I had to delay it’s Thursday NZ time to Thursday UK time so that I could collect on my bets that the Poms wouldn’t have the bottle to leave the EU when it came to putting an x in a box. But the results have just come hot off the Thursday press, and it is a 52:48 win for the Brexit team. I lose my bet. Wow, I didn’t see that coming.
I read an article in this morning’s paper saying that although the polls were favouring ‘remain’, the journalist noted a strong element of the ‘remain’ supporters were the young 18-24 year olds. Having no confidence that this age group would actually then make the effort to vote, he believed the critical balance of “Bremain” votes would be missing in action, still in bed or too busy on their i-phones and Brexit would win. Maybe he was right.
But maybe I misread the outcome because of my pragmatic Celtic heritage. As it turns out 62% of Scotland and 56% of Northern Ireland voted to remain in, but 53% of England voted to leave. Same with the Welsh, no-one seems too interested in what the taffies think. Of more relevance is that London voted to remain in, as they would, and that now there are calls for London to declare itself an independent city state in order to remain in the EU. What larks. The Republic of Ireland remains in the EU of course and the Celts are politically in tune and in opposite camps to the English. That bodes for an interesting reconsideration by the Scots whether to abandon the UK and rejoin the EU. The ghost of Bonnie Prince Charlie will rise again, Culloden will be avenged. I think that the biggest strategic error of the referendum was in a 50%+ ‘winner take all’ format on a decision with such huge implications for three countries in an already shaky political alliance of their own.
The Brexit people based a lot of their arguments on the immigrant issue. England want to slow down immigrants into their country. “They are takin’ our jobs guvnor”. Be careful what you wish for England. I know a kiwi who has lived in London for quite a few years now who has observed that if London didn’t have Eastern European immigrants, nothing would get done. If you need a builder a plumber or an electrician or if you want service in a shop or an office, then you talk to an immigrant and keep well clear of the Brits. And if the English ‘don’t do service’, there is also the problem that they don’t actually make many things anymore either; nor are they that big into farming. Britain’s most important industries today are not manufacturing or agriculture but Banking, Finance and Tourism. Even two of the remaining iconic British car brands, Jaguar and Land Rover, are owned by an Indian company Tata Motors. “Takin’ your jobs? Are you ‘avin a larf, me old china plate?”.
How ironical that Britain spent three hundred years travelling the world, parking themselves uninvited in any country they wanted, killing or enslaving the locals and pillaging their resources. Now they want the world to leave them alone. They want the rest of the world to stop invading their country and polluting their culture.
So much of Britain’s economy is based on the wealth of Europe being channeled through the financial institutions of London, “The City”. “The City” has a more of the world’s capital in it’s vaults (or computer banks) than any other in the world, processing 41% of the global foreign exchange transactions, over twice as much as the #2 city, New York. The London Stock Exchange has a value of 6 Trillion USD, twice the size of the European Union Stock Exchange. And a major part of the investment industry is in London property. Following the collapse of the Soviet Union, the people were abler to buy their own homes at exceptionally low prices. A lot of opportunities for new private businesses opened up. Over 200,00o Russians have become millionaires. The impact of the collapse of the Soviet Union went much wider than the 88 Oligarch billionaires that we read about. So tens of thousands of ‘mere millionaire’ Russians were attracted to Britain initially as a tourist destination, then to the schools for their children’s education and ultimately into London as a property investment. This created a stimulated economy of wealthy visiting Russians, Arabs and other nationalities investing in the London property, splashing out a few hundred quid on a night out in a restaurant or spending a few thousand quid in the High Street. But that type of spending that does not automatically build a productive and sustainable base beneath it.
The value of the currency is the barometer of an economy. The announcement of Brexit plunged the value of the Pound to a 30 year low and it is expected to go further. Having conceded most of their manufacturing and agriculture to overseas countries, the necessary imports now escalate dramatically in price. The potential of a falling economy from inevitable rising cost of imports and job insecurity has meant an instant devaluation of property values in London. Those spending up large because they saw their property values increase faster than they could spend it, now have to seriously review their spending priorities. Banks will start to call in loans on over-mortgaged properties. The properties then have to go to an oversupplied and desperate market and the dominoes start falling.
Britain’s tourism is based on Heathrow being the biggest transport hub of Europe. Heathrow has 73 million passengers pa (93% are international). Charles de Gaulle has 64 million and Frankfurt just on 60 million. Just watch the European airports start jockeying with the airlines for a bigger chunk of Heathrow’s business now that Britain is tightening immigration controls and as a contracting economy impacts on service delivery at Heathrow. Air NZ and Qantas may well get made offers they cannot refuse from Charles de Gaulle to use Paris as their European hub; or from Leonardo da Vinci to use Rome? Either of those work for me.
As Britain withdraws from the European Union agreements, those two critical pieces of infrastructure, “The City” financial hub and the Heathrow international transport hub, will come under significant pressure. I hope the Brits know what they are doing. Actually I don’t really mean that; I still remember that they dumped us to join the EU and they partied hard with their Euro friends, so it’s not easy to get upset as they now go through a messy and expensive divorce. And as with any divorce, they will inevitably have to divide their friends as well as their assets. Europe is 700+ million population, Britain 64 million (England alone 53 million). Do the maths.
And as Britain contracts it will be acutely aware that it’s best friend USA is effectively insolvent following the earlier collapse of Fannie Mae and Freddy Mac. China had been selling huge amounts of goods to the USA for some time and had a mountain of USD in their vaults, a lot of which (10% of their GDP) they had reinvested in Fannie Mae and Freddy Mac. So China now owns a lot of the debt over a lot of the properties in the USA. China is their daddy. China could bankrupt the USA if they had the allies to win the inevitable war (hello Mr Putin,…hello Hassan,….hello Kim,…..).
Remember China? You Brits ran the opium trade there not so long ago and addicted at least 10% of their people to your narcotics. You did it because China had built up such a stockpile of British pounds from all the tea, spices and silks that you imported, that you set up this drug cartel growing poppies in India and converting them to opium, then selling it to the Chinese in order to get your pounds back off them. When their government protested you sent the navy in to sort them out and then you stole Hong Kong from them to give you a base to continue trading your opium to them for the tea, spices and silks that they produced. If you Brits think that is old history and forgotten, I bet there are those in dark places in China who have not confined it to ancient history. What goes around comes around.
And if you still think the Brexit decision is the smart one, just remember, Donald Trump and Sara Palin agree with you.
Footnote: The referendum is actually not binding on Parliament. It still requires Westminster to pull the Clause 50 trigger on the EU agreement. If the TV show “Yes Minister” is more documentary than sitcom, then the bureaucrats may yet win the day with delay, delay, delay. Meantime PM Cameron has thrown the mess over to Johnson. His resignation is effectively saying ‘you caused this mess, Boris you clean it up’. (His actual words to his aides were: “Why should I do the hard shit?”.