British universities after Brexit

It’s her favourite topic: Europe. Helen Drake is a professor for French and European Studies at Loughborough University. For years, she has researched European politics, European integration and European history. This, the Brit fears, could become much more difficult, should the UK go ahead with its plan to exit the European Union. “European studies will lose a lot of their attraction”, the professor said when I interviewed her earlier this week. “My students are already less interested in Europe than in other topics.”

She believes that this is down to the ambivalence that has characterised the relationship between the UK and the EU for decades. For her, the vote for Brexit could also have personal consequences – Drake holds a chair for European Integration that is financed by the European Commission. “I have no idea whether I will be able to keep it beyond the initial funding period”, she stated.

These days, academic staff and students think along similar lines. They all worry about the future of the British university system, should the UK leave the EU, as requested by its people. Students and staff with European passports are equally worried. They fear that the cost of studying in the UK will go up and that European funding will no longer be available to British researchers.

Up until now, the vote for Brexit hasn’t had too many practical implications, neither for Europeans nor for Brits (except the pound/stock market crash). “There is no immediate change to the UK’s participation in the Erasmus+ programme following the EU referendum result”, the website of the British Erasmus office states. “All participants and beneficiaries should continue with their Erasmus+ funded activities and preparation for the published application deadlines in 2016 and 2017.” Every year, there are tens of thousands Europeans that come to the UK with the help of this program.

Many now fear that this could change within a couple of years. “It is understandable that there are fears among the 125.000 EU-students and the 43.000 staff from EU-countries”, Julia Goodfellow, the president of Universities UK, the association of British universities, commented recently.

It all depends on the negotiations between Brussels and London, once Article 50 is officially triggered. In the run up to this, the universities are only one of many parties that lobby the government. “The universities have to work hard to influence the government in order for them to keep the status quo”, said Charlie Beckett, one of my former professors at the London School of Economics and Political Science (LSE). For him, it is very difficult to forecast the impacts of a British divorce from the EU, at least at this point in time. “It does not change the fundamentals but many of the details”, he said.

One core area of concern is the freedom of movement. This could hit the universities hard: Europeans make up five percent of the student body, among the University staff, it’s 15 percent. “The end of the European freedom of movement could lead to many European students no longer coming here”, explained Julie Smith, a lecturer at the University of Cambridge and a Member of the House of Lords.

This is also what Ulrike Franke believes, a PhD student at the University of Oxford. “Not only with regard to the legal status, but also with regard to tuition fees, there is a lot of uncertainty”, the 28-year old German said when I phoned her. So far, Europeans pay the same amount of fee as British students, up to 9000 pounds per year. It is quite possible that they would have to come up with substantially more than that, should the UK treat them like overseas students.

With fees of around 35.000 pounds per year, a degree in the UK would become much more expensive. “In this case, many Europeans will consider going to the US instead”, Franke stated, “the UK would lose the cost competitiveness that has drawn a lot of Europeans here.” Two weeks after the historic vote for Brexit, she is still desperate. “I am heartbroken”, she said.

After the British exit from the EU, life for scientists and researchers could also become harder. “Because about the uncertainty around tuition costs, future job opportunities and the legal status, many professors and students will give it a second thought”, said Marc Szepan, another PhD candidate in Oxford.

Deans have started thinking about how to compensate for the loss of European funding after Brexit. Given that the UK is running a substantial budget deficit, they don’t assume that the government will be able to foot the bill. “The government simply cannot afford this”, Julie Smith from the University of Cambridge believes.

According to data from Universities UK, British universities received 836 million pounds during the 2014/2015 academic year, a similar amount came from the central government in Westminster and the NHS. Thus, the public sector would have to double its spending once the UK turns its back on the EU. The majority of income though, around 33.2 billion pounds, is provided by tuition fees.

Already now, a short time since the referendum on June 23rd, British scientists are receiving unofficial warnings to not apply for European funding after 2018. “Even if we were theoretically still eligible for European funding, we should not underestimate the subjectivity factor”, Helen Drake said. By that, she means that even in case the UK continued to qualify for European grants and funding, researchers or students might not be selected, because of anti-British feelings. So far, more than 60 percent of the research partners of British Universities come from other EU-countries, Universities UK has found out.

Interestingly enough, some German scientists are more optimistic than that. Theoretically, it could be the case that the UK is cut off from European projects such as Horizon 2020 (budget: 80 billion Euro), should it press on with its exit from the EU. However, “I don’t believe the EU will really do this”, said Markus Rudolf, dean of the German business school WHU. “It would reduce its own attractiveness if British universities were no longer part of the European network.” Contrary to this, LSE-professor Beckett believes that British universities will increasingly have to search for funding outside of the EU. “We are already seeing that funding agreements are being postponed or even cancelled”, he said.

