Brexit Special


On the eve of the Brexit referendum, we catch up with the rhetoric from both sides. Will you be voting in or out?

Not a moment too soon

This post isn’t much fun to write.

  • It’s been a depressing campaign on both sides, and like many people, I can’t wait for the Neverendum to be over.
  • I only hope that people can forget in time about the horrible things that have been said.
  • I have my doubts.

I console myself with the thought that by batching together the last three weeks of propaganda, I’ve at least avoided writing about the EU on a couple of occasions.

  • It’s also good to hear that this is a “once in a generation” decision, though I’m sure that if the vote is close enough, that won’t be the case.

So on that cheery note, let’s sift through the recent hyperbole to see if we can come up with any facts.

Six reasons to stay

Let’s kick off in the Spectator, with what they called a debate, but was actually two articles each offering six reasons to stay or leave.

Matthew Parris was up for Stay.

His first three reasons were really just one – the EU is a proxy for things we don’t like:

  1. being told what to do by the government
  2. powerlessness
  3. the failings of the British economy

I don’t buy any of this.

  • I’m for smaller government, and there seems little prospect that the UK would replace EU bureaucracy with something worse.
  • The entire point of leaving would be to regain power, and while the UK economy has its shortcomings, it’s far stronger than those in Europe.

He makes a good point that people complain about EU immigrants when it’s really those from Asia that they don’t like.

  • But I defend their right to an opinion about who is let in.
  • And if they are reluctant to specify who they would keep out, this may reflect the prevailing political and media view – as famously expressed by Gordon Brown during the 2010 election – that anyone who does so is “just a bigot”.

Matthew’s fourth reason is that he doesn’t like the politicians on the Brexit side of the debate.

  • I suspect he knows them better than me, but I’d be just as happy with Boris and Gove as I am with Dave and Osborne.

Number five is that he wants everyone to get on with each other.

  • A fine sentiment. I want to be Prime Minister, but it’s not on the cards.
  • In any case, we can get on with people as an independent state just as well as part of a 28-nation block over which we have little control.
  • Perhaps we have a bit more input into who we want to get on with.

His final point is that the Common Agricultural Policy (the CAP) has been good for the countryside.

  • Perhaps, but at a cost of 40% of the EU budget, it ought to be.
  • If we think that is a priority, we can do better with our own money (which the CAP is, since we are net contributors).

So that’s a pretty miserable none out of six.

  • Let’s see if the Leave side can do any better.
Six reasons to leave

Daniel Hannon was in bat for the Brexit camp.

  • His arguments were more about what the EU is, and what it should be.

First, it’s a legislative group, rather than a trade association – commerce and cooperation would continue if we left.

  • I’m fine with this.

The second reason is a little more esoteric – the EU is a customs union rather than a free-trade area.

  • It sets barriers around all its members as well as removing them between them.
  • A small but telling point, indicative of the desire for political union, and particularly relevant for the UK, which is one of only two members who sell more outside the EU than within.
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Reason number three is the plan for the amalgamation of fiscal and economic policies between the states.

  • The Belgian commissioner wants welfare systems to be harmonised, and Juncker wants a European army.

Reason number four is the decline of Europe.

  • The EU was 36% of global GDP when we joined, and now it’s only 17%.
  • We joined a set of countries doing better than us, but now we’re stuck with countries doing worse.

Reason number five is that we can strike a deal “even better” than those of Switzerland and Norway, two of the richest – but smallest – countries in the world, and countries massively opposed to EU membership.

  • If being outside works for them, it can work for us.

Reason number six is the message that a Remain vote would send.

  • After Cameron’s trivial reforms, agreeing to stay in would be seen as capitulation.
  • Daniel lists a number of restrictive laws that have been postponed so as not to negatively influence the referendum.

Daniel’s reasons are less emotional than Matthew’s – more boring if you like – but easier to understand, and to agree with.

  • I wouldn’t quite call it a whitewash for Leave, but it’s not far short.
Catch-up links

What else have we missed?

  1. The Economist collected together its weekly Brexit briefings into a single PDF, which isn’t behind a pay wall.
    • There’s still time to read it before tomorrow’s vote.
    • I thought that the briefings started off well, but became increasingly biased towards Remain. ((This could of course have been me slowly forming the opposite opinion ))
  2. The briefs we haven’t covered so far include a couple of articles on what would happen after a vote for Brexit.
  3. The newspaper also looked at alternative models for the UK if we vote to leave, fixating for some reason on Iceland.
  4. The Economist also felt that the Labour party was letting down the Remain campaign: Jeremy Corbyn, saboteur.

There’s plenty more where this came from, if you can summon the will to search for it.

  • I’m going to leave it there.
Money magazines

MoneyWeek and the Investors Chronicle each took a look at what the referendum might mean for your money. ((As a Remain vote has become more likely this week, the markets have already responded, with the FTSE and sterling both up strongly ))

In MoneyWeek, John Stepek wasn’t convinced by all the doom around Brexit.

  • More money printing and QE would be likely, keeping interest rates low and house prices high.
  • Cutting spending and raising taxes is unlikely.
  • Sterling would fall, but it fell 25% in 2008/2009, and we recovered.

The Investors Chronicle focused on the risks from Brexit to the City, and hence to financial shares.

  • Stocks in general might fall, particularly cyclical mid-caps with heavy domestic exposure.
  • The magazine provides some potentially useful lists of stocks to look at.
  • There could also be a shift to Gilts, keeping yields low.
  • Sterling would fall, and more QE is possible.
  • Property transactions – particularly in London – have been depressed in advance of the referendum, but might well rebound afterwards.

