Brexit

[Salome]

Originally Posted by iron yuppie

Would you? It seems like the assumption in this thread is that the EU is a hell of a lot healthier and more stable than it really is. You already have three member states in full-blown crisis (Cyprus, Greece, Spain) with another one looking poised to follow in Italy, also apparently rumblings of major financial problems on the rise in France. You can talk about the Pound struggling as well, which distracts from the Euro being barely 1.10 vs the Dollar as we speak. Only five years ago it was 1.60 if I am remembering correctly, maybe even higher.

It is not an assumption that companies are postponing investments in UK.
It is what is actually happening.
Apparently they feel it's more likely that the EU will survive than that they feel that the UK can offer them the required stability.
And if the EU will blow up, the UK will blow up with it as they are part of the EU and will be so for at least another 2.5 years. At a minimum.

[iron yuppie]

Originally Posted by Salome

And if the EU will blow up, the UK will blow up with it as they are part of the EU and will be so for at least another 2.5 years. At a minimum.

Not necessarily, because the UK has control of its own currency and can implement policy in that regard in response to external factors. France or Italy cannot do that. If the EU blows up, all the new currencies in those states will be huge question marks versus the Pound, which is a known quantity.

This is still the immediate short-term, far too early to extrapolate long-term economic consequences. All the political squabbling in the UK certainly isn't helping with investor fears; if the political situation stabilizes and investors/business are still tepid about the UK, then we can start talking about long-term complications.

[Salome]

Originally Posted by iron yuppie

if the political situation stabilizes and investors/business are still tepid about the UK, then we can start talking about long-term complications.

I think Popmartijn's chart shows pretty accurately why it is doubtful the political situation will stabilize.
About half the voters who showed up voted quite passionately for a Brexit. They will find out they are not going to get what they thought they would.
Not even almost.
I don't see how this could lead to a stabilized political climate for years.
And years of no progress will have negative consequences for what follows.

[mama cass]

Originally Posted by iron yuppie

The UK government can choose to fund those for themselves if they like

[LuckyNumber7]

Originally Posted by Salome

I think Popmartijn's chart shows pretty accurately why it is doubtful the political situation will stabilize.

About half the voters who showed up voted quite passionately for a Brexit. They will find out they are not going to get what they thought they would.

Not even almost.

I don't see how this could lead to a stabilized political climate for years.

And years of no progress will have negative consequences for what follows.

You keep saying this, but I fail to see how that chart says anything at all about political climate. It suggests next to nothing. Once both England and Europe are suffering enough, there's zero reason to believe the people won't step up (let's not forget, Brexit was a near 50-50 draw). In hard times, which are probably near for the UK, there's no reason to believe the Brexit voice will remain the majority.

To think the Brexit plan won't somehow be masked as "different" but end up being virtually the same as the UK being in the EU is silly. We are talking about the same UK which has always been the special exception in the EU. They're going to do what's best for the UK. Even Brexit leadership, which isn't even guaranteed to be around, will catch wind of the idea that it's what they need. All they have to do is mention "Britain has the freedom and independence to sign their own deals" blah blah blah and half the voters won't even think twice about it.

[anitram]

Originally Posted by mama cass

contingency plans are already underway re. relocating the financial services, and job losses have already been announced - financial sector just couldn't stay in Britain due to passporting requirements... lots of contenders (including France) currently rubbing their hands together with glee... they want Britain out as soon as possible

And this (relocation of FS) can happen quickly and permanently.

Most people here are not Canadian and therefore probably not aware of the fact that Montreal was Canada's financial capital where nearly all financial services were concentrated in the 50s/60s/70s. Toronto was kind of like a provincial backwater. Then there was a lot of nationalist unrest in Quebec in the 1970s, threats of secession and so on. Well the banks had enough and basically uniformly relocated to Toronto in the late 70s/early 80s. There is now an enormous difference in how the cities have developed, where the wealth is concentrated, etc.

[Popmartijn]

Originally Posted by LuckyNumber7

To think the Brexit plan won't somehow be masked as "different" but end up being virtually the same as the UK being in the EU is silly.