Britain’s move to exit the EU will not only impact European students in the UK. “Also for British students, this will be dramatic”, said Ulrike Franke, the German PhD student in Oxford. “Even before the referendum, they spent less time abroad compared to other EU nationals.” Helen Drake has made similar observations. “The number of British pupils and students learning a foreign language has gone down continuously”, the professor stated. “This trend will be amplified in this current climate of euro-scepticism.”

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Soulsearching

It was an easy question, at least from the perspective of the radio presenter who asked it. “So would you apply for a British passport if this would allow you to stay in the country?” The scene took place Monday early afternoon, at Western House in Central London, right next to Oxford Circus. I had been invited to share some of my experiences as a European in a post-referendum Britain, on the Jeremy Vine Show on BBC Radio 2, and there we were. Right at the heart of the question.

Imagining that the European Freedom of Movement could be restricted or even revoked after a British EU-exit, would I still want to live in this country and, secondly, would I apply for British citizenship in order for me to be able to stay? It´s an interesting thing to think about, especially for me. So far, I have merely seen the outcome of the referendum as an unexpected turn in British history. I have watched the pound crash, Cameron resign, EU-Commissioner Hill step down. Within days, Boris Johnson was knifed, George Osborne dumped his austerity goal and Nigel Farage quit.

As a journalist, I watched it with fascination – seldomly, we get the chance to witness decades happening in a couple of days – but I haven`t really contemplated on what all this means for me personally. I have been in the UK for three years now (four if you count the year that I did at the London School of Economics in 2011) and I always liked it here.

I find it disappointing that a country with so much potential is now slowly dismantling its reputation in the world, its relevance as Europe’s leading financial center, its relationship to Europe. Of course, from a journalist point of view, this is as exciting as it gets. But from a personal perspective, do I still want to be here?

The huge amount of racist incidents since the referendum has clearly not helped. These days, you watch videos in which Brits are telling Europeans to leave their country. You read about insulting behaviour on trains and trams, in streets and restaurants.

The more worrying to me though is the debate about Europeans living in the UK and the question of whether they will be allowed to stay, should the UK really trigger Article 50 and sever its ties with the EU. For a long time, we were told (and happily believed) that nothing would change for those who are already in the country, that there would possibly be grandfathering of those arriving between now and the formal exit.

However, over the course of the past days, the debate has changed a little. Theresa May, currently Interior Minister and one of the favorites for the job of Prime Minister Cameron, alluded that she might be using the Europeans currently living in the UK as a bargaining chip in the negotiations in Brussels.

On the Peston Show, May stated: “What’s important is there will be a negotiation here as to how we deal with that issue of people who are already here and who have established a life here and Brits who’ve established a life in other countries within the European Union. (…) There’s no change at the moment, but of course we have to factor that into the negotiations.” Foreign Secretary Philip Hammond made similar comments on Monday.

Although May and Hammond were criticised heavily for what they said – not only by Remain-supporters but also by Leave-campaigners – I guess these comments give us a bit of a foretaste how the negotiations between the UK and the EU turn out once the UK officially starts the divorce proceedings. May and Hammond have made clear that they might want to use the approximately three million Europeans currently living in the UK as bargaining counters. (According to the FT, May’s team rowed back on Tuesday, stating that “Her position is that we will guarantee the legal status of EU nationals in Britain as long as British nationals living in EU countries have their status guaranteed too.”)

Given that the negotiations will not start for a while, I find this development deeply worrying. With comments like these, and the amount of racist incidents that have been reported since the Brexit vote, the UK has already changed dramatically. To me, it seems to be a less friendly, less open place to live in. I know that it all depends on the outcome of the negotiations so I think there is no need for premature panic. But – many of my European friends share my worries and some of us fear that the climate will become more heated once the divorce talks are under way.

A long answer to a short question. Would I apply for a British passport, in some years from now, and give away my German passport that allows me to travel to a record 177 countries, visa-free, according to most recent edition of the Visa Restrictions Index? I don`t know. Maybe not. Hopefully, there will be an alternative solution to this.

“Investors are worried”

For DIE WELT, I interviewed Neil Woodford, one of the most successful fund managers in the UK. Woodford worked for over 25 years at Invesco Perpetual before founding his own investment management company in 2014, Woodford Investment Management. I went to Oxford to pose some questions to him. The slightly longer version of the interview, in German, will be published in DIE WELT later this week.

How did you initially react to the Brexit vote? Did you see it coming?

In the lead up to the referendum I had thought that the vote would be close but I was surprised by the outcome. It was a surprise largely because the bookies were confidently predicting a Remain win as was the market – the polls were much closer but their credibility had been undermined by their failure to accurately predict the outcome of last year’s General Election.

