So what means “Brexit means Brexit”?

Ever since Theresa May stated that “Brexit means Brexit” during her first speech as Prime Minister, she has left her cabinet, her European counterparts, decision-makers in the world of business and finance, and, not to forget, her electorate wondering what “Brexit means Brexit” actually means. Up until now, it is – though ingeniously crafted – an empty formula that has left ample room for interpretation for Brexiteers as well as Bremainers. But, with the first major, though officially “informal” EU-meeting without the UK approaching, Theresa May now needs to fill the phrase with life and with meaning. And that’s where it’s getting pretty complicated. With both hard and soft Brexiteers in her cabinet, as well as Bremainers, May needs to find out quickly what the British position towards Brexit is.

A first step towards that will be taken on Wednesday, when May gathers her cabinet at Chequers. There, at the Prime Minister’s country retreat, senior ministers will reportedly have to come up with a so-called action plan to “make Brexit work”. As the Guardian explained on Sunday, each cabinet minister has to identify opportunities in their field of competence that could arise from the UK’s departure from the EU.

For that, May and her ministers first need to define what Brexit means. Does it mean continued access to the European Single Market? If so, for all sectors or just for some (e.g. only Financial Services)? Does Brexit mean continued unlimited freedom of labour movement? Or does it mean restrictions to this very freedom? What kind of model does the UK pursue in its negotiations with Brussels – the Norway model, a Swiss-type agreement or a Canadian free-trade solution? Or, would it prefer the “Continental Partnership” , a model that was first discussed on Tuesday after a group of policymakers and scholars published a paper calling for a new, looser organisation between the UK and the EU?

With advocates for both a soft and a hard Brexit in her cabinet, this will be a tough call for Theresa May. She will no doubt struggle to find an agreeable solution for the likes of Brexit minister David Davis or trade minister Liam Fox as well as for Philip Hammond, the Chancellor of the Exchequer. According to the Sunday Times, there is a split between different members of the cabinet, precisely over whether the UK should strive for continued access to the Single Market or not and, if so, whether it would accept continued unlimited European migration or not.

From a European perspective, there won’t be one without the other. Like many of his European counterparts before, Germany’s vice chancellor Sigmar Gabriel underlined this again during the weekend when he stated that the UK would have to “pay” for Brexit. “If we organise Brexit in the wrong way, then we’ll be in deep trouble, so now we need to make sure that we don’t allow Britain to keep the nice things, so to speak, related to Europe while taking no responsibility,” Gabriel said.

Not only the members of the British cabinet but also the members of the civil service seem to be split about what Brexit really means. The Brexit-side in particular gives the impression of fearing opposition from within the civil service. According to the Guardian, Steve Baker MP, who campaigned for Brexit, has suggested that officials should be “summarily fired” if they tried to block the Brexit process.

Unfortunately, the problem goes beyond cabinet and the civil service. MP’s are still shocked by May’s announcement to not consult the House of Commons before triggering Article 50. Should MP’s, most of whom were against Brexit before the referendum on June 23rd, not be questioned, given that the decision to trigger Article 50 will most likely be the gravest decision that the UK government is going to take for decades?

To many MPs as well as outside observers like me, that sounds odd, given that the vote for Brexit was presumably all about democracy and “taking back control”. In my home country Germany, it would be unheard of for our chancellor to go ahead without parliamentary consent (although, I admit, parliament was not questioned before Merkel allowed more than a million refugees in last year).

Then there is the Labour party, with its ongoing leadership contest. Corbyn’s challenger Will Owen has promised a second referendum, should he be elected Labour leader and should his party gain a majority in parliament. Both events are highly unlikely. In addition, the first endeavour is, as the FT’s Wolfgang Muenchau put it – also a waste of time and energy. According to him, the Remain-side should focus on securing a Brexit that is as soft as possible, not accidentally end up with one that is as hard as possible.

“Those who campaigned for the UK to stay in the EU are shaping up to be two-time losers. They lost the referendum vote on June 23; now they are losing the battle to keep the UK inside the single market. Both defeats are based on repeated misjudgements”, Muenchau stated. “After the referendum, they should have conceded defeat, and moved on to argue the case for the closest possible relationship between the UK and the EU. That would at least have kept open the possibility of a return to the EU in the future. Instead, they are calling for a second referendum.”

