Post-Brexit focus should be economic, not market driven

The result of the Brexit referendum last Friday gave me a mild surprise but I was not totally shocked.

While the bookmakers and the markets believed it would not happen, the opinion polls were suggesting that it would be a close run thing and that is pretty much how it turned out.

I had believed, for some time, that at the end of the day sanity would prevail. It didn’t, but perhaps that shouldn’t have surprised me. Democracy does have a nasty habit of delivering outcomes that stretch the bounds of sanity.

What has really shocked me, however, is the reaction of the “leave” side since the vote.

They have described some of their pre-referendum assertions as “possibilities rather than promises” and they have absolutely no idea of how to deal with what has actually transpired.

It is a little bit like a dog following a car — if he ever caught it, he wouldn’t know what to do with it. Perhaps that shouldn’t have shocked me either.

They described “project fear”, which was the term the “leave” side coined to describe the “remain” campaign, as a giant hoax.

Clearly that has not turned out to be the case.

The results of the referendum are now very real and are pretty frightening.

The Labour Party is imploding; the prime minister has sensibly announced his resignation; the leadership of the Tory party — and, hence, the next leader of the country — is far from certain.

The EU does not want to negotiate with the UK on anything until Article 50 has been triggered.

The UK is in absolutely no hurry to trigger it, including bizarrely the “leave” side. Financial markets have been pretty chaotic, although as expected they are starting to settle down again for the moment at any rate; and generally and justifiably there is a level of fear and uncertainty prevailing that is at fever pitch.

There are just so many “unknown unknowns” out there at the moment, that planning is a total waste of time.

We do know certain things. Britain is a parliamentary democracy, where decisions are taken by parliament rather than through referenda.

Last week’s referendum is merely advisory and could, in theory, be ignored by parliament.

However, to ignore such a referendum would be incendiary from a political and popular perspective.

The result cannot be ignored and will have to form the foundation for the way forward.

The UK Government could seek to get concessions from the EU on the free movement of labour and then perhaps hold another referendum. However, this might not be that easy to deliver, particularly from an EU perspective, where free movement of labour is such an integral part of the whole edifice.

The EU is anxious that the UK would now trigger Article 50, which would represent the formal declaration of the intention to leave. Only the UK can decide when to trigger the Article, but once it does, the power switches totally to the EU-27 in terms of the negotiation process.

David Cameron is leaving the discretion to do this with his successor, who will be elected in September.

The general view is that if the UK does actually proceed to leave the EU, it will eventually agree to the Norwegian option, whereby there would be access to the Single European Market, but the UK would have to sign up to the rules and regulations of the market, including the free movement of labour, and also make a significant EU budget contribution.

Norway has to accept the rules of the EU, but cannot influence them.

In effect, it has “Integration without Representation”.

If the UK does eventually leave and agree such a deal, it poses the very serious question as to why it decided to leave in the first place.

Not much about the vote to leave makes any sense, but the people have spoken and woe betide the politician who ignores the will of the people.

In the meantime, uncertainty will be the name of the game, and there is nothing that saps business and consumer confidence more than uncertainty and fear of the unknown.

A sharp slowdown, and perhaps recession, is now likely in the UK.

This would not be good news for Ireland.

Meanwhile, sensible people should learn the lesson that populist politics can deliver very poor outcomes.

The focus should not be on how the markets are reacting, but rather on the real economy effects over the coming months.

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