What is your assessment of the initial market reaction and what do you expect for the weeks to come?

Investors are worried – they don’t know what Brexit means politically and economically. At times like this, it pays to keep calm. I’ve said before on several occasions, that this result isn’t going to change the fundamental trajectory of the UK economy over the next three to five years. We’ve been cautious about the outlook for the UK economy and the global economy for some time – there are many other challenges that we need to face up to.

In how far will there be a long term impact for financial markets in the UK, Europe and also globally?

It’s very difficult to say. It is likely that political uncertainty will continue both here in the UK and in the rest of the EU – not least because the new Prime Minister will not be known until after the summer and only then is it likely that the process of triggering Article 50 will start. How the negotiations then unfold is not clear. Having said that, I believe that the vote’s economic implications have been exaggerated significantly and that the fall in equity markets overdone. Within a few weeks I expect calm to return and a more balanced perspective to replace the fear of the last few days.

Do you think this could trigger another financial crisis or not? If not, why not?

I do not expect the UK economy to fall into a recession. Growth will slow but not by as much as people think. Inflation in the UK will also end up being a little higher as a result of the fall in sterling. Financial markets in other parts of the world should also recover some poise in the next few weeks. However, macro challenges will continue to build and global growth will continue to slow.

What does this mean for investor sentiment towards the UK? Will the UK become less attractive for international investors and do you think this period will last long?

Sterling’s fall makes the UK more attractive as a destination for foreign investment although how the discussions go with the EU after October will have an important bearing on the near-term level of business confidence. In the medium and long term other factors will be much more important in defining international investors perception of the UK as a destination for investment – for example, productivity, legal framework, tax, labour market flexibility, regulation, education and skill levels, and political stability.

Which stocks do you see benefitting from this, both short- and long-term?

We construct our portfolio in the light of those challenges that we’re going to have to navigate through over the next three to five years and beyond. I don’t think the prospects for the businesses that we’ve invested in have deteriorated at all as a result of the referendum. The course of those businesses is broadly as we thought it was before we voted to leave. So if you accept that the prospects are unaltered, and yet prices are lower, then by definition this means that the investment opportunity is more attractive.

Should we stay or should we go?

It has only been a week since we learned the results of the British EU-Referendum. Voters, politicians and business people are slowly coming to terms with the decision to leave the European Union. Although we can’t foresee all of the implications yet, it is quite obvious that the amount of change will be tremendous.

That’s especially true for firms that rely on accessing the European Single Market (e.g. Vodafone, the telecommunications company, or EasyJet, the low budget airline). Both Vodafone and Easyjet are headquartered in the UK, for now. Given that the UK might lose its access to the single market, these firms have, among others, announced that they could be forced to relocate their headquarters, should it be necessary for their businesses.

This news also got my editors interested. Ideally, they want me to find a company that will not wait whether and when Article 50 – the official start of the British divorce from Europe – is triggered, but that will be moving to Continental Europe any time soon. So far, I haven’t managed to find such a company.

According to what a German lawyer told me on Thursday, the reason for this is simple. Relocating your headquarters is a complex, time consuming and expensive business, not something you would do just in case, as a precautionary measure. “The starting shot will only be fired once we have clarity over the progress of the negotiations”, Marcel Hagemann, a partner at CMS Legal, told me.

Assuming that Article 50 will be triggered towards the end of the year, the UK has two years, until the end of 2018, to come to an agreement with the EU. His expectation is that by the end of 2017, we should see companies starting to relocate to the EU.

“You need some notice for this”, Hagemann said. From the legal side of things, it takes about a year to move a company from the UK to Europe, depending on what kind of legal process you want to undergo. According to the lawyer, there are two core solutions to this issue.

Firstly, there is the merger between the UK entity and a Continental European entity. For this, you can either establish a new company in Europe or buy an existing one. The only important thing is to merge this one with your British entity, making sure that the headquarter of the new entity is based outside of Britain. This is, Hagemann said, a relatively simple process, assuming that your company is not listed in Britain. If it is, it will lose its listing here in the UK (as it is not longer headquartered here).

The second solution to the problem is the creation of a European public company, a Societas Europaea (abbreviated SE). So far, the UK only has 34 of these whereas Germany has 350 SE-style companies. According to the lawyer, an SE is functioning similarly to a PLC. Whereas the founding of an SE is a bit complicated, moving the headquarters from the UK to Continental Europe should be relatively straight forward – as long as you finish the process before the UK officially leaves the EU.

