Six things we learnt from the EU referendum The United Kingdom’s historic vote to leave the European Union surprised millions around the world. The subsequent explosion in media commentary and market turmoil has done little to guide, reassure or unite people around a path forward. CNC has listed the six things you need to know. Our aim is to help you understand the impact of Brexit.
A nation divided – and a call for unity The result revealed stark differences across geographies and age groups in the UK. While most of the governing elite and professionals in the South East voted Remain, many older voters across the UK – and a significant percentage of the electorate in Wales, the Midlands and the North – voted out. The result has sparked an emotional response by those who feel the margin of victory is too small – with many blaming ignorance and social demographics for the result. The UK today is a divided society. Many families are divided, too. One of the key challenges facing the government and next Prime Minister is to unite the nation.
FACT : 52% of voters chose Leave. But there was a huge generational divide: 75% of people aged 18-24 voted Remain. Among those aged 65 and older, only 39% did. The result surprised financial markets, politicians, commentators and businesses. Most expected a Remain victory.
UK & European politicians were not prepared for the result, and it will change the faces of politics. With some in the Leave camp conceding defeat late on the day of the vote, it seems that until the results came in all sides had expected a Remain vote. Fast-forward 12 hours and the impact was seismic. David Cameron announced his intention to resign as Prime Minister. The same day saw the stirrings of a no-confidence motion against the opposition leader Jeremy Corbyn. Labour MPs accused him failing to convince Labour voters to vote Remain, and indeed of actively “sabotaging” the Remain campaign. The Scottish First Minister, Nicola Sturgeon, started pushing for a second referendum on Scotland’s independence. Meanwhile, the Liberal Democrats – the fourth largest political party in Westminster – will go into the next general election with a pledge to take the UK back into the EU.
FACT: A vote of no-confidence in the opposition leader, Jeremy Corbyn, has been tabled. Two-thirds of his shadow cabinet have resigned in the wake of the vote.
The Government and Bank of England had prepared, but were powerless to stop the shock to the markets. The Governor of the Bank of England responded quickly to reassure the markets. However, sterling suffered its biggest one-day sell-off in recent history, and the Brexit result wiped $2 trillion off the S&P Global Broad Market Index. The long-term impact remains to be seen, but bank stocks and housebuilders in the FTSE 350 suffered particularly badly as many investors forecast a UK recession, leaving them susceptible to takeover bids. Yields on 10-year government bonds sank below 1% for the ďŹ rst time on Monday.
FACT : In morning-after trading, the FTSE100 plunged as much as 8%, but recovered to close down 3%. Interestingly, stock markets around Europe saw bigger losses: the French CAC closed down 8%, while Germany's DAX index dropped 10% before closing down 6.8%. The main indices in Italy and Spain both dropped more than 12%. Second-day trading on Monday followed a similar path. On Monday evening, after markets closed, S&P announced it was downgrading the UK’s credit rating by two notches from AAA to AA.
So, the UK is leaving the EU. Aren’t we? The formal process of negotiating an exit from the EU will start once the UK formally triggers Article 50. This has not yet happened, and despite expectations that it would happen immediately after the vote, it now won’t happen until a new Prime Minister is in place – as late as 2 September. EU leaders want it to happen sooner rather than later. Brexiteers now want to trigger Article 50 only once it’s clear what kind of UK-EU relationship is on offer. At the same time, Remain campaigners are desperately seeking ways to challenge the implementation of the referendum. The success of these challenges remains to be seen, but it seems unlikely any government could entirely ignore the vote. However, with David Cameron’s resignation and the resulting leadership contest, will there be calls for another general election before the referendum can be implemented? And could that election somehow “revoke” Brexit?
FACT : The referendum was in fact only advisory. The implications of this are still unclear. Furthermore, in 2014 Scotland voted narrowly to remain part of the UK - on the premise of continued EU membership. The Brexit vote is now prompting Scottish politicians to call for a second independence referendum.
The EU is under scrutiny from within. Many Leave supporters have long decried the power of unelected politicians in Europe. Even the Remain voters saw the EU as “better the devil you know”. While European leaders rallied to protect the union, some have started to look at the EU’s internal problems that led to the referendum. And Jean-Claude Juncker, the President of the European Commission, is under fire for his handling of the negotiations with the UK earlier in the year.
Global impact.
The reverberations of Brexit are being felt beyond Europe. Some fear Brexit could cause the next global recession, while others cite poor economic data and stock market performance pointing in the same direction. EU leaders are concerned about contagion. Some EU politicians from fringe parties are already calling for referenda in their countries. Many also worry about the impact of this result on the upcoming US elections.
FACT : Despite much speculation, the extent of the impact of Brexit remains to be seen. The fundamentals of the UK economy have not changed (yet) – this is still one of the strongest economies in Europe.
China’s Reaction. Chinese Prime Minister Li Keqiang
Chinese Prime Minister Li Keqiang addressed the opening ceremony of Summer Davos in Tianjian last Saturday and he said “European countries are important partners for China. Under the new circumstances, China will continue to maintain and grow its relations with the EU and the UK. We hope to see a united and stable EU and a stable and prosperous UK”, and that “the world’s major economies, while making macro-economic policies, should consider not just their own growth needs but also the spillover effects of their policies”.
The President of Asia Infrastructure Investment Bank Jin Liqun
The President of Asia Infrastructure Investment Bank (AIIB) Jin Liqun said at its first annual meeting in Beijing that “the decision will not affect the UK's position as a major shareholder in the AIIB,” and that “We certainly believe that whatever happens in the follow-up of Brexit, the United Kingdom […] will continue to play an important role in the development of this bank”. UK was among the 57 founding members of AIIB that launched officially in January with USD 100 billion in capital. Former British Treasury Minister Danny Alexander is one of the vice-presidents in the bank, which has China, India and Russia as the biggest shareholders. The Founder of China Wanda Group Wang Jianlin
The founder of China Wanda Group, and richest man in the country Wang Jianlin said Brexit “would not be a smart choice for the UK”, and “a bunch of Chinese companies would move elsewhere in the event of Brexit” in February this year.
EU is the second-largest trading partner for China. In 2015, Chinese companies invested Euro 23 billion in the EU, increased 44% from the previous year. Among which, Germany, UK and France are the “big three” investment destinations for Chinese companies so far.
MSLGROUP China with 200 staff in 5 offices are dedicated to provide multinational companies operating inside and outside China with the most updated and in-depth insights from global markets on world’s pressing issues. The heated debate around topics such as the beginning of de-globalization, the rising of populism ideology, China’s structure reform and the ‘major-country’ diplomacy approach are shaping the strategy and decision-making of companies every day.
MSLGROUP is Publicis Groupe’s strategic communications and engagement group with more then 3,000 staff in 100 offices around the world. MSLGROUP will provide a series of updates from inside UK to our global network. As one of the world's leading international strategic communications consultancies, CNC - Communications & Network Consulting advises large corporations, mid-cap companies, institutions and individuals on all aspects of strategic communications. CNC is part of MSLGROUP, and has around 150 employees at 11 offices.
AND FINALLY - WATCH THIS SPACE These are key events to watch: • Conservative leadership contest to become the next Prime Minister - nominations by Wednesday, results by early September. • Labour party vote of no-confidence in its leader Jeremy Corbyn. • UK markets vs European markets - who will be the true losers? • EU meetings in Brussels this week.
Anna Davies, CNC, Anna.Davies@cnc-communications.com +44 203 219 8807
Lusha Niu, MSLGROUP China, Lusha.Niu@mslgroup.com +86 21 5169 9311