Keep calm and carry on

12 min read

Since it became clear in the small hours of Friday morning that a majority of voters here in this democratic United Kingdom - of which, whether Nicola Sturgeon likes it or not, Scotland is still a part – chose to put the country on a path to exit the European Union, events have been overtaking events.

I have spent an inordinate amount of time, as I’m sure most of us have, reading and listening to opinions on what has happened, why it might have happened and what will happen next.

Let me, a reluctant exit voter, begin on a desert island. One finds oneself sitting on a beach having been shipwrecked. In due course bits of wreckage begin to wash up on the beach and one is faced with one of two choices. One can either gather in the wreckage, build a shelter and sit in it or one can strap the bits together the best one can, construct a raft and start paddling. The only thing that cannot be done is to reconstruct the vessel as it was before. The analogy of the Titanic is also not far away although it might prove difficult to identify whether the UK is the ship or the iceberg.

While stock markets around the globe were all over the place on Friday – at 3.15% down the FTSE outperformed the DAX, the CAC, the Dow, the S&P and most other major indices which, given the weakness of the pound, is no great surprise – and Bunds went shooting back through zero to open at -0.18%, I think it is fair to say that the proper level for the price of financial assets has still to be found. Where that might be I know no more than any other mortal and shall therefore this morning desist from trying to pin the tail on the donkey.

I have always argued that an opinion can neither be right nor wrong. One might agree or disagree with an opinion but one cannot measure it either for correctness of for fallaciousness. Among the many things which have crossed desk and screen this weekend have been the words many otherwise silent citizens from both sides of the argument who have felt the need to confine their thoughts to paper. One of the best lines is that of a Remain voter who suggested to behave as though the referendum was carried by 17.5 million over-sixty-five working-class racists is both childish, fatuous and does nobody any credit.

There have been all manner of argument proffered by the Remain campaign which, for better or worse, are now worth nothing. One of the more common ones is that British prosperity is the result of EU membership. I suspect that the reason so many of the older voters supported the Leave side is that they know this not to be quite true. We joined in 1973 during the Conservative prime ministership of the late Edward Heath who was hounded from office by recalcitrant trade unions and the three-day week. The turnaround in the fate of Britain came under Margaret Thatcher who took on the unions but who might never have had the chance, had she not also done the unthinkable by assembling a task force and retaking the Falkland Islands after they had been invaded by Argentina. In doing so, by the by, she brought an end to Argentina’s odious and murderous military dictatorship for which the people of that country might, truth be told, be just a little bit grateful. The turnaround of Britain was made in labour relations, not trade relations.

It is a fact that the 18-24-year-olds, in as much as they did vote, were firmly in favour of remaining. Although I sadly have no children of my own, I understand the youngsters of this age group to be dubbed “Generation Snowflake” for their propensity to go into melt-down when they don’t get what they want. They are a generation full of a sense of entitlement. I grew up when the voting age was 21 although it had been lowered to 18 by the time I had reached that age. When it was lowered, it was on the basis that the vast majority of 18-year-olds had between 1939 and 1945 gone to war, had fought and died for their country while the post-war bunch had done national service – even though by the time the voting age had been lowered, national service had been abolished – and were largely part of the working and tax-paying population.

Now, at 18, Generation Snowflake is off to “Uni” to take a three-year degree in Leisure Management or Hairdressing with Media Studies. I have one elderly friend who would most probably suggest that the time has come to raise the voting age again and not, as in the Scottish referendum, lower it to 16 on the basis of reversing the cry of the America Revolution to “No representation without taxation”. I’m not sure I would fully agree although this might also be a good time to more broadly review received political paradigms.

