It’s big news. On June 23rd, 2016, Great Britain voted to leave the EU. The question that may spring to many minds is: What happens next?
I would like to share my thoughts with you. Please feel welcome to share yours.
Nobody knows exactly what will happen
While many of those interested in Britain’s referendum (Remain in or Leave the EU) expected that the British would vote to remain, it didn’t happen, and 52% of the Britons voted to leave. As of next week we will start realising what the British have voted for. The consequences will not only be felt by the British, but by the whole of Europe and other parts of the world. I expect we will face a certain time of volatility and uncertainty. Whether it is going to be several months, or even a few years, only time will tell. The full repercussions and impacts will only be fully revealed over time.
Selloff on stock markets, fresh fuel for financial crisis
While we still haven’t experienced the full taste of global recovery from the financial crisis that started in 2008, sadly Brexit may add fresh fuel to the financial crisis. It already started the day after Brexit. A great number of investors are likely to sell off their stocks and seek safe havens like bonds and gold. This could result in a decline of the value of financial stocks over the coming weeks. The Pound and Euro may decline, while other currencies such as USD, Yen, Yuan Renminbi and Ruble may gain comparing with the first two currencies.
The UK may not remain united
Even in the case of Remain the UK would have had a dilemma with the huge division of the votes. While the majority of England and Wales voted for Leave, a bigger majority of Scotland and Northern Ireland voted to remain in the EU. I expect old wounds will reopen.
The Scottish people may feel uncomfortable with the outcome of the recent referendum. I expect Scotland may call another referendum about whether or not to stay in the UK.
If that is the case, Scotland may very likely vote for independence so they can stay within the EU. Northern Ireland may follow Scotland. And the EU may encourage the independence of Scotland and Northern Ireland.
Higher unemployment rate and recession expected in UK
Uncertainty and recession often go hand-in-hand. More than any other country, the UK will economically suffer as a result of Brexit. The uncertainty surrounding Brexit can make companies freeze new hires and start a fresh round of reorganisations. The question remains for the time being: will smaller companies survive Brexit? Some Britons may lose their jobs and unemployment in the UK may rise. In turn this would lead to a recession dominating the Britain economy for a certain period of time.
EU will be harsh on the UK
The EU and the UK never had a happy marriage. Now that the UK has decided to leave, you could consider it as a divorce. The parties may be harsh on each other when processing the divorce. And the harshness could be greater from the EU side. The European leaders could make it so painful to leave in order to send a warning signal to other member states to not even think about it.
European political and economic landscape will change
As the result of the forced divorce, the EU will probably care much less about the UK going forward. The UK will probably try to form new economic allies with alternatives; e.g. with Switzerland, Norway, Iceland, other European countries who are not EU members, and possibly even with Russia. Forced policy change will alter the economic and political climate in Europe. In any case, both the EU and the UK will be weaker on a global political scale, and I think the UK will have more to lose.
London to make place for other European cities
Which Fortune 500 company does not have operations in the UK, particularly in London? Think of the Citi Group, HSBC, Barclays, Unilever, Royal Dutch Shell, thebig four and many others who have huge operations in the UK, and particularly in London. I expect a notable number of these companies will pack up and move to other European cities such as Dublin, Amsterdam, Paris, Berlin, Frankfurt, Madrid, Vienna and the like. This means many jobs will disappear from the UK and move to other European countries along with the Fortune 500 companies.
EU criticism will gain ground
Whether or not we like it, it will happen. The EU sceptic political parties will become more vocal in Europe. They now have an example, the UK. They will copy the strategies and campaigns that the Leave camp in the UK successfully executed. We will be watching furious debates between the ‘remain’ and ‘leave’ camps in different European countries.
More exits will follow if Brexit succeeds
Before Brexit was made official, I already heard of other exit projects such as Nexit (Netherlands leaving EU) and Frexit (France leaving EU). Other imaginable exit projects are Dexit (Denmark leaving EU) and), Iexit (Italy leaving EU) and Grexit (Greece leaving EU). I expect the exit campaigns will grow and gain ground. However, they will await the results of Brexit. If Brexit has good results for the UK, I have no doubts that more exits would follow.
UK brain drain will kick off soon
In fact, Brexit was more the wish of the older generation who made it hard for the younger generation to remain in love with Britain.
I have no doubts a certain percentage of the young generation will seek their future outside the UK and this will be bad news for the aging UK. While immigration problems were important drivers of the leave camp, one of their new problems will be brain drain (emigration of their human capital).
Brexit has proven the EU needs reform
EU leaders will feel the bitter taste of the shortcomings of the EU institutes.
Perhaps one of the few positive results of Brexit may be the fact that the European leaders will realise no matter how great the EU membership is, if it becomes too much some members leave the EU family.
I expect the wiser EU leaders will rethink the EU policies. What does multi-level governance mean? What should remain national? What is wise to handle at European level? And many more such complex questions will be raised. The more dominant members such as Germany and France will have to make the EU institutes more democratic, setting more pragmatic policies which are digestible for other members.
What do you think?
These are my thoughts noted directly after hearing the result of the Brexit referendum. Do you agree or disagree? What would you add to the above? Please feel welcome to share your ideas. Always appreciated.
About the author
Hamid Safaei is the founder of ImOcean Academy. He is a qualified executive coach helping executives and budding entrepreneurs unleash their potential. Hamid has led successful business transformations for a number of Fortune Global 500 companies.
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