After Brexit – What now?

Brexit has exposed deep divisions in Great Britain and in the EU. An analysis by Mark Dawson and Pierre Thielboerger.

What an evening. It started with confidence. The markets were sure – the hedge fund managers had done their polls and made their bets. Britain was going to stay. The story of the night was the story of the pound. As Newcastle and Sunderland – bastions of the Labour party – delivered shocking results for Brexit, the pound fell like a stone. The markets that got the financial crisis wrong got this one wrong too.

There was a certain hope around the Brexit campaign in the last week. The hope was that the type of casual xenophobia, and even racism, that has been a cornerstone of the leave campaign (reaching its height with Nigel Farage’s now infamous ‘breaking point’ poster in front of a line of Syrian refugees) would be rejected across Britain. Surely in Brussels another hope was simply that the EU – a project beset by one crisis after another in the last decade – would finally receive some much-needed good news.

Today, that hope is dashed. This campaign and result have exposed deep divisions not just between Britain and the EU but within Britain itself. In truth, this was two parallel campaigns. Leave’s message of disenfranchised citizens, left behind by political elites and ‘swamped’ by perceived levels of migrants, won unprecedented support in rural England and the industrial cities of North and Central England. Remain’s call for Britain at the heart of a larger European and global market was equally backed by voters in Scotland, London and Northern Ireland. Similar divisions emerged between younger and older, and richer and poorer, voters. President Obama once lamented the division of the US into ‘blue’ and ‘red’ state America. Post June 23rd, we have just as deep a division in the UK too: Leave Britain and Remain Britain. It is difficult to see how these two Britains can be put back together again.

Where do Britain and the EU go now? Step one will be a stage of deep crisis. Britain now has a lame duck Prime Minister, clinging to the head of an emergency government, facing down an angry public on the one hand, and jittery global markets on the other. The Prime Minister will have no choice but to activate the Article 50 procedure for UK departure from the EU, while signaling to markets (and citizens who may quickly develop buyer’s remorse as house and stock prices fall) that the UK will still remain an open trading nation.

Step two will be a stage of deep recrimination. Domestically, the Prime Minister, and the larger ‘one nation’ Conservative party he claims to lead, is damaged beyond repair. Leadership campaigns in the Conservative Party (and perhaps the Labour Party too) await, with even the entire re-configuration of the UK party system a real possibility. At the European level, more questions will be asked on when the constant erosion of legitimacy and confidence in the EU project can be stopped.

Finally, in step 3, Britain and its European partners will have to find a new equilibrium. From the perspective of today, it is difficult to see how this will emerge. The EU’s very difficulties – the shaking of confidence of citizens in the EU project – will gain even greater resonance if the UK is, at some future point, able to achieve economic stability and independence outside of the union. Such a ‘success story’ could be one for other unsatisfied EU states (or populist euro-sceptic parties within EU states) to follow. This alone should make EU leaders highly reluctant to provide any future UK leader with easy access to European markets. In Britain too, any UK leader seeking to deliver a new relationship with Europe will face strong resistance if he or she negotiates access to European markets with heavy restrictions on UK sovereignty. The window for a mutually beneficial arrangement is small and is likely to close quickly.

This was a difficult night for Europe, and for Britain. There may be many more to come.

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