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Two Brexit visions as seen from London

[Editor’s note: Miles Staude works in London and voted to ‘remain’, and considers the Brexit result “a very sad turn of events”. He received many requests for his reaction and wrote this update exclusively for Cuffelinks late during this week. In an earlier note, he wrote optimistically: “It is important to know however that the final outcome does not necessarily have to be as bad as the initial headlines have made out … If the UK can maintain access to the common market, then the actual impact will be quite mild.”]

The first fight in the 'Brexit' referendum was not in fact between those in the leave camp and those campaigning for remain. It was instead a fight between two very different Brexit parties seeking the nomination to be the official leave campaign from the Electoral Commission.  At stake was the ability to raise and spend a large amount of money under the Electoral Commission’s campaigning rules. Grassroots Out, the party associated with Nigel Farage’s UK Independence Party (UKIP), had a wide support network built up from years of railing from the political edges. Vote Leave, a movement supported by leading conservative MP’s like Boris Johnson and Michael Gove, was a newer organisation seeking to run as a cross-party establishment movement.  Vote Leave won the contest, becoming the official leave campaign for the referendum. This however did not stop Grassroots Out from raising a significant war chest of its own, and going on to campaign as the anti-establishment party of the referendum.

The different campaigns to leave

For many years, UKIP has campaigned on an anti-immigration platform. Over the past decade the relative economic success of the UK, combined with the free movement of labour rules which govern the EU, has led to a large increase in the number of Europeans living and working in the UK, a situation that has unsettled many voters across the country. Grassroots Out campaigned in the referendum on a similar theme, a heavy focus on the perceived risks coming from ‘uncontrollable’ immigration. At a time of austerity, falling living standards and rising levels of terrorism, it was an easy sell to much of the electorate.

Vote Leave in contrast ran on a much more principled campaign. The essence of the Vote Leave argument was a democratic ideal. Britain had ceded too much power to Brussels, an unaccountable, undemocratic Leviathan.  Their argument ran that a UK freed from bureaucratic red tape would go on to prosper outside of the EU, striking trade deals around the world in a manner that reflected its outward-looking, free-trading nature – a nature that was inherently at odds with inward-looking continental countries.

Vote Leave’s vision for Britain was for a European Singapore, free-trading and outward-looking. Grassroots Out’s vision was for an end to immigration mixed with nostalgia for older times.

These two different visions matter greatly today as the UK starts on its path towards renegotiating its relationship with the rest of Europe. In economic terms, the most important feature of EU membership is the access it provides to the European common market, the largest free trading bloc in the world. Access to the common market does not only come through EU membership however. European countries like Norway and Switzerland maintain access, whilst still retaining many of the key democratic powers Vote Leave has argued needed to be returned. Unrestricted access to the common market comes at a price however, including the free movement of labour throughout the economic zone.

Towards the end of the campaign Grassroots Out came under considerable criticism for running highly emotive anti-immigration ads. In response to these ads, Boris Johnson contrasted his own position on the immigration issue as such, “I am passionately pro-immigration and pro-immigrants.”

Know who will be negotiating with Europe

With these two different Brexit visions in mind, it is important to note that it will be the conservative government of the day, led by those in the Vote Leave camp such as Boris Johnson and Michael Gove, who will be the ones renegotiating the UK’s arrangements with Europe. If, and perhaps it is a hopeful if, those negotiating the new arrangements are true to their cause about a return of UK sovereignty, and less concerned about immigration, then access to the single market could still be maintained. Such a result would lead to a very different, and largely positive, outcome for the UK and Europe when compared to the Grassroots Out vision for the future.

The economic case for immigration is clear. European immigrants to the UK and pay more into the state coffers than they take out in terms of benefits. They are typically younger, healthier and more entrepreneurial than the general population at large. In every economic sense, they are a tremendous asset to a heavily-indebted economy with an aging population. How well this vision is upheld over the coming months will determine what the UK’s future relationship with Europe holds.


Miles Staude is Portfolio Manager at the Global Value Fund (ASX:GVF), which he manages from London. The opinions expressed here are his personal views and do not consider the circumstances of any individual.

July 01, 2016

What a balanced and insightful look into the two camps, I like that "Brexit Lite" and "Brexit Full" Appreciate the insight and independence Miles.

