1st March 2016
The lack of a clear alternative plan to an EU membership is Brexit supporters’ biggest weakness, says Rowan Dartington Signature’s Guy Stephens…
It is just over a week since David Cameron fired the starting gun on the EU Referendum. The campaign will have lasted four months by the time we actually get around to voting on 23rd June and it is already turning into a media frenzy. On one side, we have the incumbent Government with all the top job holders supporting David Cameron which includes the Chancellor, Home, Foreign and Defence secretaries. A select few of the cabinet have chosen to support the ‘out’ campaign, with Boris Johnson being the main candidate with the most to gain should Cameron lose and inevitably have to step down. A cynic would argue this is why he has chosen this position and his 24 hour delay on declaring his position suggested he was assessing more than his view on Europe.
So far, the clamour from industry and the heights of economic power and influence are overwhelmingly in favour of retaining the status quo. The main argument appears to be ‘better the devil you know’ and that a leap into the dark on the basis of nationalistic emotion could well turn into a nightmare. It does appear quite convincing to us that to unpick all that has been put into place since the UK joined the Common Market in 1975 will create a huge amount of additional bureaucracy rather than its removal. However, nothing is written down as to what will happen if the UK votes ‘No’, and this is probably the biggest weakness with the ‘No’ campaign. What is the alternative and what will it look like? A Government analysis has already said this week that this process could take 10 years, already contradicted by Commons Leader, Chris Grayling, who is not surprisingly supporting the ‘out’ campaign. Last week also saw the spat involving Michael Gove over the legal robustness of what has been agreed in Brussels, with yet more contradictory debate which the man on the street will not understand or be particularly interested in.
It should not be forgotten that it was David Cameron who started the whole debate in Brussels, where he embarked on a unilateral crusade ahead of the UK’s election last year. It would now appear this was designed to appeal to Euro-sceptics, who may have been thinking of voting UKIP. Observing the electoral results for UKIP would suggest that this was successful but now he has to deliver something substantive without splitting the Tory Party down the middle. However, the vast majority of UK voters were hardly shouting from the rooftops, demonstrating about all the red tape and benefits for migrants as well as wanting this Referendum. Is the anti-Europe feeling really that strong that voters will be prepared to risk the leap into the dark where no-one knows what lies ahead ?
This is very similar to the Scottish Referendum: where the rule makers didn’t want it, so they made no effort to formulate a plan for the supporters and therefore anything other than maintaining the status quo looked too dangerous and uncertain. In that case, the collapsing oil price and departure of big business from Edinburgh was a key factor and the situation for an independent Scotland today would be looking grim had the vote gone the other way.
There has been lots of scaremongering with regard to importing and exporting to Europe, the Common Agricultural Policy and overseas comment from the US and China, all in support of maintaining the current position. This involves the imposition of trade tariffs, the need for goods to clear customs when they arrive from Europe and vice versa, the subsidies our farmers enjoy and the guarantees they get for their harvest. In addition, the US is in the process of negotiating a new EU Treaty and they very much want this to include the UK, probably more for their convenience than anything else.
Some high profile fund managers believe the economic arguments are marginally negative and certainly not as catastrophic as some would have us believe. However, the man and woman on the street who votes will not care too much about the technical detail of trade agreements and the like. They will be more interested in the personalities and job prospects as portrayed by the media – and we all know the media loves a negative story. However, it is interesting that both the Labour Party and Scottish Nationalists wish to remain in Europe, a rare alignment of recent views.
So, on balance, it looks like the ‘No to Brexit’ camp are winning the key economic arguments so far, with an information vacuum from the ‘Yes’ camp. The bookies odds are currently 4/11 for ‘No’ and 2/1 for ‘Brexit’ which supports this. Sterling has weakened since the announcement was made and demand for Gilts from overseas investors will have been undermined by the whole event. Unhelpfully, we have another restraining bear feature for the UK equity market which will boost overseas earners whilst Sterling remains weak. It will deter investors as the uncertainty builds as the currently unlikely just might happen if the pollsters are as inaccurate as they were ahead of the UK election.
Finishing on a lighter note, the next Eurovision Song Contest takes place on 14th May. It is said that the Europeans desperately want us to remain part of the Common Market. Perhaps this year we may actually finish in a respectable position, or maybe that is pushing it just a little too far.