Brexit – What next

https://www.pgurus.com/brexit-what-next/

It was a nail biting finish for Britain to decide by a referendum on staying with or leaving the European Union (EU). It should be noted that Britain was not part of Euro currency even though it was with the EU.

The primary issues were regarding sovereignty of Britain/ Refugee influx and increasing unemployment. It was felt that EU was deciding about fiscal policies and other regulations without considering local sensibilities. The fiscal deficit set by EU—at 3%-was not followed by many countries in practice but still was felt as a diktat from an unelected body to sovereign nations.

But the last straw on the camel’s back was the refugee issues wherein every EU country was to take refugees pouring in from Syria/ Yemen and even Pakistan.

In the context of local unemployment hovering above20 % and youth unemployment as high as 40% — many countries were unhappy about this.

So the Poorer / Rural/ Less educated British decided to opt out of EU while London voted for staying with the EU.
DemographicsOfBrexitVote

Also to be noted that younger generation voted for EU compared to oldies. Youngsters were looking at long term benefits if any in remaining in the EU while oldies were voting out of experience.

Interestingly Scotland voted for EU. This can have implications in terms of Scotland renewing its desire for independence. Even London may feel that it’s voice is not heard and demand separate status within EU. Already protests are happening. A large number of people in London are angry and demonstrating. It should be noted that London is known as Londonistan due to its composition of population.

So in a sense UK is unraveling with Scotland, Ireland and London wanting to have a say on staying with EU. Very soon, one can expect Scotland to re-try seceding from UK. Scotland wants to be in the EU, which might embolden EU to sweeten the pot for the Scots.

In other countries like France and Netherland too there is a clamour to leave the EU. We can safely say that the “Project Europe” is coming to an end. EU as we know may not exist.

In the short run the pound will be pounded with a fall. Already it had a massive intra day fall since 1985– to the extent of nearly 10%. It will help exports by UK.

India currently enjoys a positive trade surplus of around US$ 3.64 billion with the UK. The depreciation of the British Pound will differently affect exporters and importers. Our importers will be happy in the short term and exporters will fret.

India will need to negotiate agreements with EU and Britain separately. At present, India’s trade with Britain stands at around US $14 billion, which is more than the rest of Europe put together. Britain’s exit could also mean Britain and EU could compete for trading with India and enter into long term relationships, by resolving pending issues. It is expected that the EU will take a more favourable look to complete its negotiations with India to conclude the EU-India Bilateral Trade and Investment Agreement. However, India would like to first initiate and conclude a trade and investment agreement with the UK and then will consider concluding its BTIA with the EU, according to an analysis from CUTS-E group forum.

Indian Foreign Minister Sushma Swaraj noted that UK was India’s gateway to the EU as around 800 Indian firms operate from Britain, for easy access to the EU. EU leaders have already suggested that with Brexit, India will be treated as a third party and will need to engage with EU to gain access. This could adversely affect Indian companies as  a local office in London might no more mean being present in/ having access to EU. Consequently, they will have to revisit their business strategies and consider relocation. On the other hand, with Brexit and expected depreciation of the British Pound, in future, Indian investors in the UK may get a more favourable treatment. Similarly, British investors may like to divert their investment to India and other such countries where they expect to get better returns. The UK may look at India’s investment regime more favourably than the EU. Overall, there will be investment creation for India and strengthening of the capital markets between India and the UK.( says the same CUTS analysis)

Interestingly with Brexit, the UK will no longer be obliged to offer quota-based jobs to the citizens of the EU countries. This will open up the market for skilled and semi-skilled labour. Overall, there will be employment creation for Indian and Commonwealth country migrants, including temporary workers, in the UK.

Now the issues are much larger. It is perceived as a slap on the face of globalisation by the unwashed masses in rural England and Wales. At one level this argument is valid since they do not want impersonal bureaucrats from Belgium -where EU is head quartered -to rule them under the guise of European  Union.

#Brexit  will be a trigger point similar to the assassination of Archduke of Austria Hungary which many suggest as the beginning of 1st world war.

Europe is on a time bomb which may implode in a few years.

The decline of G-7 is a great opportunity for re-emerging markets and civilisations like India.

Views Personal.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: