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Palm trees and politics - my thoughts on Brexit

Rolf Groenewold is our Managing Director and a co-founder of FocalAgent. Having cast his vote before boarding his flight, he learned of the EU Referendum’s outcome from a beach in Sri Lanka. Now back in the UK and with time enough for the news to sink in, he shares his thoughts on one of the biggest political decisions in living memory.

As the results of the EU referendum came in I was on a much needed holiday, happily kitesurfing on a beach in Sri Lanka. During my trip I was treated to the surreal combination of extreme sports, beautiful beaches and post-Brexit politics. I’m not going to lie, lounging underneath palm trees wasn’t exactly a bad place to ponder on the referendum results as information started to filter through.

To clear up my position on the matter, I voted Remain - although I do have biased reasoning. I was born in South Africa and moved to the UK before I reached double digits, so Britain is my home. I also hold a Dutch passport and being a part of the EU has enabled me to live my life as I know it – so it would have felt a little hypocritical to vote Leave in the first instance. I’m also a strong believer that everything is better when we work together, regardless of our race, nationality or the languages we speak. I’m proud to say that this is a belief that I’ve always supported in the workforce of FocalAgent.

There was a second part to my decision as well. Any uncertainty created within the UK economy always affects the property market and would thus impact FocalAgent. Although my outlook is still optimistic, I’d like to think everyone in my position will now be hyper-aware for the foreseeable (and unpredictable) future.

Buying time for Britain

As I sat sunning myself and recovering from countless wipe-outs practising a new kitesurfing trick (the S-bend), news reached me about David Cameron resigning. At first it seemed obvious that Cameron was just trying to save the last piece of his professional dignity, but then it dawned on me that perhaps he was heroically sacrificing himself for the good of the country (maybe both!). Cameron’s refusal to sign Article 50 before he leaves Downing Street would mean that Britain’s exit from the EU will be in the hands of our next Prime Minister. This would buy Britain a few extra months to see how the world reacts and will put the responsibility to the next Prime Minister to pull the trigger.

If the economic situation continues to decline, it could be political suicide for the next PM to sign Article 50 and plunge the country into another recession. Their time in charge would only be remembered for signing the country’s death warrant, not to mention that it would be four years of administrative duties, re-writing legislation and trying to negotiate trade deals without any leverage. If I had worked my way up the political ladder only to find this was the job on offer, I’d be having second thoughts!

A nation divided

Whoever takes the reins, it looks like they’ll be in charge of fractured and divided country. As I started to look into the demographic data about who voted there were some interesting insights. People with professional occupations or degree-level educations overwhelmingly voted to Remain, whilst low-income areas and people without passports decided to vote Leave.

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Source: Financial Times

 

Most noticeably younger people and older generations have been at each other’s throats since the referendum, with many young people unhappy that older generations have voted against their desire to Remain affecting their futures. Sky Data shows that 64% of under 24s didn’t vote. 73% of those young people who did vote wanted to remain in the EU. It’s a hard fact that shows young people that their vote counts, and political ambivalence will lead to a misrepresentation of their demographic. 83% of those aged 65 and above voted, and voted largely to leave the EU.

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Source: BBC

Perhaps most worrying for the UK is how fractured it is on a geo-political level. Scotland faced widespread contempt from England when the government held its Independence Referendum in 2014, but you can be sure the irony of the situation hasn’t been lost on them as they heard their arguments for Scottish independence basically recycled by Leavers pleading the case for a Brexit. With Scotland, along with London and Ireland, voting heavily to remain in the EU could we see a second attempt at Scottish (or even Irish, Welsh and Cornish) independence? As instability and unrest builds across Britain, it seems like the ‘United Kingdom’ is quickly becoming a paradoxical name.

Confidence vs. arrogance

It’s well known that Britain, or more appropriately England, has a less than sterling reputation across the globe (probably something to do with all that colonisation and more recently, the antics of our football fans) but what message does the Brexit send to our international neighbours? I’m not talking solely about governments and businesses; I mean the real people of Europe that you meet in the streets abroad or at home.

As of writing this, I’ve struggled to find sound reasoning for why we’ll flourish outside of the EU. There’s no economic data that supports being independent and it seems that patriotism along with misguided information (Nigel Farage NHS blunder) has driven much of the Leave vote.  This view that because we’re British we’ll be just fine out of the EU is actually incredibly disturbing. The fine line between British confidence and arrogance is about to be tested in possibly the highest risk scenario I can imagine.

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Source: BBC

In the fortnight since the referendum, things have already started to drastically change as the world reacts to the reality of a Brexit. The immediate global impacts including the pound falling to a 31-year low against the US dollar and £1.5trillion wiped off the global stock markets - the largest one-day loss since the collapse of Lehman Brothers which sparked the 2008 financial crisis. The reduction of Britain’s prestigious AAA credit to AA along with negative impacts to banks, airlines and property companies are just further evidence of the growing economic pressure we now face.

