The June referendum decision of the United Kingdom electorate to leave the European Union (EU), nicknamed Brexit, was a political and constitutional revolution. The effects of the vote, for both the United Kingdom and the European Union, are set to be profound, though they are in many ways still unknowable. The British government is in no hurry to trigger Article 50 of the Treaty on European Union (TEU), the formal mechanism by which a member state starts a two-year process of disengaging from the bloc, and there is much to be figured out about what precisely they will ask for. The nature of that exit will define the relationship of the UK to the EU for decades to come, but will also set a precedent for other countries that might wish to leave in the future.
The shock following the decision is still manifesting itself — constitutionally, politically and economically. What many see as a catastrophe for the UK and for the EU, others see as a golden opportunity. There is a localization-specific aspect to this situation too.
The Disunited Kingdom
The decision by then-British Prime Minister David Cameron to hold a referendum on membership in the EU was a gamble born of fear of the electoral gains made by the United Kingdom Independence Party (UKIP), a populist and nationalist party that advocated withdrawal. Once considered a fringe group, its controversial but charismatic leader, Nigel Farage, had built UKIP to a level that began to unnerve Cameron’s Conservative Party. Cameron also knew that his own party had been historically divided on the issue of the UK’s relationship with Europe, a significant minority being in favor of either major renegotiation of membership or else outright withdrawal from the EU. In January 2013, Cameron promised to hold a referendum if the Conservatives were to win an overall majority in the 2015 General Election — something that seemed unlikely at that time. Upon the Conservatives’ surprise victory in May 2015, however, Cameron kept his promise. He calculated that a referendum would neutralize UKIP’s whole raison d’être and settle the Conservative split on the issue for a generation. His gamble was to fail catastrophically.
In a referendum campaign marked by hyperbole and focused on personalities, two major themes emerged. The Remain Campaign, backed by the leadership of all major parties as well as by most large businesses, focused on the adverse economic consequences they claimed would follow a vote to leave. The tactic was derided as “Project Fear” by opponents, but as is often the case with arguments advocating the status quo, it was perhaps the logical card to play in a country not marked by passionate enthusiasm for the EU. However, a campaign marked by threats of “punishment budgets” and lacking any positive case for EU membership was always at a disadvantage in the race to reach uncommitted voters.
The Leave Campaign, on the other hand, had what turned out to be a stronger message, summed up by repeated use of the word control. “Taking back control” was a cry that resonated with many people from traditionally conservative areas of Middle England to the traditionally Labour-voting urban working class in deprived and neglected former manufacturing towns and cities in northern England. Control in this narrative meant regaining sovereignty over many areas where it had been ceded decades beforehand, from fishing to farming to finance. But there was one area in particular that dominated like no other under this heading of control — immigration.
The refugee crisis, the deadly attacks by Wahhabi extremists in mainland Europe and elsewhere, and the phenomenon of cheap foreign labor from “new Europe” — the former Eastern Bloc countries — all fed into an atmosphere of hostility toward what was perceived to be a metropolitan liberal experiment in mass immigration at the expense of a working class left behind by globalization. The failure of the government to meet its pledge of reducing immigration levels to tens of thousands per year (a record net immigration level of 333,000 was announced during the referendum campaign), was blamed upon the undoubted fact that the government has no means of reducing numbers arriving under the EU’s free movement of workers rules. This was to prove a powerful factor in swaying many, particularly in traditionally Labour-voting urban areas (outside London, which is a very separate beast in terms of demographics and attitudes). The unlikely alliance between this bloc and traditionally Conservative middle class southern England (as well as south Wales) was sufficient to narrowly swing the vote for Leave, despite Scotland, Northern Ireland and London voting Remain.
