On June 23, 2016, 17,410,742 Britons (representing 51.9% of the votes cast) voted in favour of leaving the EU. Out of a total population of 65.65 million Britons, that is just over 26%. How or under what conditions that exit should have taken place, has never been a question. It is very likely that misleading and sometimes even incorrect information from the 'Leave campaign' has had a substantial influence on the outcome of the vote. Despite the non-binding nature of the referendum, politicians have accepted the result quite unanimously. On February 1, 2017, the House of Commons adopted the decision to leave the EU with 81% of the votes. Even at that time, though, seven months later, there was no actionable blueprint for the future relationship with the EU after Brexit.
Now, almost three and a half years later, such clarity is still lacking in the House of Commons. Apart from it being clear that there is no majority for a 'no-deal Brexit', the rest remains muddled in uncertainty. Boris Johnson did manage to secure an unlikely agreement with the EU on a revised Withdrawal agreement. He even won his very first vote as PM on the first reading of the Withdrawal Agreement Bill (WAB). Subsequently, he managed to sabotage his bill, by insisting on an insincere and impossibly short three-day timetable, to get the law over the finish-line. The question is whether this was ego-driven or a deliberate attempt to force an election.
We must now assume it is the latter, and as a result, once again, the only constant is that everything is still uncertain. Johnson has been campaigning for the next election since taking office in July of this year. He needs 320 votes to get a guaranteed majority in every vote; he now only has 288. That makes governing impossible, and as such early elections inevitable. With the help of his spin doctor Dominic Cummings, Johnson has put himself in the self-proclaimed role of defender of 'the will of the people'. Anticipating these early elections, they minted the 'people versus parliament' slogan and positioning. Particularly in the early days of this Prime Ministership, he used it to significant effect with his usual mutterings and theatre. He went out of his way to irk the opposition and even managed to alienate members of his own party to make it look like they were the ones preventing getting Brexit done. The popular press helped the hard Brexiteers further by branding the Supreme Courts 'Enemy of the People' after their decision on the Prorogation of parliament. It is not necessarily democratic, but it did seem to work.
Even convinced 'remainers' are done with it, sick and tired of Brexit keeping country and parliament in a deadlock or by being put aside as traitors. Although most of them have not changed sides (although some admittedly have), they have given up their resistance against the outcome of the referendum. Justification comes by saying: "The people have decided; I don't want to stand in the way of democracy". Unfortunately, many miss the irony of it all.
What were people thinking?
Johnson has masterfully succeeded in framing the so-called will of the people. Surprisingly he received little or no counter play. This is extraordinary, if you consider that the vast majority of people had not yet heard, let alone thought, about the impact of Brexit on the situation in (Northern) Ireland. Neither was much thought given to the possible scenarios for the future relationship with the EU (customs union, free trade relationship, no-deal with WTO conditions), or how much money exactly went back and forth between the UK and the EU and how intertwined the UK and the EU are in terms of trade, services, cooperation, etc.
The main areas of concern for the average 'leave' voter stem from entirely different considerations:
Sovereignty
Nearly half of the 'leave' voters (49%) saw as the most crucial reason for their vote, the idea that the EU forced decisions upon the UK over which the British had no influence. That the world today cannot function without partnerships and what, in that light, actually entails sovereignty and how that works out in practice, was then and still is unclear to almost everyone.
Immigration
For 33% of the 'leave' voters, regaining control over immigration and UK's borders was the most important reason to vote for Leave. Although the UK is not part of Schengen and therefore has some theoretical control over its borders, it is required to admit foreigners with an EU visa issued in another EU country. That is bothering many voters. The fact that almost no catering establishment or chain of stores can operate without foreigners, has escaped a lot of Britons.
"Fear of being left behind"
There is also a large group of 'leave' voters, especially in the less prosperous midlands and northern England, who feel abandoned and forgotten. They see a lot of wealth accumulation in London and the regions around it, and feel marginalised and excluded by globalisation and free trade. The transition from a manufacturing to a service economy in recent decades has hit them relatively hard economically. Jobs have disappeared or are under threat, level of education falls short of current requirements and the future, and that of their children looks insecure.
Source: BBC Brexit referendum site
They do not consider themselves represented by the large EU, but above all have the feeling that their own politicians ('Westminster') have abandoned them. In this sense, the 'leave' vote is also a protest vote. However, it is not clear how exiting from the EU will help them, certainly under the terms of the exit agreement as Boris Johnson and the EU have now agreed. Much aid for socially disadvantaged and economically weak regions is paid for by EU funds, precisely for that purpose.
The 'Vote leave' campaign excelled in providing misinformation about the net costs of the EU to British voters, Turkey's membership status, many absurd and often outright incorrect examples of pointless EU rules and procedures and exaggerated the effect of losing British self-determination to the EU. It aimed to exploit emotions, create anxieties and sow uncertainty with vulnerable people about their place and future in a changing society.
Singapore-upon-Thames
Why leaving the EU would change anything about, let alone improve, the socio-economic circumstances of the typical 'leave' voter, is entirely unclear. The only explanation that makes sense to me is that there are ulterior motives which further the interests closer to the hearts of seasoned Conservatives. An article by Owen Patterson, a prominent brexiteer and member of the European Reseach Group (ERG), provides a rare pointer as to what those interests might be. In an opinion piece for The Daily Telegraph, Patterson advocates turning the UK into a financial-economic free state based on the Singapore model. He states that a conservative think tank, Economists for Free Trade, shares this vision. Surprise, surprise ... this think tank has or had links to prominent Brexiteers such as Jacob Rees-Mogg, Matt Ridley and David Jones as their 'advisors'.
