Brexit gave rise to active speculation about an alternative to referendums in Scotland and Northern Ireland, the inhabitants of which the majority (62% and 56% respectively) voted for the preservation of places of great Britain in the EU. The first Minister of Scotland Nicola Sturgeon on June 24 said that the second in two years a referendum on independence would be conducted “with high probability”. “It is obvious that the possibility of a second referendum would be on the agenda, and it’s on the agenda,” said Sturgeon, promising that he would do everything necessary to ensure Scotland remained in the EU.
Northern Ireland Deputy first Minister Martin McGuinness said about the need for a referendum on unification with Ireland. “The British government had no democratic mandate to represent the interests of Northern Ireland in future negotiations with the EU”, — he stressed.
About the increased risk of further disintegration of the UK today, wrote analysts at Citi Research. According to them, Brexit raises the probability of the second Scottish referendum on secession from the Kingdom and divide the Belfast agreement” in 1998, concluded for a political settlement of the conflict in Northern Ireland. The Irish nationalist Sinn FEIN have already called for a referendum on reunification in Ireland. Brexit will strengthen the position of other nationalist and separatist movements and parties in Europe and possibly beyond, the commentary said Citi.
Common market under threat
“We leave the EU, but the key point is that we remain part of the European single market. Out of it would be a mistake. I will insist the government to keep the country within the single market became the basis of negotiations with the EU”, — said immediately after the publication of the results of the referendum, the mayor of London Sadiq Khan. However, the question of the fate of the single UK market and the EU remains open — it will be a subject of negotiation between London and Brussels. Supporters of Brexit — against the preservation of the common market, since it implies, in particular, the free movement of labor. “To stop the free movement of labour, but remain within the single market is a utopia,” says Professor Warwick University Nick crafts.
As options for the regulation of trade between the EU and the UK in the volume of $575 billion a year London may choose one of three models — the Norwegian, Swiss and Turkish. In the first country, not entering the Schengen area, retains access to the single market. The second option, trade relations are governed by bilateral free trade agreement. And the third model assumes that the UK can be entered into the customs Union, assuming free imports of industrial goods.
The Economist offers five models for commercial and institutional relations with the EU
1. To join the European economic area (EEA), which now includes Norway, Iceland, Lichtenstein.
2. To follow the example of Switzerland, a member of the European free trade Association (Switzerland is not included in the EEA, but has concluded with the European Union more than 20 large and 100 small bilateral agreements).
3. To enter into a customs Union with the EU, as did Turkey, or to conclude a unit of a comprehensive free trade agreement.
4. To use WTO rules to access the EU market.
5. The model, which are the most eurosceptic, is to agree on special conditions for the UK which provide a free trade regime with the EU, but excludes the disadvantages of other models (this scenario will be difficult to implement in a tense atmosphere after Brexit, according to The Economist).
The output of the common market will greatly reduce the investment attractiveness of the UK — according to the EY survey, 72% of investors named this factor important advantage of the UK. Right now the UK ranks first among EU member States in attracting foreign direct investment in 2010-2014, according to UNCTAD, the figure was $56 billion.
Minus £100 billion
A week before the referendum, the Economist Intelligence Unit in the report on Brexit, has predicted that in the case of the EU the negative consequences for the British economy could last until 2020. By that time, according to estimates by EIU, the British economy will be 6% (or £106 billion) less than if the country remained in the EU. Brexit would lead to the fact that the national currency will weaken, prices will rise, consumers will spend less and companies to postpone investment decisions. All this has a negative impact on the unemployment rate (peak — 6% — will be in 2018). The decision on an exit from the Eurozone will increase the number of unemployed at 380 thousand people, estimated by experts EIU.
While voters, despite the abundance of negative forecasts on the eve of the referendum, the majority did not believe that it will affect them personally. In April the British Ministry of Finance published a forecast stating that each household in Britain on average will Peter out on £4.3 million a year for 15 years, however, according to surveys by Ipsos, 70% of Brits decided that it wasn’t true.
The results of the referendum, very bad for British economy, says economist Bank of America Merrill Lynch for Europe, Gilles Sinks. “When the dust settles, will not find it. After the spontaneous reaction will end, it will be obvious that the main victim of the decision will be the British economy,” he writes in the review for June 24. Predicting the United Kingdom recession, due to the uncertainty of future relations with the European Union, Bank of America reduces growth forecast for UK economy in 2017 from 2.3% to 0.2%. Strategist at UBS Joff Dennis notes that the main consequence of the referendum for the UK will be the increased uncertainty, resulting in near-zero growth for several quarters.