When asked how expensive the whole process might be, Hagemann shrugged. Obviously, he did not want to be nailed down to a specific number. “It varies a lot, depending on the size of the company and the amount of people that will have to move”, he stated. Whereas he does not think that anyone will officially move their headquarters before the end of 2017, many firms have started searching for alternative locations.

Duesseldorf, where Hagemann is based, has already rolled out the red carpet to British telecommunication firms such as Vodafone. “They already have their German office there, so maybe this would be a good choice for the group headquarters as well”, Hagemann said.

Although the outcome of the referendum did surprise him, the German is still hopeful. “In the past, the British have been very good at negotiating in their favour”, he said. Plus: “Don’t forget that Germany has an interest in keeping them in the Single Market. We do have a strong voice here.”

Firms however will have to prepare for the worst. If they only learned one thing since the British referendum, it is that politicians don’t tend to stick to what they said before. Thus, they’d better be prepared if Britain’s EU negotiations break down in late 2018, leaving them with the prospect of a hard Brexit.

Some firms have already reacted. Siemens for example, the German industrials company, will not make further investments here in the UK before they have clarity over where the country might be heading. Two days ago, Virgin cancelled a deal that would have seen them take over 3000 staff. UOB, the Singaporean bank, stopped providing financing for British real estate projects.

According to Hagemann, we will see much more of this – but only once it is clear whether Britain remains part of the Single Market or not. “German companies will not start closing their factories straight away”, the lawyer said.

What a great relief. So watch out for 2017.

So what does Angela Merkel think?

In our post-Brexit world, there are some key figures that will strongly influence the outcome of the negotiations. One of them is Jean-Claude Juncker, the head of the EU Commission, a seasoned EU-politician who made us laugh earlier this week when he asked Ukip-leader Nigel Farage why he attended a session of the European Parliament, given that he was one of the driving forces behind the Leave-campaign.

Juncker did not speak English during that session and made sure that none of his staff or that of other EU-bodies enters any preliminary talks with the British before Article 50 of the Lisbon treaty has officially been triggered. According to Juncker, there “can be no preliminary discussions”. Since the referendum vote last Thursday, Juncker has played hard-ball. As the leading EU-representative, he is obviously not just angry about the British vote to leave but also afraid that it could lead to contagion among other dissatisfied EU-member states. The last thing that Juncker wants to see happening is more countries following the British example.

Then there is Francois Hollande, the French President who will face a general election next year and who has promised to not seek reelection should the unemployment rate stay at where it is. For Hollande, Britain’s vote for Brexit is a dangerous affair. After all, Mr. Hollande has a Ukip-like party in his home country as well, called Front National, a party that has been around since the early 70ties and that has gained some support by voters during the last years.

With France’s economy continuing to suffer and the population resisting reforms, their leader Marine Le Pen offers even more drastic solutions to the country’s problems than Nigel Farage in the UK. It is precisely this why France is relatively harsh towards the UK – to send a message to voters at home that populism does not lead to great results. Thus, the head of the French Central Bank declared over the weekend that UK banks will lose their passporting rights that currently allow them to trade in Europe should the UK leave the EU.

This week, President Hollande delivered a second blow by stating that the City of London would be losing its right to conduct Euro-clearing should the country separate from the EU. According to the FT, he said: “It can serve as an example for those who seek the end of Europe . . . It can serve as a lesson.” Thus, we can assume that France will – for domestic reasons – take a ruthless stance in the divorce talks.

Besides Juncker and Hollande, there is – of course – Angela Merkel, the German chancellor. Also in this crisis, Merkel has followed her previous success recipe. In Germany, we have gotten to know her for only taking sides and positioning herself once all or at least most of the other parties have voiced their opinion. It’s a strategy called “merkeln” that Merkel mastered during her early years in the Christian Democratic Union (CDU), at the time a hugely male-dominated club of guys that ran the show. By waiting them out, Merkel was over time able to gain control over the party.

Even when she became Chancellor, Merkel stuck to her strategy. On numerous occasions, we have seen it played out, both on the domestic but also the international front. No surprise then that it also came into play when Merkel started talking about the consequences of the British Brexit-vote. On Friday, just hours after the announcement of the result, Merkel warned against drawing “easy and hasty conclusions”. On Sunday, she said she would not “push for an immediate withdrawal”.

But before the European Summit on Tuesday, Merkel changed her tone. According to the FT, she said: “We will ensure that the negotiations will not be run on the principle of cherry-picking,” the Chancellor said. “We must and will make a palpable difference over whether a country wants to be a member of the family of the European Union or not. Whoever wants to get out of this family cannot expect that all the obligations fall away but the privileges continue to remain in place.”

