When I first head the term “Brexit” casually mentioned, I thought someone was talking about a new breakfast cereal. I didn’t connect that it was a cute term for a “British exit” from the European Union (EU). I didn’t think that Britain would vote to leave the EU, nor it seems did British Prime Minister David Cameron who called the vote seemingly to placate rambunctious members of his back bench. In case you missed it, the result was 52% of the 70% of eligible voters who turned out, voted to leave. And Mr Cameron found himself in an untenable political position, offering his resignation.
Referendums on subjects this huge invariably get voted down – and that’s because most people just can’t deal with change, opting to stay with the status quo. Some good recent examples of that are the Scottish Independence vote, lost 45%/55% and the vote taken in 1999 here in Australia for a Republic, again lost 45%/55%.
I lived in London for a year in 2010 and had a really wonderful experience. I did note then that a cross-section of the community were growing in their opposition to the rules under which the British had to live, which were created and enacted by unelected EU officials on the continent. The huge elephant in the room though was the open borders which bought large numbers of people from all over – mostly Eastern Europe and even many from Africa and the Arabian States (coming via Europe) arriving and entering the country. That unsettled some people as they saw their country changing and not for the better. And they liked not the thought that they were not in control of their own destiny. They felt they had no sovereignty – or control over their own land.
I found it wondrous that I could walk down the streets of central London and hear a dozen different languages in the space of a few hundred metres. Or that I could buy Spanish oranges or French strawberries along with Dutch cheese in the local supermarket. A lot of that could change as new trade agreements will need to be negotiated, though it would be reasonable to expect that each nation will want to ensure their economy by keeping up foreign trade. And with the borders more closed, perhaps there will be less cultural diversity?
The UK could have an easier time of it than other nations who may have chosen to leave the EU because they retained their currency, the pound, when the Euro was introduced in 2002. But make no mistake there will be continued uncertainty and volatility in the UK, European and global marketplaces over the next year or two while this vote is implemented. This is because we are all so much more economically connected than in past centuries. Though I am reasonably certain that over time all the fuss will die off and people will go back to living their lives as before.
An excellent recent example of such turmoil, is the wide ranging effect of what became to be known as the GFC, which should really have been called the USAFC. The fact that some America institutions sold their dud loan assets all over world ensured that. Right now, stockmarkets and currencies all over the world are weaker, the pound dropped to a 31 year low and the Euro dropped 8% in value.
And that is all before anything has actually happened. So far it’s just been a vote.
And there are even some who are calling for more referendums until the right result is achieved! The politicians who set the vote up made an elementary mistake in not knowing the eventual result before the poll was conducted. They underestimated the will of the people. Having said that, although the overall vote was in favour of leaving, the majority of Scottish & Northern Irelanders, younger people and Londoners all voted to stay. The Scots & the Irish are now considering their own positions and may look to organize a vote to leave the UK.
So why should you care?
Because the gentle flapping of the wings of a butterfly on one side of the world can cause a typhoon on the other side of the globe.
In other words small economic effects in Europe could become large here in Australia. For example, foreign investment in to property in London may be curtailed for a while, since the UK may not be considered “safe” until this EU stuff gets sorted. A good portion of that capital may find its way to Australia, which could support our property markets. On the flipside, if overseas financial markets tighten up capital raising for our banks, that could mean less finance for housing here in Australia – and that would have a negative effect on values. And if Britain’s economy falters, that might be bad for us since they are our 7th largest trading partner and a significant source of foreign investment capital.
For the moment I don’t think your house value is going to change overly. So I don’t see any need for wholesale panic or concern. Though it is wise to keep up with the global economy.
Change can be an amazing thing. I think the overall result for Britain will depend on this – did the people who voted to leave do so because they wanted to go back to “the good old days” – or were they looking forward to a new and better future?
They can’t undo the change wrought by 41 years of EU membership, so I hope they are looking forward to a new and exciting times.