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Market Commentary

Of Brexit and icebergs

By June 3, 2016March 7th, 2023No Comments

We can’t avoid the Brexit referendum, as it is dominating both the front pages and business pages. This is a personal view.

Anyone who tells you that they know what will happen in the UK in the months and years after the referendum is a liar or a fool, possibly both. The track record of people like the World Bank and IMF and various central banks forecasting either recessions or simple GDP is abysmal, and this fact has been proven many times. You are guaranteed that the politicians know no better.

The stupidity of comments by Cameron on the prospect of World War III were surpassed by Boris Johnson, and this silly merry-go-round of blah blah has persisted almost daily.
One point of history is very clear – Britain was dragged into two world wars precisely because it was in alliances with other countries.

So what will dictate how you vote? Many will be driven by personal prejudices, some petty, some not so.

It might merely be the hum of foreign languages in the GPs surgery for some “Out” advocates. Many inclined to “Remain” are motivated by a sense of uncertainty deliberately spiked by Cameron & Co.

In the absence of trusted analysis by those leading both campaigns, such prejudices will persist in driving many votes.

Yet there are some facts that are indisputable, and these largely highlight the risk of the UK being dragged down by Europe. In extremis, being a part of the EU feels like being towed into dark icy waters by the Titanic. Lower economic growth, higher unemployment, more government debt, older demographics, less democratic accountability, and, at its centre, a currency union which is visibly dysfunctional.

Plus the EU desperately needs a range of reforms e.g. around a democratic deficit, a failing currency union, and debt and demographics. That these will not happen any time soon is illustrated by the strikes in France over watered down, and much-needed, labour reforms.

Perhaps the biggest, and equally measurable, concern is the growing revolt by ordinary people through the ballot box.

This is a phenomenon across Europe, from France to Poland, and Germany to Greece. Those with a sense of history know that such trends are extremely dangerous – all the more so when there is no leadership on the increasingly fragmented continent.

If there was a majority vote for Brexit, this will surely trigger dislocation in some sectors until new trade agreements are put in place. But it is the sense of this writer that it will ultimately generate a new dynamism for the UK economy, and prevent the UK being sunk by the increasingly dangerous EU.

P.S. There’s more to come on this over the next fortnight. Sorry!

Dennehy Wealth