An article from the London School of Economics and Political Science shows us what the Singapore model precisely entails:
"an ultra-business-friendly environment with low or zero corporation tax, low wages, weak trade unions, vestigial welfare provisions and a significant temporary migrant 'non-citizen' workforce (around 30 per cent of the total workforce), largely without the protection of national labo(u)r laws or access to welfare provisions."
Would that be the will of the British people, and more specifically the 'leave' voter? Is this what all the British want? Nonsense! This vision is the foundation for a financial-economic mecca so attractive, that it no longer matters if British bankers and insurers no longer have access to the EU financial markets. The money (always liquid) in these plans, now magically flows towards the UK. Unfortunately, however, in this world, there is no place for the average 'leave' voter (lower educated, older and without permanent employment or decent pension).
Whenever politicians present themselves as defenders or executors of the will of the people, loud alarm bells should ring and vigilance is appropriate. These politicians are often false prophets with a dual agenda who manipulate, lie and cheat to achieve their goals. They cleverly fuel and exploit the ignorance, discontent and emotions of the most vulnerable in society. The Conservative party, now entirely under the control of the hard Brexiteers of the ERG, has cunningly made leave-voter complicit in its actions ('we need to deliver on the people's vote'), thereby eliminating their resistance as much as possible in advance.
Now that general elections will take place on December 12, it is up to the British people whether they either reward or punish the Conservatives for their deception, manipulation and bullying. If they punish them, the electorate would also have to assess whether Jeremy Corbyn is fit to lead the country as a PM. With the LibDems positioning themselves for the remain option, it will be tough to make up one's mind.
Brexit monitor 2nd quarter 2019
That brings us to the economic impact of the Brexit up to and including the second quarter of 2019. My Brexit monitor follows the British economy in its development since January 1, 2015, and tracks it against that of the Netherlands and the EU as a whole. For this purpose, I have selected six parameters from the real economy and two that are indicative of confidence in this (see my first Brexit monitor for an explanation and explanation of this).
In the second quarter of 2019, the UK again lost ground. The EU and especially the Netherlands have recovered well from the dip in the first quarter of this year. The Netherlands is even at the highest level since I started this monitor in 2015. Compared to a year ago, the gains made by the British fell as the result of a slightly weaker GBP, but there is still a plus of nearly 0.2 on the scoreboard. Both in absolute and relative terms, the Netherlands shows the best result with a plus of 0.6 compared to a year ago. The EU is an excellent mid-range engine with a plus of 0.4 compared to a year ago.
Changes compared to last quarter and a year ago
The movements in the index are still mainly determined by changes in consumer confidence and economic sentiment. Often they anticipate developments in the real economy, and as such, they are considered indicative of what is to come. Here, too, the higher one rises, the harder the fall is. This is particularly true for the Netherlands. Over a year, consumer confidence, in particular, has fallen relatively sharply (down from 106.6 a year ago to 96.1 now), although it has stabilised in the past quarter. That is in sharp contrast to the Dutch development in house prices (up from 118.1 to 128.2). The British continue to amaze with the continuous factual increase in wage volume in the financial sector (plus 4.5 over the past year); how long can that continue? If the British succeed in creating a kind of 'Singapore-upon-Thames', as described above, then I expect that its growth will go through the roof. Even more than now, prosperity will favour the south-east of England (where the English 'remain' voice ironically sounded the loudest).
The overview above shows the relative values, with the second quarter of 2016 as the benchmark (index = 100). The table below shows the absolute values for the second quarter of 2019, which makes it possible to gain a better insight into the order of magnitude in which the outcomes move.
I always look specifically at the development of house prices in London, the beating heart of the British economy. Over the past year, house prices have fallen by an average of 2.7%. In the most expensive borough of London, Kensington & Chelsea, house prices have fallen by 4% in the past year (1,267 transactions, average house price now ₤1,254,715). In the second most expensive borought, the City of Westminster, house prices are recovering again with a decrease of only 0.4% over the past year (1,791 transactions, average house price now ₤965,019). Prices in the City of London fell the most with 9.8% (262 sales, average house price now ₤711,892). Of the 33 London boroughs, only four managed to record (modest) growth in house prices over the past year. In Ealing, prices rose most by 1.9% (2,566 transactions, average house price in June ₤486,033).
Development of exports from and to the United Kingdom with the Netherlands and the EU
I separately monitor the exports between the Netherlands, the United Kingdom and the European Union. From June 2016, the volume of exports in GBP from the United Kingdom to the Netherlands and the EU has increased considerably (plus 45.6% and 28.1% respectively). This is mainly due to the decrease in the exchange rate between the GBP and the euro. Interestingly, since 2015, exports from the Netherlands to the United Kingdom have grown by 16.8% (from the UK to the Netherlands plus 15.3%) and exports from the Netherlands to the rest of the world even by 23.6%. The negative "Brexit effect" that Dutch exporters feared so much does not seem to materialise (as yet) as a result of substitution effects through export to other parts of the world.
Due to the uncertainty about the outcome of the entire Brexit process, the British economy is under increasing pressure. Meanwhile, the chances of a no-deal Brexit seem to have decreased, but certainly not evaporated. Despite the current agreement between Johnson and the EU, a no-deal Brexit still is a possibility. Should it be averted, the current agreement still presents the worst forecast for the economy of all 'deal' scenarios. However, everything is still uncertain and will remain so until the general elections. I am not overly optimistic about any party winning a majority in these elections, so won't put any money on this being 'solved' by January 31, 2020. When will this self-inflicted misery end?