The immediate political consequences of the vote to leave the EU were immense. David Cameron resigned as Prime Minister within hours. The subsequent Conservative leadership election, won by Theresa May, was short but bloody, characterized by brutal political backstabbing. Chancellor of the Exchequer George Osborne, like many of David Cameron’s allies in government, was unceremoniously fired. The most prominent Leave campaigner Boris Johnson’s leadership ambitions were torpedoed by his own campaign chairman Michael Gove’s last-minute decision to run himself; Gove was in turn sacked by new Prime Minister May. The new government has created a number of ad-hoc Cabinet positions specifically to deal with the issues raised by the vote to leave. Johnson, though frustrated in his leadership ambition, was surprisingly made Foreign Secretary, perhaps with an eye to keeping him politically neutralized or as a means of having him help sort out the mess he was instrumental in creating.
The Labour Party also turned in on itself, with leader Jeremy Corbyn subjected to a protracted coup attempt — ostensibly triggered by anger at what many in the Labour Parliamentary Party considered to be his half-hearted backing for the Remain campaign (he had been in favor of withdrawal in pre-leadership years). That saga has led to suggestions of a historic split in the Party, as well as to court cases, and has still not finished playing out. Corbyn is expected to retain his leadership given the strong backing for him among the Party’s membership. The real possibility of an unprecedented realignment of British politics remains in the coming decade.
Scotland’s First Minister, Nicola Sturgeon, emerged as the only apparently strong source of leadership in the days after the vote. Sturgeon articulated the case that Scotland had voted to remain within the EU but was instead being dragged out of it by England (though the Scottish majority in favor of remaining was less than expected). Her Scottish National Party (SNP) had lost a 2014 referendum in Scotland on independence from the rest of the UK, but Brexit now presents an opportunity to argue for a rerun on the basis that the political context has been transformed and the previous result voided. She is canny enough, however, to know that losing a second referendum on independence would kill the idea for decades. Short of poll ratings indicating somewhere in the region of 60%-plus support for independence, Sturgeon will bide her time — instead concentrating on an argument for Scotland remaining within the EU when the rest of the UK leaves. This is politically and constitutionally impossible, as she probably knows. The fall in oil prices over the last year means that the SNP’s case for economic independence is not as strong as it had been during the previous referendum. However, the prospect of being isolated from the EU in a United Kingdom geared more and more toward the turbo-capitalism of financial services in London might prove too much for many who opted for remaining within the UK last time around. Brexit could well turn out to be the fatal blow to the 300-year-old United Kingdom.
That in turn would have implications for the relationship of Northern Ireland to the rest of the UK. Northern Ireland’s Unionists have always been more emotionally aligned with Scotland than England — Scotland is easily visible from across most of the northern coast of Ireland, and most northern Unionists are of Scottish origin. A Scottish exit from the UK presents a major existential challenge for Northern Irish Unionism, faced with membership of a rump UK outside the EU and a Scotland possibly within the EU. Northern Ireland voted to remain within the EU, with Nationalists/Republicans overwhelmingly in favor of this given the distinct possibility of a hard border of customs and immigration posts being imposed across the island. This is because the Republic of Ireland remains firmly committed to EU membership. Both the Irish and British Prime Ministers have committed to keeping the border open and invisible, but that might prove impossible if the UK opts for a “hard Brexit” of leaving the European Common Market in order to stop the free movement of EU workers into Britain. The alternative, staying within the Common Market with all its attendant rules and regulations, necessitates commitment to EU free movement principles, and this would contradict the apparent will of the UK electorate, as well as making any sort of Brexit seem pointless. It is thus hard to see how, in relation to the Irish border, the circle can be squared (other than with a customs and immigration border between Britain and all of Ireland, a possibility floated by David Cameron in Parliament before the vote, and angrily rejected by Unionists).
The economic shock in the UK following the vote was immediate, manifesting itself while votes were still being counted. Sterling plummeted on the foreign exchange markets to levels not seen in 30 years. The low pound is good for tourism and exports but not for importers, and many British exported goods rely on imported component parts, the prices of which can remove any competitive advantage on foreign markets for the final product. Business and financial planning have been made very difficult, with numerous industries reporting a fall-off in orders or long-term plans being put into abeyance.