To me, this was a clear sign that Merkel has synchronized her attitude towards the British question not only with fellow Christian Democrats such as Finance Minister Wolfgang Schäuble (“In is in. Out is out”), but also with her European allies. Even if we hear conflicting messages out of Brussels, the Leave-side should not take this too serious. Yes, there are different positions on how the EU should deal with the British exit but leading figures such as Merkel, Hollande or Juncker will make sure that there is a unified position in the end.

Instead of reading the tea leaves in Brussels, the British side should focus more on making up their mind and defining what kind of relationship they want with the EU. Unless they have reached that stage, there is no point in bowing and scraping in various European cities. Until Article 50 is triggered, the UK will not be able to strike any agreements with the EU, even if Merkel continues stating that there is no need to be particularly nasty towards the Brits.

Whoever succeeds David Cameron should not rely solely on comments made by German industrials like Markus Kerber, the head of the BDI, the equivalent to the CBI. Just because Kerber warned against trade curbs between the UK and Britain, this does not mean that this position is widely shared by decision makers. For Merkel and other Europeans, there is more at stake here than trade.

Leaving the UK

It did not take long. Several days into the new, post-Brexit reality, more than a handful of foreign friends have already declared their intention to leave the UK. It’s not just Europeans but also Americans, Canadians, and even Chinese. They all have different reasons for leaving.

Take Jovana, a change consultant who has lived and worked in London for four years. Jovana is German but thought she would stay in the UK. However, after Thursday’s Brexit-vote, things have changed quite dramatically. Although nothing has really changed, from a legal perspective, Jovana wants to leave the UK, as soon as possible, but no later than the end of the year. “If this is the message – that we are no longer welcome here – I don’t want to continue living in the UK”, she explained when I interviewed her on Tuesday.

Jovana is a true believer in the European project and thus the rejection of it by British voters has affected her deeply. “I am perceived as one of the better migrants”, she stated, highlighting the differenciation that is being made between “good immigration” from countries such as France and Germany, and “bad immigration” from Eastern European countries. Jovana is currently searching for jobs in Berlin, one of the cities that might actually benefit from Britain’s vote to Leave.

Another friend of mine, Natalie, hasn’t gotten quite that far. She has lived and studied in the UK as well, founded her company here. Natalie is American and has waited since March for the arrival of her new investor visa. “Since then, I haven’t even been able to go to Paris”, she complained, “I had to submit my passport for this.”

If for any reason, her visa is not prolonged, Natalie already has a Plan B. She plans to move to Amsterdam, to the Netherlands, a city that is, according to her, much more open to young businesses than London with its sky-high rents and lots of economic uncertainty, thanks to the vote for Brexit. In her circle of friends, Natalie is not the only one thinking of leaving the UK: “There are several others who have are mulling over this idea as well”, she said.

There are a couple more examples I could mention. All these friends are relatively young, cosmopolitan, well-educated and can’t identify themselves with the strange turn that the country has taken since it voted for Brexit on Thursday. Interestingly though, none of them mentioned a potential change in the existing Freedom of Labour framework that has so far allowed non-British EU-citizens to work and live in the UK. According to recent labour market statistics, there are 2.1 million of these people currently working in the UK.

What might happen to them after a British divorce from the EU is difficult to tell. Both camps have declared before the referendum that Europeans who are already in Britain would be allowed to stay and those who are arriving between now and the exit date could be grandfathered, thus allowed to stay. That, it seems, is also what a majority of Europeans working in the UK would want. According to a survey by Totaljobs, 76 percent of Europeans working in the UK want to stay even in case of a Brexit.

Another interesting fact is that the Leave-side has already backtracked on some of its core arguments regarding immigration. As Tory MP and Leave-supporter Daniel Hannan explained, people who thought that European immigration would be reduced to zero after a British exit from the EU would most likely be disappointed.

Thus, Madeleine Sumption, the Director of the Migration Observatory at the University of Oxford, assumes that there will be some form of continued European immigration into the UK. “Immigration will continue to be the most controversial issue in unpicking the relationship between the UK and the EU”, she stated on Monday when I interviewed her for DIE WELT.

For those that want to stay in the UK, this question is one that will keep us awake at night. Others, like Jovana, have already relocated from the UK, at least in their minds.

Forgetting Brexit will be easy, says a scientist

If was a Brexit-supporter, imagine how would I be feeling, given that Nigel Farage, Liam Fox and Daniel Hannan have taken back most of their (it wasn’t that many) arguments for why it would be a good idea for the UK to leave the EU. 350 million pounds per week for the NHS instead of the EU? We never said that. No more European immigration? Well no, you cannot do that. Within a couple of days, the case for Brexit seems to be more diminished than ever. But unfortunately, voters have already made their choice and contrary to a lot of wishful thinking both on the British and the European sides, the chances for a second referendum are pretty small.