British prosperity is, nevertheless, not solely the reward for hard work but the result of the high levels of owner-occupancy through the years of asset price inflation in general and property price inflation in particular. It made my parents and my own generation rich beyond our wildest dreams and the banks’ generosity has permitted us to use our principal asset as an ATM, thus exposing large swathes of the population not only to a mark to market, should house prices correct, but to a vicious debt-trap. This situation was going to face the country sooner or later. Brexit, and its impact on immigration, is set to relieve the pressure on the housing market and the elephant in the room might very soon begin to trumpet. If there is anything to be scared about it is the way in which growth has been driven by ever increasing indebtedness, both at the private and public level. Paradigm review here too?

Cocking a snook

Much of the shock effect of the vote is not just the fear of the unknown and the uncertainty but also the way in which the majority of the population, small as it may be, has cocked a snook at political correctness. Political correctness is the polite way of describing Orwellian thought control. Ban people from thinking a certain thought and the concept can be forced to go away. In his inimitable Antipodean way, Alex Moffatt of Joseph Palmer & Sons in Melbourne observed overnight that “the European government has just experienced a taste of the backlash from a people who are sick of over-government and would do well to reflect on it as other EU nations might contemplate a similar move”. Oops!

There is suddenly talk across the union of the need to create a “road-map” for the future and to put it to a referendum. Isn’t that rather a case of trying to close the stable door after the horse has bolted? Brussels’ stubborn and unshakable belief in the infallibility of its ideology – do I detect a spot of “Kremlinitis” – is in many ways to blame for the outcome of the referendum and unless it wakes up pretty quickly, more countries will follow in Britain’s wake.

The hope that harsh treatment of the UK will scare other populations into shunning exit sentiments is ridiculous. If, on the other hand, “lessons have been learnt”, all I can ask is why not sooner and why did it take so long to wake up? Would it not be sad if a post-“road-map” EU were to be the very one which the British people would have in the first place voted to remain a member of?

Some jobs may well leave the City although legal vehicles can easily be established in Dublin without all the people having necessarily to physically relocated. Some jobs moved there long before the referendum was called. What the City will be, though, is an offshore haven free of the stifling constraints of Mifid II. Nowhere prospered more in the 1980s and 1990s than London where “petrodollars” could be traded and invested free from the vice of US regulation. London will surely, going forward, become to the euro what it once was to the dollar.

Taking stock

After the shrillness of the Muppet-in-Chief’s protestations, Mutti Merkel is the voice of reason; let’s take stock of what we have and where we are going before we begin to argue about who gets the DVDs. That seemed very much to be the approach that Chancellor of the Exchequer George Osborne wishes to take. FTSE futures, having traded as low as 5,822.50 overnight were back above at 6,000 shortly after he had finished his pre-open speech. He assured that the country and the economy are in good shape and he would stay on and do his best to implement the declared wish of the people. He might stand accused of trying to turn on a sixpence, no less so than Mark “The Magician” Carney did on Friday, but this is clearly not a time for self-immolation.

Political journalist and TV presenter Andrew Marr nailed it yesterday when he observed that things would not be as rosy as Brexiteers had hoped for but then again they would also not be as dark as Remainsters had feared.

I did speak to a captain of industry yesterday who was bitterly disappointed that an inward investment he had been working towards was swiftly cancelled on Friday. Of course things like this will happen. Yes, of course life will be tough during the next few years but we have to knuckle down and focus on the solutions rather than bemoaning the problems. Maybe it is time to revive the relationship with EFTA that now just constitutes Iceland, Liechtenstein, Norway and Switzerland but which once, before they joined the EU, included Austria, Denmark, Finland, Portugal, Sweden and, of course, the UK.

EFTA, the European Free Trade Association, in an updated and upgraded form, might just fulfil the promise of free trade without the political baggage which 52% of the British people appear to crave. This week sees the beginning of a new long game. None of us know what the result will look like but that should not per se be a reason for headless panic. The country is after all flooded with tea towels, mugs and key rings reminding us to “Keep Calm and Carry On”. Maybe someone will have one printed which reads “You have your Juncker and we have our Spitfire”.

Good luck this week and may the force be with you.