Brexit: So Far, the Costs Are All to the UK
by Erik F. Nielsen, Group Chief Economist and Head of CIB Research, UniCredit
The British population defied the advice of the vast majority of domestic and international political leaders, economic and financial institutions, the business elite and most of the media when they voted to leave the EU.
The vote, which divided England (excluding London) and Wales against Scotland, Northern Ireland and London; old against young; and people with relatively little education against the ‘educated elite’, has already had three clearly negative effects on the UK.
First, the outcome of the referendum has caused huge uncertainty in the UK with respect to politics and policies. While the leadership vacuum after Cameron’s resignation was resolved faster than expected, new prime minister Theresa May is struggling with potentially unresolvable conflicts. Her first task was to appoint a government that reaches across the pro-EU and anti-EU divide in the Conservative Party. To do so, she appointed three prominent Brexit advocates (now dubbed ‘Brexiteers’) to the Foreign Office, and the newly created departments for International Trade and Exiting the EU. So far, most reporting from these ministries has been about turf battles.
Fig 1 - EU Referendum has Divided the Country
Source: Electoral Commission; UniCredit Research
While some have suggested that these ministers have been set up to fail, ultimately, the question of Brexit cannot be delegated. Not surprisingly, Theresa May’s first trip as prime minister was to Edinburgh to meet with First Minister of Scotland, Nicola Sturgeon, who predictably had responded to the Brexit vote with a vow to hold another referendum on Scottish independence. To keep the UK together is no doubt paramount to Theresa May.