This might be the eventual result (and I wouldn't be too surprised if it actually comes to this. I'll first need to see the Brexit actually happen.). But the thing is that many of the 'Leave' votes were specifically against issues (mainly immigration and complete independence) that will stay the same in such a situation.
Because in the Norway/Switzerland situation they will still need to comply with EU regulations. And they'll need to have free movement of people and services, if especially their financial sector wants to stay world-leading. But that'll also mean that other people and services can move freely to (and from) the UK.

[iron yuppie]

I think there is another dynamic to consider in UK financial relationships with the USA and also China and Southeast Asia. SE Asia especially is an important emerging market. I don't see why Brexit would harm British interests in those places. I get that the Eurozone is important to the British economy, but it's not the only major partner they have.

[mama cass]

Originally Posted by iron yuppie

I think there is another dynamic to consider in UK financial relationships with the USA and also China and Southeast Asia. SE Asia especially is an important emerging market. I don't see why Brexit would harm British interests in those places. I get that the Eurozone is important to the British economy, but it's not the only major partner they have.

a lot of trade with these other markets is thru existing agreements with the EU - they would need to enter into a whole load of new individual agreements...

[mama cass]

Originally Posted by anitram

And this (relocation of FS) can happen quickly and permanently.

Most people here are not Canadian and therefore probably not aware of the fact that Montreal was Canada's financial capital where nearly all financial services were concentrated in the 50s/60s/70s. Toronto was kind of like a provincial backwater. Then there was a lot of nationalist unrest in Quebec in the 1970s, threats of secession and so on. Well the banks had enough and basically uniformly relocated to Toronto in the late 70s/early 80s. There is now an enormous difference in how the cities have developed, where the wealth is concentrated, etc.

[LuckyNumber7]

Originally Posted by mama cass

a lot of trade with these other markets is thru existing agreements with the EU - they would need to enter into a whole load of new individual agreements...

But what makes you think they somehow won't? The world is not mad at the UK. Only Europe has any reason to "punish" them, and that won't last long when the EU ends up needing fair deals with the UK as much as the UK needs fair deals with the eurozone.

[iron yuppie]

Originally Posted by mama cass

a lot of trade with these other markets is thru existing agreements with the EU - they would need to enter into a whole load of new individual agreements...

Are you sure of this? Within the EU I would see why this might be the case, but what incentive would the UK (or any other sovereign state) have to bind themselves to EU regulations when dealing with Singapore, for example?

[Popmartijn]

Originally Posted by iron yuppie

Are you sure of this? Within the EU I would see why this might be the case, but what incentive would the UK (or any other sovereign state) have to bind themselves to EU regulations when dealing with Singapore, for example?

For the outside states a deal with the EU means that it's valid for all the countries in the EU. So they only need to negotiate with one entity. And I believe the EU member states are not allowed to negotiate with those outside states separately. Because of the (huge) internal market you don't want to have one point (country) of entry to be different than another one. That would only lead to confusion and erosion of EU regulatory standards.

So, with the UK leaving the EU they are also leaving all the trade agreements the EU made with outside states. This means they'll have to negotiate new ones for themselves. Now, I'm not saying their own trade agreements will be far worse than the existing EU ones (because, although the UK can't offer access to the internal market of the EU, they're still a pretty big economy on their own). But a new trade agreement will take effort and time. And the UK's resources for these are limited, while many new agreements will have to be made.

[iron yuppie]

Originally Posted by Popmartijn

For the outside states a deal with the EU means that it's valid for all the countries in the EU. So they only need to negotiate with one entity. And I believe the EU member states are not allowed to negotiate with those outside states separately. Because of the (huge) internal market you don't want to have one point (country) of entry to be different than another one. That would only lead to confusion and erosion of EU regulatory standards.

So, with the UK leaving the EU they are also leaving all the trade agreements the EU made with outside states. This means they'll have to negotiate new ones for themselves. Now, I'm not saying their own trade agreements will be far worse than the existing EU ones (because, although the UK can't offer access to the internal market of the EU, they're still a pretty big economy on their own). But a new trade agreement will take effort and time. And the UK's resources for these are limited, while many new agreements will have to be made.

