Britain is getting exactly what it voted for when it pipped for a Brexit.
It is hurtling towards a recession and a fractured political landscape that seems irreparable at this point in time.
This is not fear mongering. The warnings were laid out over and over again across a seemingly endless raft of reports from the Treasury, bank analysts, and independent research firms and think tanks.
These were dubbed “Project Fear,” the idea that doomladen forecasts would scare voters into submission to vote for the status quo.
And it is all coming true. Maybe people were “fed up of hearing from experts,” as a Leave campaigner claimed. But wilful ignorance does not negate the fact that all the warning signs were there in big, blaring neon lights.
All those forecasts are happening and the worst is yet to come.
Osborne’s statement was anything but reassuring
Britain’s Chancellor George Osborne finally made a speech to the public on Monday after being notably absent since Britain voted to leave the European Union. He sought to try and reassure the markets after stocks, the pound, and various other asset classes crashed in the immediate aftermath of the referendum result:
“I want to reassure the British people, and the global community, that Britain is ready to confront what the future holds for us from a position of strength. We have worked systematically through a plan that today means Britain has the strongest major advanced economy in the world.”
“On Thursday, the people of the United Kingdom voted to leave the European Union. That is not the outcome that I wanted or that I threw everything into campaigning for. Now the people have spoken and we, in this democracy, must all accept that result and deliver on their instructions. I don’t resile from any of the concerns I expressed during the campaign, but I fully accept the result of the referendum and will do everything I can to make it work for Britain.”
A week before the referendum took place, he said explicitly that Britain’s Treasury would have to draw up an emergency budget to plug a £30 billion budget “black hole” in case of a Brexit. That would be increases to income tax and cuts in spending.
And despite members of the Leave campaign filing his comments under “Project Fear” and members of the public saying that it was “typical” Conservative party policy to hurt the more vulnerable parts of society, independent research houses backed up the plausibility of his claims.
Carl Emmerson, Paul Johnson, Ian Mitchell, and David Phillips at the Institute of Fiscal Studies said in a report titled “BrExit and the UK’s public finances” that the UK economy would actually then shrink over the course of two years. so therefore, a Brexit would mean that Britain is
most likely increase borrowing by between £20 and £40 billion in 2019-20.
If the economy tanks, tax rises and public spending cuts become the natural course of action as the country’s fiscal position worsens.
The fact he said he not “resile” — which means to abandon a position — several times in his speech and in questions that followed his speech, indicates that these warnings from before may in fact come true.
Prophecies are coming true
What is also coming true is the fact that the markets are reacting exactly how the experts predicted they would.
Over the last few days, bank analysts and research firms have published countless notes on what to expect next. All the forecasts are dire and in line with what they said before the referendum.
Markets are in near-freefall.
Take a look at European stocks falling off a cliff since just before the referendum:
Banking stocks, such as Royal Bank of Scotland and Barclays are being annihilated. Analysts Chirantan Barua, Daniel Lasry, and Mark Burrows at research house Bernstein predicted this would happen in the event of a Brexit.
Pretty much every analyst that released a report over the last year about a Brexit also predicted the massive slump in the pound. Goldman analysts Silvia Ardagna, Robin Brooks, and Michael Cahill argue that a so-called “Lehman-type” scenario – where uncertainty in the markets increases as much as it did following the collapse of the investment bank Lehman Brothers in 2008 – would cause a huge crash in the pound sending it down to levels not seen in decades.
And they were right — alongside many other analysts, such as those at Credit Suisse:
On top of that, experts and ratings agencies warned repeatedly about how Britain’s economy was going to be so badly hit that it would threaten GDP growth and therefore would affect UK’s triple A credit rating. Moody’s on Friday cut its outlook on the United Kingdom’s long term debt to ‘negative’ from ‘stable.’ The lower the rating, the more expensive it is for the country to borrow money.
The UK Treasury, the International Monetary Fund, the Organisation for Economic Cooperation and Development, several independent research houses, and the banks all warned us about this. So really, those who voted for a Brexit knew exactly what we were getting ourselves into.
Britain’s broken political landscape
Predictions of political chaos sounded like hyperbole before the referendum but the aftermath of a Brexit vote has proven them correct.
Britain’s political landscape is an utter farce right now.
Prime Minister David Cameron announced his resignation in the morning that the referendum results were announced. While he will be PM until October this year, Osborne confirmed on Monday that the government will not trigger Article 50 — the formal notification to the EU that Britain is exiting the bloc and thereby triggering a 2-year exit negotiation period — until a new leader has been chosen.
On top of that, the Tory party is split in half right now and those on the Leave campaign side have been criticised for reneging on key campaign pledges, like giving £350 million to the NHS from the lack of EU payments or curbing immigration.
On Sunday, Boris Johnson, Brexit campaigner and favourite to become the country’s next Prime Minister, failed to give a concrete Brexit plan. Instead he made a dubious claim that Britain will still enjoy trade conditions of the EU’s Single Market.
Meanwhile, Britain’s main opposition Labour is a complete shambles. There have been more than 30 resignations in the Labour party, from backbenchers to the front bench shadow cabinet.
Corbyn, who had for decades been actively been a Eurosceptic, was in charge of getting Labour members to vote for Remain. But in the end, a bulk of Labour voters pipped for a Brexit:
Since the final results showed that 51.9% voted to leave the EU versus 48.1% that voted for Britain to stay within the EU, some argue that the surprising amount of Labour voters opting for a Brexit tipped the Leave campaign over the edge. There were 17,410,742 votes for Leave and 16,141,241 votes for Remain.
Elsewhere, predictions of an uprising of right-wing political parties across Europe are gathering strength.
In a note by Morgan Stanley a few days before the referendum, analysts predicted that a Brexit could help trigger widespread and significant political change across Europe.
Barclays also demonstrated in a note earlier this year that anti-EU feeling was rife amongst European countries, not just Britain.
And now we are seeing this prediction turning into reality.
France’s Marine Le Pen, leader of the far-right National Front party, called the Brexit “victory” while the party’s vice president, Florian Philippot, called for a French referendum on leaving the EU.
In Slovakia, the anti-immigration, anti-euro People’s Party-Our Slovakia, which takes over the European Union’s rotating six-month presidency in July, launched a petition to get its own referendum on EU membership.
Meanwhile, other right-wing and anti-immigrant parties in the Netherlands, Denmark, and Sweden are all calling for the same thing.
So, this is what you voted for Britain. It was not speculation, nor fear-mongering. We were all given this in-depth analysis months, even a year, ahead of the vote and now it is all coming true.