That leaves, as I explained on Monday, an awful lot of voters with a strong sense of regret. According to what British papers wrote during the past days, the UK is currently suffering from one of its worst hangovers, now that people realize that voting for Leave was not what it presented itself to be. I thought this was a really interesting phenomenon and questioned Andre Spicer, Professor for Organisational Behaviour at Cass Business School here in London about why humans tend to feel collective guilt after taking the wrong decision.

In psychology, the phenomenon is called cognitive dissonance. It occurs in all sorts of situations, like for example when you go shopping and later take a look at what you bought and find out you don’t really like it. “People tend to focus on the positives before. They make decisions very fast and ignore everything else”, Spicer said. “However, when the deal is done, all the negatives that were overlooked mercifully before come to light.”

Spicer went on explaining another interesting phenomenon. I assumed that over time, when the negative implications of the vote for Brexit become obvious, people would become more disappointed. I thought that the real anger would be felt in maybe three to five years from now, with the economy tanking, the British divorce from Europe still not settled and a gloomy outlook for Britain’s future. Spicer however said that soon, people will start accepting this new reality. “Of course, over the course of the next three months, everything will be linked to Brexit”, he said.

But later on, the causality chain weakens, according to him, which makes it more difficult for people to pin their plight down to one single event.”In five years”, Spicer explained, “the political agenda will have moved on. People will have forgotten.” This is supported by a number of studies that show that human memory is short. Political memory is, as Spicer pointed out, even shorter.

Cultural differences add to that. According to Spicer, time is valued differently in various societies which leads to more or less short-termism. The Anglo-Saxon economic model, the professor stated, is much more short-term focused than for example the German economic model. This thinking also impacts the wider society, Spicer said, and leads, also in government, to a repetition of mistakes because the amount of people that have been around for long enough to actually recognize reappearing patterns is too small.

Plus, don’t forget that humans are not good at long-term thinking anyway. There is a behaviour called temporal discounting which leads to people being offered one pound now or two pounds in three months taking the one pound now. “People want what is in their face”, Spicer said, “We tend to place little emphasis on long term planning.”

Of course, there is also a second group: The ones that don’t seem to regret the choice they made. There is also a psychological explanation for that. “Studies show that people tweak their beliefs a little so they can hold on to them”, Spicer said. According to his research, voters are more convinced once they have taken a decision. “Signing up for something tends to harden people’s views”, he points out.

Fortunately, Spicer had even more explanations for why people voted the way they did on June 23rd. If you ask yourself why people in the Midlands and the North of England, people who will most likely be hit the hardest by an economic downturn, still voted for Brexit, Spicer has an answer for you. The trick is called self-harm effect and describes situations like in Sunderland where Nissan produces a lot of cars for its European exports and where people strongly voted for Leave, although they were warned of the implications beforehand.

Add to that the fact that many voters thought they did not benefit from the economic recovery – leaving aside that the unemployment rate has reached historic lows – and you get a sense of why people thought it did not matter how they voted. “Many of these voters have nothing to gain from the economy”, Spicer said. “If you have nothing to lose, then you are more willing to take risks.” Anti-establishment sentiments and class dynamics further added to the anger.

That both the Leave side as well as the Remain side have withdrawn some of their promises (Prime Minister Cameron did not stay on, he did not directly trigger Article 50 and Finance Minister Osborne does not plan to present an emergency budget) is according to Spicer undermining the legitimisation of the whole political system. “Both sides have lost credibility”, he said.

Looking beyond the initial shock, fear and anger, Spicer expects the British people to “just get on with it”, as they have done with past challenges. The New Zealander who has lived in the UK for over a decade describes this as British stoicism: “There is something about the British that enjoys suffering”, he thinks.

I am a bit sceptical about this. Do people really like suffering, especially in this day and age where things have become so comfortable? And do people like suffering when they know that they have inflicted that suffering on themselves? We will see.

#Bregret

It’s not as if the outcome of the British EU-Referendum took me by surprise. Brexit had been my base case, for over two weeks. Not because this was my favourite outcome – it clearly isn’t – but because I have come to distrust people and their ability to make rational, long term decisions. In addition to that, I also did not trust the polls nor the bookmakers. They got it wrong before, so why should their forecasting accuracy magically increase just before the referendum?

Friday was thus not a day of shock and horror for me but one of painful realization. Yes, there are questions in life that should not be decided by a referendum. Yes, there is a strong divide between the rich and the poor in this country, a lot of anti-establishment sentiment, a lot of stupidity, naivety and wishful thinking.