According to preliminary estimates, the S&P Global, “moderately hard” scenario, UK GDP growth could be reduced by 1 percentage point in 2017, “if foreign investors will not lose to the country interest.” The Agency reported that the rating of the UK is likely to be lowered to c level AAA (highest level). “We believe that the AAA rating unwarranted under the present circumstances”, — said the head of Department of sovereign ratings S&P Moritz Kremer the Financial Times.
Escape from city
According to London mayor Sadiq Khan, London still remains the world’s best place to do business. However, a number of experts and business representatives do not agree with this. “There is no doubt that the leadership of London as the hub for currency transactions of $2.2 trillion is now under threat,” — said before the referendum, the head of consulting company Chatsworth Communications Nick Murray-Leslie.
The advantage of London, which forced large banks from the US and other countries to open offices in the British capital was accessed from London to the European market without restrictions (the advantage of the so-called “certification”). Now, this advantage will disappear, and on the reduction of the staff of the London divisions (4 and 1 thousand, respectively) previously reported, JPMorgan and HSBC.
A blow to the European project
Brexit is the impact on cohesion, confidence and international reputation of the EU, writes the FT. He undermines the liberal political-economic system, on the guard which traditionally are UK, EU, as well as partners and friendly bloc countries worldwide, the newspaper notes. “Decade” of the integration processes within Europe questioned.
Brexit could change the political landscape in Europe, as it will strengthen the position of right-wing parties in the West of the continent, the FT notes. It is unlikely that these forces will come to power, but with significant voter support, they will be able to directly influence the political agenda, and hence on the actions of governments.
In France looms the prospect of strengthening the right-wing National front, which opposes European integration and the tightening of immigration policy. The head of the party marine Le Pen has said that if they come to power, will push for a similar referendum in France. France “a thousand times more reasons to leave the EU than the UK,” said the politician. “Regardless of the voting results, they are evidence that the EU is in decline and everything is bursting at the seams,” she said.
In addition to Le Pen, the outcome of the British vote was welcomed by the Dutchman Geert Wilders, leader of the right anti-European freedom Party, as presented in the Dutch and European parliaments. “Now came the turn of the Dutch referendum”, — the politician wrote in his Twitter. Such sentiments will intensify ahead of parliamentary elections in the country in March 2017. In April, the Dutch have already voted against the ratification of the Association agreement between Ukraine and the EU by putting in the difficult position of the government of the Kingdom.
Officials from the EU to consolidate the 27 remaining countries in the bloc, where the population can be convinced of the need to strengthen ties to tackle the problems of extremism and immigration. But Brussels is not well suited for this, as the voters have developed a negative attitude towards bureaucracy. If this role will take on Germany, its pan-European leadership may be under fire. But if Germany takes a neutral stance, the political vacuum can fill out the nationalist forces in various EU countries.
The weak links of the EU
Although economists emphasise that the main victims of Brexit will become Britain itself, the EU will also have to face significant difficulties. “The combination of direct reduction in demand from the UK and higher uncertainty in Europe may lead to reduction in growth rate EU GDP from 1.6% to 1.1% next year,” notes Sinks from Bank of America.
Without the UK the nominal GDP of the EU will decrease by 16%, says Bloomberg Intelligence analyst Dan Hanson. Kingdom, generating 4% of global GDP, the second largest economy in the EU. Its GDP is comparable to the combined GDP of 19 most economically weak countries of the block. Brexit will hit the rest of the EU-27, but negative consequences for them would be weaker than for the UK, he said.
Brexit will break the internal balance of the European Union, will increase the political and economic weight of Germany in the Union — a prospect that appeals neither to Berlin, nor his bloc partners, the FT notes.
In addition, Brexit will strengthen the exposure to financial markets risks in the Eurozone. Investors may cast doubt on the political will and public support for the currency bloc needed to restore and strengthen after the debt crisis. Weak Eurozone countries will be under scrutiny of market participants. Portugal’s fragile ruling coalition that are experiencing financial difficulties Greece and Spain, in which, in addition to serious political contradictions, there remains the problem of the movement for the independence of Catalonia.
How exactly Brexit will affect the EU economy is hard to say. It depends, among other things, on three factors, says Bloomberg, will be a new agreement regulating the trade between the UK and other EU countries (at stake — $575 billion a year), the terms on which the British company will have access to the single market of the European Union, which is estimated at $13.6 trillion, and whether banks registered in the UK, continues to do business in the EU.
If you look at the direct business channels, most of all because of the situation the UK could be affected Ireland and the Netherlands, whose exports to the United Kingdom accounted for 7% and 6.6% of GDP respectively, says chief economist for Europe at Standard & Poor’s Jean-Michel six.