’ on this referendum, the UK government will still be devolving several powers to the Scottish government.

This agreement, which was reached between the two governments through the Scotland Act of 2012, is a strategic move by Westminster to convince Scotland to stay in the United Kingdom. Although it may be true that these powers will be passed on to Scotland, separatists are clearly looking for more independence and greater democracy than what the UK is willing to give up through devolution.


The result

Above all, Scottish independence would be a substantial victory for the nation’s progressive movements. For decades, Scotland’s political representation has been tied down to Westminster’s neo-conservative Parliament. An independent Scotland would offer an unprecedented opportunity to rebuild the welfare safety net, prevent the privatisation of the NHS, remove corporate interests from politics, and keep the austerity agenda at bay.

We do not want to see the United Kingdom torn apart, we do not want to see it lose its position as a global superpower, and we do not want to see its 300-year old political union with Scotland take a massive step backwards. However, if an independent Scotland means more democratic representation – which it might – then we fully support whichever decision the Scottish people choose to make on September 18th.