The Ramifications Of the Brexit Vote

تم نشره في Wed 29 June / Jun 2016. 10:05 PM - آخر تعديل في Wed 29 June / Jun 2016. 10:06 PM
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By Leheb Ata Abdul Wahab
Iraqi Energy Economist

Edited by A.r. Bazian

The outcome of the British Referendum —whether to “Remain” or “Leave” the European Union— came as an utter surprise to many observers, with polls showing, on the eve of vote, on the 23rd of June, that the outcome is too close a call to the “Remain” camp, which has been gaining in light of the assassination of the Labour MP, Jo Cox, as she campaigned in her constituency for the Remain camp.

The results, were quite dramatic. With 52 per cent in favour of leaving the EU, 48 per cent of the populace, on the other hand, elected to Remain. Despite the heavy turn out with 70 per cent of eligible registered voters amounting to 46 million taking part, the rejection camp held the upper hand.

Accordingly, what has emerged after the Referendum has a divided and polarized the United Kingdom with England and Wales voting overwhelmingly to Jump the Ship, and Northern Ireland, along with Scotland, to “Remain” aboard. The UK as a whole was stratified by age, with most of the youth (18-35 years of age) having voted in, lest they lose their lucrative jobs in the City, UK’s financial harbour in the capital, London. The elderly, on the other hand opted for the “Leave vote”, with restoration of full sovereignty; to break free from the dictations of Brussels, primarily. Notwithstanding the issue of the mutual open door policy migration arrangement, with more than 3 million people, the Polish being a majority, working in England,

Fallouts:

(1) On the Political Front:

The vote to leave the EU had a seismic impact politically. Prime Minister, David Cameroon offered his resignation, effective September, 2016. The Conservative Party convened afterwards, to elect a successor, who is most likely to be Boris Johnson; the former Mayor of London. It will fall upon the shoulders of the new leadership to trigger article 50 of the Lisbon Treaty which should put in motion the process to leave the EU which could take two years.

The opposition Labour party has imploded following the resignation of half of the shadow governments, who have called for a motion of no confidence in their leader, Jeremy Corbyn, after his lukewarm support in his campaign in favour of the Remain camp.

(2) On the Economic Front:

The Pounds Sterling plunged to USD1.32, its lowest since 1985. Billions of dollars were wiped out from the stock market. HSBC, as well, announced transferring more than one thousand employees working at their headquarters to other branches in Europe and beyond.

(3) The Oil Market:

The element of uncertainty is the order of day following Brexit Vote. To put matters into perspective, UK is not a major Oil player. Britain shares with Norway, North Sea Oil companies, with a proven reserve of 2.5 billion barrels and production of 950 thousand barrels per day, the equivalent of one percent of total world production. The giant oil company, British Petroleum, BP, has its HQ on British soil and has made it clear that it does not plan to move, come what may.

With a GDP of USD2 Trillion, the 5th globally, many observes, including the IMF, warn of a looming recession that could see the British Economy shrinking by more than 2 per cent by 2020, with a ripple effect felt in continental Europe. Such a development could see the demand for oil dipping leading as a consequence to a decline in oil prices as portrayed by the fall of Brent to around USD48 per barrel, following the results of the Referendum.

To conclude, the impact of the Brexit on the global economy according to many pundits, is short term, with the markets soon adapting to the new environment.

Britain, on the other hand, has just suffered two ignominious defeats; knocked out from two prestigious organizations within a matter of 72 hours. First, the EU, on the morning of June 24th, then eliminated from the EURO2016 Cup, just a couple of days later, by the Icelandic minnows, 2-1, adding further insult to injury!

What an irony.

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