Thanks for the explanation. I guess I just can't imagine why an already developed country like Germany or the UK would want to restrict themselves in such a manner. If anything that is another reason to be wary of the EU's future, if a place like Germany might be hindered financially because Asian investors are seeing the entire EU as volatile.

Just to be clear: do those stipulations about trade also extend to financial matters like buying bonds etc? I imagine the UK must still have a bond market of its own in which it can buy and sell on the international market independent of EU regulations. Or at least I would hope.

[mama cass]

Originally Posted by LuckyNumber7

But what makes you think they somehow won't? The world is not mad at the UK. Only Europe has any reason to "punish" them, and that won't last long when the EU ends up needing fair deals with the UK as much as the UK needs fair deals with the eurozone.

like i said earlier, sure it's possible, as long as the UK has the time and specialists to spare to bang out the new agreements, while the economy continues to tank in the meantime - these things take years...

[mama cass]

Originally Posted by iron yuppie

Are you sure of this? Within the EU I would see why this might be the case, but what incentive would the UK (or any other sovereign state) have to bind themselves to EU regulations when dealing with Singapore, for example?

because a trade deal with the EU, which automatically opens up access to a market with 28 countries, is much more attractive and feasible than having to draw up multiple agreements with each individual country

[mama cass]

Originally Posted by Popmartijn

For the outside states a deal with the EU means that it's valid for all the countries in the EU. So they only need to negotiate with one entity. And I believe the EU member states are not allowed to negotiate with those outside states separately. Because of the (huge) internal market you don't want to have one point (country) of entry to be different than another one. That would only lead to confusion and erosion of EU regulatory standards.

So, with the UK leaving the EU they are also leaving all the trade agreements the EU made with outside states. This means they'll have to negotiate new ones for themselves. Now, I'm not saying their own trade agreements will be far worse than the existing EU ones (because, although the UK can't offer access to the internal market of the EU, they're still a pretty big economy on their own). But a new trade agreement will take effort and time. And the UK's resources for these are limited, while many new agreements will have to be made.

[LuckyNumber7]

Originally Posted by mama cass

like i said earlier, sure it's possible, as long as the UK has the time and specialists to spare to bang out the new agreements, while the economy continues to tank in the meantime - these things take years...

The economy is currently tanking due in large part from speculation. Don't forget, nothing has actually happened yet. These things do take years, and luckily the UK has precisely that. They've years to transition.

Though, I don't want to step away from the EU over Southeast Asia at the moment. The eurozone is still roughly half of the UKs trading. At the end of the day, I just don't see how the Brexit movement actually survives. It unexpectedly made it through, and has sent the economy plunging. Support won't continue if hard times follow, but opposition will arise. And, at the end of the day, it's difficult to see this playing out in any other way than the UK and the EU continuing to be partners.

[Popmartijn]

Originally Posted by iron yuppie

Thanks for the explanation. I guess I just can't imagine why an already developed country like Germany or the UK would want to restrict themselves in such a manner. If anything that is another reason to be wary of the EU's future, if a place like Germany might be hindered financially because Asian investors are seeing the entire EU as volatile.

In which way is this different from, say, California not making agreements on their own with other countries, but restrict themselves to the agreements made by the entire USA? Or Asian investors making financial decisions regarding the US as a whole while looking at developments in Florida?
Though I don't think many would like to see such a strong unification as the USA, the EU does want to act (and be seen) a bit like the United States Of Europe. It may not always succeed in that, but at the same time it does bring advantages due to its sheer size. (And smart investors will always take into account what's going on in an individual country instead of only considering the EU as a whole. And those investors have the most money.)

[Popmartijn]

Originally Posted by LuckyNumber7

The economy is currently tanking due in large part from speculation. Don't forget, nothing has actually happened yet. These things do take years, and luckily the UK has precisely that. They've years to transition.

Once the UK triggers Article 50 of the EU agreement (that deals in very generic terms with the situation that a country wants to leave the EU) they have 2 years to set up agreements to leave the EU. That's not a long time.

And, at the end of the day, it's difficult to see this playing out in any other way than the UK and the EU continuing to be partners.

I agree, they will remain to be partners. On what level, that we'll see in the coming years. Again typical of the Leave-campaign, they wanted out but they didn't have a plan what they'd want once they get out.