Dear David, Eoin,

I decided to use the time spent stuck in traffic in Knightsbridge caused by the nth tube strike to write down a few thoughts re what is happening in the UK, with no particular order and without aiming to come out with any brilliant conclusion.

My thoughts are the following:

1/ this referendum, as the one on Scotland independence, created a very serious institutional "vulnus" which will need to be mended, whatever the outcome. It will weight on the risk premium demanded by investors to put their money in this country. There's evidence of this in the FX market ‎already. Governance is everything.

2/ there is an extraordinarily high degree of uncertainty re what "Brexit" means, to a point that it will be impossible for anyone to make an informed and rational decision. 

3/ the only reason I can see to leave the EU is that the EU looks like a doomed political project. I can therefore imagine 4 scenarios for the EU and the UK:

I) Brexit wins + the EU collapses. Entails global prolonged recession and geopolitical chaos.

II) Brexit wins + EU mends itself. ‎It would mean a relative deterioration of Britain vs. rest of Europe. 

III) Britain remains in EU, and EU collapses. Entails global prolonged recession and geopolitical chaos and implies brexit.

IV) Britain remains in EU, and EU mends itself. Not very likely at this point, but I believe the most positive scenario.

From this point of view, I still cannot get my head around why going for a Brexit and risk scenario II, when Brexit remains a free option were things to deteriorate materially in EU (scenario III).  

4/The establishment of the City of London as financial centre is the result of a degree of independence which the square mile has historically maintained from Westminster. This independence has been however eroded over the centuries, especially because its population has diminished dramatically. Extending the concept of the City of London to Greater London: London as a whole may not have the anticorps to defend its international nature against the national interest of the UK, and consequently could lose its position as a financial centre. Or in other words: London's nature of Political Capital will prevail over that of Financial Centre. 

5/ ‎this is connected to point 4 above: tax paying, highly skilled, internationally connected foreign businessmen cannot vote for the referendum, and their permanence in London will be decided by the vote cast by - say - someone in Aberdeen who has no interest in maintaining London as it is. A practical example: in the company where I work, no one will be able to vote (there are no UK citizens), yet a Brexit would be extremely problematic and almost certainly mean a dramatic move away from London. Needless to say, on a personal level, this would be a blow; there really should not be taxation without representation.  

I also suggest everyone watch the Treasury Committee grilling Boris Johnson on the parliament website. It's a good, "myths about the EU"-busting exercise everyone should watch. Boris as always is very charming, but obviously unprepared.

Much more interesting is the same Committee confronting the BOE's governor Carney.  ‎Can't find the link, and I have finally reached my bus stop. 

Happy Easter!

Ciao

David Fuller's view

I am sorry to hear about the inconvenience of your slower journey but delighted to benefit from your detailed thinking on the hugely important issue of Brexit. 

I agree that your “IV)” above is the most positive scenario, albeit not very likely at this time.  “II)” above seems the most unlikely conclusion, in my opinion.

I also agree with your point about no taxation without representation.

Thank you for giving us so much to think about.

I would welcome more thoughts from Subscribers on Brexit.