The Governor of the Bank of England, Paul Carney, took the controversial pre-referendum step of warning of significantly adverse consequences of a vote for Brexit. Though post-referendum data is not yet sufficient to confidently predict long-term economic consequences, what has emerged seems to vindicate the pessimism. Consumer confidence fell by the largest amount in 26 years in July, according to market research company GFK. Manufacturing output contracted at its fastest pace in three years in the same month. The National Institute of Economic and Social Research stated that the chance of recession within 18 months moved to 50/50 after the vote. Permanent recruitment fell in July to levels not seen since the financial crisis of 2009 according to a Markit/REC report, while the overheated London property market has begun to show several signs of contraction already.
The Bank of England Monetary Policy Committee, in reducing interest rates to an all-time low of 0.25% as well as announcing a large stimulus package of money-printing, seems to be throwing everything it has in its arsenal at trying to prevent a recession. Whether this is a wise precaution or the result of panic, the package indicates that the UK is expected to experience economic shock in the coming months and years. The EU economy as a whole is also taking a hit, post-Brexit.
What now for Europe?
Opprobrium has been heaped upon those who led the campaign for Brexit by leading political figures in Europe, some of it justified. However, responsibility might also be laid at the door of those very same European politicians, whether national or EU, for their inertia in response to recent crises. The Eurozone economic crisis has still not been fully resolved, after six years — the one-size-fits-all currency still suffers from the inherent contradictions that brought about the last crisis, without there being the fiscal or political union necessary to address the problem. With the Spanish and Italian banking systems in severe trouble, the perception of a disastrous economic experiment was one factor in the UK electorate losing faith in the purported economic benefits of membership of an EU where the UK was already separated from the core by its retention of sterling.
The woeful response of the EU to the refugee crisis, and the perception of complete inability to deal with mass immigration from outside the EU, was another factor. The UK is not part of the Schengen free travel area (already largely suspended and perhaps fatally damaged prior to the vote), but the obligation to allow free movement of workers within the EU meant that many in the UK felt that the country was a hostage to the decisions of others about who was let in to their territories. The UK’s labor market structure and generous welfare safety net make it attractive for people seeking to settle within the EU. So a perception grew that other EU member states were not doing enough to keep external borders monitored and enforced. The Schengen system was designed for more tranquil times, but is not equipped to deal with an age of mass movements from south to north.
That mass migration toward the EU has been exacerbated by the EU’s tariff walls, its Common Agricultural Policy (CAP) and the practice of dumping excess produce on poorer countries. Economies in North Africa and elsewhere cannot flourish when its infant industries and its small producers are smothered by this combination of EU policies. This in turn stokes high unemployment and poverty, contributing to the mass movement of peoples into Europe from North Africa and beyond. Another major reason for such movement can be found in civil wars that began as uprisings encouraged by European leaders, exemplified by the chaos in Libya since the overthrow of Muammar Gaddafi, supported by David Cameron and President Nicolas Sarkozy of France. The European response to this crisis has been rudderless, the notion of European solidarity taking a crushing blow in the process.
The British decision to leave is the first reverse to the seemingly one-way direction of travel toward permanent enlargement and integration. The vote has emboldened nationalist and far right parties across the continent. There was much talk, in the wake of the vote, of potential referendums occurring in countries such as Sweden, the Netherlands, Denmark and Hungary — though the likelihood is remote for the foreseeable future. European Union membership, perhaps for the first time, no longer seems the permanent and irreversible fact of life it did. This has shaken the EU’s ideal of itself to its core. How it responds to Brexit will influence how likely we are to see a contagion effect appearing across other countries with significant numbers of people disenchanted by the EU’s structures and processes.
What the UK gets out of the negotiations that follow its triggering of Article 50 will depend on the extent to which the EU wishes to make an example of the British to discourage repeats elsewhere. On the one hand, the UK is a huge market for French farmers and German car manufacturers, and support for reasonable accommodation exists. On the other, however, the rise of the likes of Marine Le Pen’s Front National in France scares European politicians and officials who fear the precedent set by the British. Privileges for the UK outside the European Union cannot be seen to be as good as or better than the current situation, lest the whole European project be undermined. Thus it is difficult to see how the economies of both the UK and the rest of the EU can avoid suffering long-term adverse consequences in the wake of the new relationship. This impulse to punish will cause problems for the only EU country with which the UK shares a land border — the Republic of Ireland. Ireland relies massively on trade with the UK, including Northern Ireland (as indeed Northern Ireland does with the Republic). The Irish might turn out to be a useful ally for the British in terms of having leverage over the negotiating stance of the EU, for the Irish will not wish to self-sabotage.
Another angle to the British decision with implications for the rest of Europe is the possibility, very real, of Scotland gaining independence. The Scots wish to remain part of the EU, a notion that gained the support of (and a standing ovation from) much of the European Parliament when proposed by one Scottish member of European Parliment days after the vote. However, the chance of this happening might be very slim when other states with their own secessionist movements get a say. It has already been suggested that the Spanish government would veto any transfer of membership status from the UK to Scotland alone for fear of encouraging Catalonian and Basque nationalists.
There is also the question of the status of three million EU workers living in the UK (as well as that of British people who have moved to other European countries). There was a palpable feeling of betrayal among many Europeans living and working in London following the vote, and much concern about their future living and working in the UK. Perhaps their fears will prove unfounded, but that will depend on the outcome of negotiations. For now, the uncertainty is detrimental to their ability to plan their lives — and to the companies employing them.
The EU must find a coherent and positive vision of itself in order to survive the crisis it finds itself in as a result of the combination of Brexit, the Eurozone problems and the refugee influx. Leadership and firm proposals are sorely lacking, and meaningful change is tortuously slow to achieve in the EU’s political and bureaucratic labyrinth. The sense of disconnection between the population of the EU and its leaders, the perception that there is a gilded elite with little understanding of the lives faced by most EU citizens, is grist to the mill of nationalist and populist movements that wish to see the breakup of the EU, and not much is being done to correct that perception.
The localization angle
Brexit will have, and is having, profound implications for both the UK and the EU, perhaps even for the global economy. Much will depend upon whether there is a “soft Brexit” (where the UK leaves but still has access to the Common Market in return for allowing free movement of EU citizen workers into the country) or a “hard Brexit” (where the UK leaves the Common Market entirely and negotiates separate trading deals). There is also the slim possibility of a British General Election where parties stand on a pledge to hold a second referendum — perhaps the only plausible means by which the decision of the people could be overturned with a fig leaf of a democratic mandate.
There are already attempts to capitalize on Britain’s exit by other member states. The French, in particular, are very keen to turn Paris into a rival to London in banking and financial services, and are actively encouraging banks and others to relocate to Paris in order to maintain headquarters within the EU. Other cities, such as Dublin and Amsterdam, are keen to portray themselves as an Anglophone gateway for non-EU (particularly American and Chinese) companies looking for EU bases. Large corporations such as Nissan and Goldman Sachs have hinted of potential withdrawals from the UK depending on the final settlement reached. The possible relocation of businesses or investment away from the UK (or indeed to the UK from elsewhere if the new regulatory environment proves conducive) provides opportunities for those working in key localization areas, from translation to culture-specific products. If the settlement eventually reached results in the repatriation of key workers in both directions, there will be knock-on effects for industries reliant upon localization services, with both positive and negative consequences for those working in the field.
There are already suggestions being made that English should cease to be a dominant lingua franca (particularly from the French), though that would likely prove counterproductive in a massively Anglophone global business environment. It does seem inevitable, however, that the loss of the UK influence will have a profound effect upon the culture and processes of the EU. However, localization opportunities will also open up where the UK seeks to forge new and independent trading relationships beyond the EU, particularly in emerging economies such as India, but also China and elsewhere. A dedicated Department of State has been set up by Theresa May to this end. The post-Brexit era of exploration for the UK economy, whether in terms of encouraging foreign direct investment or seeking out new market relationships, might offer a localization silver lining to the dark clouds gathering over the British and European economies.