June 30, 2016

In addition to Miles Staude' points :

A majority in the UK voted in the 1975 election to join a European Common Market - tariff-free trade between 8 member nations – which was a good idea.. Since then, no government has asked any UK citizen for a view on the inexorable transition from that Common Market to the political superstate which the EU has become. It has its own President and an unaccountable bureaucracy, the size of which is unjustifiable, unnecessary and stifling.

The free-trade notion has become a single-currency political regime based on the politically-correct but erroneous concept of equality (of economies, standards of living, welfare programmes etc) across all of the many member countries. The actual inequalities have resulted in a migration from the east to the west leaving the eastern countries short of skills and with undeveloped industries, health systems etc. It is the European Government in Brussels, allied with Draghi and his money-printing debt-spiral that will bring about the demise of the EU, not sane countries opting to exit from this nonsense.

It is interesting to note that those parts of the UK that voted to remain are those that depend on a net inflow of funds to maintain their standard of living and local economy. (Guess why Greece didn't exit.)

Perhaps the classic regulation that best characterises the endeavours of the Brussels polies is the straight-banana regulation that set European standards for the acceptable straightness/bentness of bananas which meant that no complying bananas were available for sale for some time in the UK. Australia might at least be able to send normally bent bananas to the UK now.

June 30, 2016

I got an idea – if Britain can exit the EU to rid itself of a completely unnecessary layer of government and regulation – so can we. NSW and all other states can voluntarily exit Canberra (the Federal system). All the states need is to fund a common defence force (NOT built in Adelaide this time!) and customs and the rest is completely useless.

Andrew Brown
June 30, 2016

I can't factually disagree with your piece Miles, but the headline tells the story as to why so many overseas commentators got it wrong before and after - "the view from London" had blinkers on. As someone born in a part of Northern England's industrial wasteland, I would point out that the Australian view of the lead up to the vote never captured the fissures within English society of rich v poor, London v the Provinces, young v old and social strata. It was always a case that for "Remain" to win would require a "normal" vote and turnout from poor, provincial, older folks (PPOF). What happened was two fold: (1) the Labour Party's Remain campaign was execrable and (2) PPOF turned out in droves to vote "Leave" partly because of (1). My home town turnout was 15% MORE than the last General Election and voted nearly 2-1 to Leave, in a place where Labour have held the seat for all but 12 years since 1922. (BTW the Conservative MP leaving in 1922 was Samantha Cameron's great grandfather) Understand that, and you understand why the vote went the way it did. Sitting in London is no use!

I've never embraced the sort of panic which set in last week on the basis that PPOF voted in a vacuum - now evident from the rapid ditching of Corbyn - and so on a better informed basis can be turned around. At present, no-one thinks there will be Referendum 2, but it is clear with some changes within Europe to UK border controls, the PPOF will come around. In turn, this will require some changes in EU Leadership but that is also likely. It is hard to get across the antipathy between Cameron and Juncker even though both are pro-Europe.

Don't forget various countries voted against Maastricht and remain in the EU.

From an investment standpoint, I accept there is uncertainty but Miles is spot on that the "free-trade, less Brussels" brigade are likely to prevail and that Article 50 won't be triggered any time soon. The posturing on both sides is no different to the mud-flinging which accompanies any divorce. Markets are already looking through that with the overseas revenue heavy FTSE 100 above the pre-vote levels inside four days (despite bank and mining stocks!) and the more domestic FTSE 250 remaining below. The pound will likely stay weak (good news) but the "massive uncertainty" analysis snores the fact that there WILL be talks behind the scenes once the emotion settles.

The other angle is that by doing the homework ahead of a potential "Leave" vote, there were genuine long term bargains galore ACROSS EUROPE in the first two days thereafter, many of which remain. Act accordingly.

peter care
July 21, 2016

I understand the biggest difference was age. The turnout for over 60 year olds was 80 plus per-cent and they mainly voted to leave.

Fewer than half of under 35's turned out to vote but they generally voted to remain.

Now, staring their future in the face they are gobsmacked with the result and are now seeking a new referendum.

Sorry folks it's your own fault for not doing your civic duty and voting.

We now have a government lead by a leader who voted to remain, trying to negotiate to leave, even though it will be bad for the country.


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