Even if things look like they may start to stabilise, I fear it may be short-lived in the face of these huge global events. The future for our economy is anything but certain at the moment with the PM’s resignation and but both major political parties facing a leadership crisis.

If destabilisation wasn’t enough, the EU is feeling under threat and is placing pressure on triggering Article 50 sooner rather than later, as well as openly stating that they will not be offering Britain any special treatment during negotiations. The latest irony is that the UK will need to look outside of its borders and rely on skilled immigrants to negotiate its trade deals with the EU! You’ve got to smile at that, regardless of the camp you’re in.

Uncertainty is contagious

An area that seemingly flew under the radar for many Leave voters was how a Brexit would actually be achieved, with campaigners basically ignoring what the actual transition process would involve. Throughout the Leave campaign justifications for the UK being better off outside of the EU were mostly made by comparing the future independent UK to ‘stable’ non-EU countries like Norway or Switzerland. What they neglected to mention though was that none of these countries actively left the EU, they were independent from the start – unsurprisingly, actually splitting from the EU is an entirely different kettle of fish. This transitional period is already affecting the country and I predict we are only seeing the tip of the iceberg with many of the key local and international economic stakeholders still to publicise what they will do next to protect their own interests.

The uncertainty that engulfs the UK at the moment is a very real problem for businesses, and sadly, it’s self-perpetuating. Uncertainty affects people’s confidence in the economy, which obviously leads to a reduction in spending and investment. This lack of growth in the economy becomes a vicious cycle.

Any publicised economic indicators such as stocks, shares, currency strength and GDP are a direct result of how people around the world feel about the UK economy. It becomes irrelevant if the Leave campaign turns out to be correct about Britain eventually being better off outside of the EU because international confidence is the driving force for the lives we enjoy living. The Brexit shakes the very bedrock which has provided this international stability for Britain.

Property and FocalAgent

The only thing we know for sure about leaving the EU is that the uncertainty surrounding it will be felt for months, years and maybe even decades. While Britain is a powerful country in many regards, exporting is not one of our strengths. As a nation we produce very little. Instead we rely heavily on importing goods and with a Brexit on the cards this is likely to get more expensive if we want to continue either trading with the EU or using trade deals that we negotiated as part of the EU. The negotiations won’t be entirely one-sided though, because as much as the UK needs access to the EU, we’ve always acted as a gateway for the EU to negotiate with our powerful allies like America. We now need to hope our powerful allies don’t seek alternative options rendering our global positioning as the door to the EU a little pointless!

If neutral or negative economic growth can be expected, it will unfortunately affect all businesses and, in turn, all those employed. Alongside the economic impact of reduced spending, the property market will be one of the first areas to be affected by the political shift and moving house will be a distant memory for many, which will obviously affect FocalAgent.

FocalAgent is already preparing to navigate the economic uncertainty left in the wake of the Brexit, and we are confident in continuing the company’s growth trajectory. This isn’t our first political ‘rodeo,’ having successfully weathered the global recession of 2008; not to mention the political upheaval following the 2010 general election, when we pivoted from a Home Information Pack (HIP) company; KeyHIPS to Property Marketing company; FocalAgent following a change in legislation scrapping Home Information Packs.

Plans always change

There are several calls for a pro-Remain candidate to surface and for a U-Turn on the Brexit to take place but there is a serious consequence to be considered.

If a pro-Remain PM was to be elected and attempted to backtrack on a Brexit, there would be widespread unsettlement from the Leave demographic. With the aggression and violence we’ve seen over the past two weeks, it’s not improbable to predict rioting (or worse) as a response to an overturned referendum. I fear we may be in an irreversible situation when considering the timelines available, but any action which could result in violence must be avoided at all cost.

In the end, I don’t expect that the Brexit will pan out like either of the parties predicted. Life is so often lived between the extremes, rather than a best-case or worst-case scenario. The likely middle ground is going to require concessions by all parties involved and a clean break from the EU whilst retaining all the benefits will be almost impossible.

At present the UK is holding very few cards as it prepares to sit down at the negotiating table, but as CEO of ‘Zappos’ Tony Hsieh once said when struggling at a poker table, “You can always change tables or just create your own.” If the UK’s trade negotiators (regardless of nationality), can change the fundamentals of the current negotiations (and in-effect reshape the table of negotiations), Britain may be able to achieve some of the desired results of a Brexit. Whatever happens, it’ll be one for the history books.

I imagine that was quite a heavy read, so for the sake of a laugh here’s a very funny, very pro-Remain video (You have been warned!)

Thank you for reading.

Rolf Groenewold

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