What did surprise me though was the amount of people that only realized their mistake after the results were announced. #Bregret and #WhatHaveWeDone quickly became trending hashtags on Twitter. From around 5:30 AM on Friday, people started googling what the impact of their choice could be. “What is Brexit?” was, according to Google, one of the most frequent questions typed into the search engine, besides “What is the EU?” and “What happens if we leave the EU?”.

TV interviews with average voters, mostly from the Leave-camp, solidified that impression. A voter questioned by the BBC said: “My vote – I didn’t think was going to matter too much because I thought we were just going to remain.” Wishful thinking, hm? But Adam, as the BBC named him, was not alone. Another voter, Mandy, told the BBC: “I was very disappointed about the result, even though I voted to leave, this morning I woke up and the reality did actually hit me. But if I had the opportunity to vote again, it would be to stay.” More wishful thinking. ITV also found plenty of these disillusioned Leave-voters. Suthi, a women from Manchester, told the broadcaster that her whole family voted for Brexit, without considering the consequences: “I said to my sisters, ‘I wish we had opportunity to vote again.'”

The same effect took hold when the Daily Mail, a strong supporter of a Leave-vote, started explaining to readers on Friday what the outcome actually meant for them. Travels to Europe would become more expensive because of the drop of the Pound Sterling, Britons could lose the right to work in the EU, pensions have lost value, studying and travelling in the EU could become more difficult.

Nothing new, at least to people that thought rationally before the referendum. But to many Daily Mail readers, this was actually brand new, at least if you judge by the comments made by some of them. “So the Remain camp were telling the truth”, Victor Mildrew, from Leeds, commented. “So we are screwed”, a reader with the nickname Up North, wrote. “Maybe it wasn’t a good idea at all”, Lulu45 from London stated.

More than three million people have signed a petition for a second referendum. Parliament will now have to consider that petition, as it does with every one that is signed by more than 100.000 people. Because of the fact that the Leave-side did win with less than 60 percent of the votes and that the turnout was less than 75 percent, there is a call for retrospective legislation. Some of my friends are desperately clinging to this, stating “We are not out yet” and “the referendum is not legally binding”.

Yes, it is not legally binding and it will take a while until Cameron’s successor formally enforces Article 50 in order to negotiate the exit. But I guess chances of a second referendum are close to zero. The UK would become laughing stock (even more), it would disregard the choice of 51,9 percent of its population and, don’t forget, some of the damage has already been done, as banks have started working on relocating some of their staff to Continental Europe.

As Germany’s finance minister Wolfgang Schäuble put it, “in is in. Out is out”. The British population will now have to live with their choice. Ironically, it is the young generation that was strongly for Remain that now bears the brunt of the decision. They will be the ones living the longest – in a potentially smaller country (as Scotland might vote to leave), with a smaller economy, less chances and opportunities, a lot of resentment towards the generation of their parents and that of their grandparents that got them into this situation.

There is at least one thing I am taking home from this. The fact that there are already a lot of people regretting their choice tells me that there are issues of a certain magnitude that should not be decided by a referendum. Although they were warned by all leading economists in the world, people did not want to listen. Reason has lost out against emotion.

A vote for Brexit: Winners and losers

It’s just a couple of hours since we learned about the vote of the British people. Twelve hours ago, at around 4 AM, I listened to the BBC and heard that Leave was in the lead, a lead that solidified at approximately 4:40 AM. Already, it seems clear that there are way more losers than winners.

Frankfurt, Dublin and Paris are clearly among the winners of Thursday’s Brexit-vote. All three of them hope to benefit from the potential loss of passporting rights for banks based in the UK with which they were able to trade seamlessly in Continental Europe before. Part of the trades that went through the City of London might now be routed through another financial centre. Several ten thousand bankers will leave London and relocate to Frankfurt, Dublin or Paris. According to what banks said before the referendum, French institutes prefer Paris whereas American banks plan to opt for Dublin. German banks will move some of their operations to Frankfurt.

Frankfurt is not the only German city to benefit from the result. Berlin, the German capital, might rise out of London’s shadow and become a much more attractive location for European tech-firms. Not only are rents cheaper, also the overall cost of living is lower. Add to that that start-ups in Berlin will be able to continue hiring workers from all over the UK thanks to the freedom of labour movement. Should the UK revoke the European freedom of labour movement, London’s reputation as a tech-hub could take a significant hit. International investors might think twice before they put money into a British start-up.

Lawyers, tax experts and business consultants will also profit from the British exit-vote. It might take several years until the UK has successfully negotiated it’s exit from the EU which will lead to a period of continued uncertainty for firms in the UK but also in other countries. They thus need a lot of external advice which will keep lawyers and other service providers busy.

