Naked Politics Blogger
June 24th 2016: The Beginning of the End. Remember? The Pound would collapse. British borders would close. Companies would flee for the hills. Children’s’ opportunities in life would decline immeasurably. Britain, despite the ONS identifying increasingly high levels of ethnic diversity, would be engulfed by anti-immigrant bigotry. Indeed, what on this fateful day, was ‘Britain’ at all? Perhaps in a roundabout way, we faced a period of such uncertainty that Britain would need a definitional makeover?
The economic overreaction is easily measured. No place was this clearer than in Wall Street where 24 hours post-referendum, the Dow had dropped 500 points, losing approximately 2% of its value. A corollary excitement permeated Britain, too, with the pound sterling dropping to a 31 year low as soon as the results trickled in. A wealthy relative of a friend of mine was, so I am told, frenetically negotiating a loss-limitation strategy with his investment portfolio manager; this, I might add, coming from a person with significant business and economic experience.
Perhaps I should for a moment, defer to Kyle Woodley, managing editor of InvestorPlace.com, who, the morning following the referendum, wrote: “If you’re…a buy-and-hold investor, nothing – not a Brexit, not a flash crash, not an alien invasion – should have you bailing right now. Yes, the S&P 500 losing roughly 4 percent today to sit around 2,000 isn’t a pleasant thought…until you realise that’s nearly 30% better than where we were sitting before the market started to tank in 2007.” In other words, the markets had slumped, but not to the extent experienced in the aftermath of the 2007-8 financial crisis.
Note Mr. Woodley’s focus on buy-and-hold – or, long-term – investors. The economy, in other words, will recover if given time. The emphasis on long-term stability should give us all pause for thought. What if things won’t be so bad after all?
With the advantage of perspective, we can positively confirm Mr. Woodley’s prediction. Britain, despite unanimously murky predictions, finished 2016 as the world’s strongest economy, growth having accelerated in the six months following the Brexit vote. Last month, the Bank of England upgraded its annual GDP growth forecast from 1.4% to 2%, while a fresh study conducted by (the now Oscars-infamous) PwC refers to Brexit as a mere “bump in the road”. Quite apart from a plunge into economic obscurity, the UK “will slide just one place – to 10th from 9th – in the global purchasing power parity (PPP) rankings by 2050.”
That is not to say that the British economy is a marvel of indestructible character. A recent Financial Times piece, to cite just one example, demonstrated the impact changing consumer habits has had on post-Brexit economic growth – an impact that, owing to its current doubling of weighted importance, could reverse, triggering an economic slowdown.
Nor can we dismiss the frustration of our leaving a Union that has ensured its members’ military security since its formation. Though economics and immigration provided the focus for our pre-and-post-Brexit debate, it is a mistake to discard the benefit of a union’s security apparatus. Of course, our membership of Nato remains intact, but with the President of the United States having previously argued in favour of dismantling Nato, we should maintain a sharp focus on the future of our security prospects.
That said, if we learn one thing from Brexit, it is to grow up in the face of disappointment; to refuse assumptions of destructive imminence in political affairs.
The morning following the referendum, I had my hair cut at a local salon. “Crazy isn’t it,” my hairdresser said. “It’s going to be so bad. I mean, going abroad is going to be so expensive. And visas and browsing charges and stuff.” Perhaps this line of thinking encouraged the voluntary sensationalism that engulfed much of British thought. Perhaps minor concerns pertaining to the ease of booking a summer holiday were more important than the (major) concern of ‘imminent’ economic frailty. This would explain the sensationalistic tone of both the media and wider society. For those of us who take a year-round active interest in politico-economic events, however, Brexit was a lesson in growing up. It has taught us to recognise sensationalism when it rears its head, as well as the advantage in sometimes just sweating it out.