In the FT, John Redwood (a Leave campaigner) concluded that Brexit wasn’t something to worry about.

  • He thinks that low interest rates are here to stay, whatever happens on Thursday.
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A lot of my readers and twitter followers are not big fans of economics, and in particular macro-economics.

  • Looking wider than that, I don’t get the impression that much of the British public is qualified to weigh up an economic argument in the first place.

I take the view that looking at the data from the recent past – even if it will be revised somewhat next month – can be useful.

  • But I’m less sold on forecasts, and in particular on forecasts that aren’t about the very near future.
  • Things change very quickly these days.

So it was never likely that either side could paint a convincing picture of what the economic future for Britain would be like five, ten or even fifteen years out (as some have tried to do).

  • It’s particularly difficult for the Brexit camp to describe a future that doesn’t exist, but equally I feel that the Remain camp are misleading the public by saying that a vote to stay means more of the same.

Status Quo isn’t on the menu.

  • The forty years of the UK’s membership of the EU have shown a clear direction of travel – ever-closer union.
  • Does anyone really believe that things will just freeze as they are today?

My view is that Brexit would inevitably lead to another two to five years of uncertainty and instability.

  • After that, things might be a bit worse than now or a bit better than now – depending on the decisions that we make and the deals that we secure.
  • It probably won’t make that much difference in fifteen years time – certainly joining the EU in the 1970s, and not joining the Euro in the 1990s didn’t – but even if it will, it’s impossible to tell from here.

So you have to make your own mind up about what’s best for you.

  • That’s democracy, for all it’s faults.

I’m voting to leave for two main reasons:

  1. We joined a trade bloc, and it’s turned into a “United States of Europe” federal project.
    • Our voice is lost in amongst 28 countries, and we sit physically and politically at one end of the EU spectrum.
    • We’re a rich country tied to a lot of poorer ones, who aren’t going to vote in our interests, so things will only get worse.
    • So although I’m not the world’s biggest fan of democracy, I prefer it to the way that the EU operates, whatever you want to call that.
  2. The second, and related reason, is that Britain, and in particular London, is the Rome of present day Europe.
    • All roads lead here, and so will all migration for the foreseeable future.
    • This puts a strain on public services, but beyond that, I’d like to live out my life in a country that I vaguely recognise.
    • Unless we get to say who and – more importantly – how many people are allowed to join us, that won’t happen.
    • Selfish, I know, and probably reflective of my age, but there it is.

I don’t do this lightly, as I like Europe.

  • It’s the EU I can’t stand.
  • But it seems we can’t have one without the other at the moment.

I suspect that following the tragic murder of a Remain MP last week, we will vote to stay.

  • But I also think that the EU is doomed, and while Brexit will speed its decline, it’s unlikely to exist in its present form in twenty years’ time.

But enough from me – enjoy polling day and the aftermath, whichever way things go.

Until next time.

Mike is the owner of 7 Circles, and a private investor living in London. He has been managing his own money for 39 years, with some success.

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5 Responses

  1. John B says:

    I’ve found that no-one who’s opinion I respect wants to Leave. Sorry that puts you in that camp, as I’m deeply bitter about the damage the Leave campaign has done.

    I’m not sure I’ll continue to read your blog in future.

    • Mike Rawson says:

      I’m sorry you feel that way. I can’t take any personal responsibility for either side’s campaign.

      I just don’t like the direction that the EU is headed in, and I don’t want to be part of it.

      I do worry that deep divisions will continue after the vote.

  2. Rebecca says:

    I sensed this would be a difficult article to cover as the referendum seems to have polarised opinions in a way I haven’t seen in politics for at least a couple of decades. It’s certainly unfortunate the way in which the level of debate has become increasingly acrimonious but I don’t think either side can claim the moral high ground.

    Personally I have benefited greatly from the EU in that I have travelled widely, have worked in several European countries and have the privilege of owning a property there. That said, I am uncomfortable with the direction of travel and am concerned that the flawed Euro project could eventually unravel either causing an extreme economic event or roll on for years having a corrosive effect socially and politically.

    All in all, I am going to stick with the Remain camp but I commend you for at least attempting the rarely seen qualities of trying to be analytical and balanced in this whole debate. Understanding different points of view is vital if you are going to have a proper debate, in the same way that people who are voting for Donald Trump should not be simply dismissed as being stupid or unhinged. There are whole sections of society that are being left behind in the great globalisation race and dismissing their views is folly.

    I’m tired of people on both sides of this argument telling me how to vote rather than explaining why I should vote for them. We don’t see eye to eye on this occasion Mike, but I for one will continue to read your excellent blog and incidentally will be cancelling my Weekend FT subscription for the very same reason.

  3. Martin says:

    Hi Mike,

    Putting the politics aside I think you are right in that the EU will eventually fade into insignificance as other regions of the world catch up. There is a quantum leap in robotics taking place right now that will not respect the borders of the EU and will require an increasingly agile and strategic form of Government to the meet the challenges this will pose – something the top down, centralised and bureaucratic EU has failed at miserably to date. I too will continue to read your blog as making the right personal wealth decisions will become more important than ever.

  4. Mike Rawson says:

    I agree with you about robotics – in fact I’m just about to launch another blog on that topic.

    Watch this space!

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Brexit Special

by Mike Rawson time to read: 6 min