Bargain hunters will make some gains as well. Shares have weakened significantly, as has the Euro and the Pound Sterling. That provides buying opportunities for investors who are willing to take some risks. Also think of the gold price as a winner of the Brexit-vote. The precious metal has surged dramatically since the announcement earlier on Friday and is supposed to gain further, should there be political and economic disruption in the UK and in Continental Europe.

To mention some names, James Dyson, the legendary British inventor, as well as Lord Bamford (JCB) and Tim Martin, head of pub chain JD Wetherspoon, have all done quite well today. The three of them have been campaigning against the British EU-membership for years. For them, a dream has come true.

When we take a look at the losers of Thursday’s vote, the list becomes significantly longer. First and foremost, there is a German that might have to rethink his strategy: Carsten Kengeter, the head of the Deutsche Boerse in Frankfurt who was planning to merge with the London Stock Exchange Group (LSE). The headquarter of the new exchange was supposed to be in London which is now, after a vote for Brexit, put into serious question.

Another loser is the Pound Sterling. It has lost value, as has the Euro, the European currency. Not only does the overall British economy suffer but each and every Brit will be worse off thanks to the vote for Brexit. That’s not only because of the expected slowdown of the economy but also because of the weakening of the Pound Sterling against major international currencies such as the Dollar.

Somebody’s gain is somebody else’s loss, the saying goes. In the case of the Brexit-vote, London is obviously one of the big losers. The City of London, Europe’s leading financial hub, will shed between 70.000 and 100.000 jobs, PwC forecasts, and lose a share of the market to Continental European competitors. Add to that international companies that might relocate their European headquarters and you get an impression of why industry organisations such as the CBI think that the British economy could lose up to 950.000 jobs by 2020 thanks to a Brexit. The IMF and other international bodies have forecasted a British recession. That might affect the world economy – another loser – as well as the German economy.

For Germany, the Brexit-vote is a double-edged sword, precisely because of the chances of a recession in the UK. The country is a major trading partner for the German economy and auto manufacturers, machining companies and the chemical industry expect to make significantly less revenue in the UK. For the CEO’s of German subsidiaries in the UK, the Brexit-vote means that they will not get any new investments in the foreseeable future.

We aren’t finished yet. There are more losers around. One of them is the London housing market, so far an attractive safe haven for international investors and their money. According to some experts that I spoke to, this will change. London real estate will not be as hot as it used to. Don’t forget the FTSE. The British index is forecasted to shed another ten percent in the coming 12 months, UBS Wealth Management has stated.

Over time, there will be many losers, I guess. Let’s see whether I was right.

 

 

 

 

The Big Day

So finally, here we are. After a long and brutal campaign, the UK votes on whether it wants to remain a member of the European Union or not. Polling stations are open from 7 AM in the morning until 10 PM at night. Unfortunately for journalists like me, there won’t be any exit polls during the day, the BBC is prohibited from reporting on the potential outcome whilst polling booths are still open. “Otherwise, this could be seen as a means for trying to influence the outcome”, a BBC producer told me on Wednesday when I came in for a short live on World News.

For many journalists, referendum day itself will be quiet. I will finish two pieces for Friday just in case and set up some last minute interviews. And then, it’s just waiting, speaking to colleagues, and maybe saying a prayer. According to the weather forecast, Thursday will see a lot of rain, especially in the morning and early afternoon. That might keep some voters from making the move to the polling station, a fact that could potentially help the Leave-side, given that they are said to be much more enthusiastic about their course than the Remain-side.

It will take a while until we get a sense of direction. Markets are not expected to move too much (or sideways) on Thursday. That might change from around 1 AM onwards. According to the Independent, Newcastle and Sunderland will be amongst the first results to declare. Both are strong Labour areas so they could provide a clue as to whether Jeremy Corbyn has succeeded in convincing his party to vote Remain. At 1:30 AM, Stirling, the first big Scottish city, is set to declare. In case there is no big win for Remain, the country might be heading for Brexit. At 2 AM, Oxford and Basildon are announced, followed by Hammersmith and Eurosceptic Torbay at 3 AM. An hour later, it’s Birmingham’s turn. Until 7 AM, there will be more and more results coming in. At 7 AM, the Electoral Commission expects the final four results.

By then, I should be able to observe how markets react to the outcome of the referendum. For many traders and money managers, it will be a long night. Banks have prepared by calling people in for different parts of the night, hedging risky investments and creating back stops. Some traders have already told me that they will  be doing an “all-nighter”, a phenomenon normally limited to the world of investment banking. “I will stay all night”, a senior trader said to me on Wednesday, “until noon, when I’ll go home to crash into bed.”

Whatever the outcome, it’s going be interesting. Let’s see what time I get to sleep on Friday.