This, Muenchau argues, leaves the definition of what “Brexit means Brexit” really means mostly to the hard Brexit camp, to the disadvantage of Remainers and soft Brexiteers. There is some truth to this and I will be watching the Chequers meeting quite closely. However, “Bremain vs. Brexit” as a blog will end today, as I will move to a new post with the Wall Street Journal. I hope you enjoyed reading.

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.

What companies hate most pre-referendum day

Uncertainty. It is the keyword best describing the state of the British economy in the run-up to the referendum on the 23rd of June. With regards to GDP, the fact that companies don’t know whether they will soon find themselves outside the EU or not, has already taken its toll. In the first three months of this year, gross domestic product expanded only 0.4 percent, down from 0.6 percent at the end of 2015. Compared to the growth levels observed in 2014 and early 2015, that’s a significant reduction in growth.

Likewise, the amount of mergers and acquisitions has gone down (39 percent compared to the same time last year), as has foreign direct investment into the UK. Overall uncertainty has also left its mark on the real estate industry, one of the core pillars of the British economy, especially in London. Buyers have put their decisions for residential property on hold, as have tenants when renting commercial property. According to the Bank of England, mortgage approvals for house purchases fell back appreciably to an eleven-month low in April.

This is likely to continue, should there be a vote for Brexit: “A vote to leave the EU would be liable to see a marked hit to UK economic activity over the rest of this year and in 2017 amid heightened uncertainties, which would likely weigh down heavily on the housing market”, commented Howard Archer, Chief UK and Europe economist at IHS, a market research institute.

The latest victims of uncertainty are the stock market – the FTSE 100, the leading British index, shed 100 billion pounds in just four days – and the pound sterling which trades at eight week lows and is forecasted to decline further in the remaining days before the referendum.

“Wait and see” also seems the option of choice for employers. The labour market has slowed down, there are less new jobs being created. As the Morgan McKinley employment monitor shows, there were five percent less jobs available in the financial industry in London in May compared to April. “The performance of many institutions has not been encouraging”, said Hakan Enver, Operations Director at Morgan McKinley Financial Services. “We still see uncertainty due to the upcoming June referendum.”

Not surprisingly, the confidence of British firms is, according to the FT-ICSA Boardroom Bellwether survey, at a four year low. Only 12 percent are expecting an improvement over the next 12 months, down from 40 percent in December 2015 and 74 percent in July 2015.

Because of its nature, the uncertainty for businesses goes beyond their day to day activities. It remains to be seen whether we will really know much more on the 24th, as a vote for Brexit would trigger a long and difficult phase of renegotiations. Thus, the much hated uncertainty may last way longer than companies might want to think. “With a vote for Brexit, the outlook remains unsure”, John Hammond, a partner at CMS Hasche Sigle, told me on Friday. “There will be more wait and see, companies will delay their decision making even further.”

Both British and German firms have been feeling the effects of uncertainty for a couple of months. Nevertheless, many businesses are not prepared for the impact of a Brexit-vote, with the exception of the financial industry. As the FT found out earlier this week, only a few businesses have taken adequate precautions to prepare for a British exit from the EU, despite the fact that the polls are suggesting a very tight race. Several polls now see the Leave-camp ahead, in some cases with a margin of seven or even ten percentage points.

This lack of seriousness when thinking about Brexit is also indicated by a recent study by the Global Counsel that stated that just over a quarter of FTSE 100 firms identify it as a concern for their performance in 2016. John Hammond, the lawyer at CMS Hasche Sigle, sees his German clients only now waking up to the possible reality of a Brexit vote: “I am telling people that their previous attitude – Brexit will not happen because it does not make economic sense – is complacent”, he said. “German companies are not particularly well prepared.”

The same goes, I fear, for a majority of not only British but also French, Dutch and Belgian companies. At the same time, some of Hammond’s clients chose the other extreme: “Some have been asking whether they can still sign contracts under British law or whether they should wait”, recounted the lawyer.

Ironically, his profession might actually be one of the few winners after a vote for Brexit, during an extended period of uncertainty. Lawyers, management consultants and tax experts are expected to see a surge in demand for their services, as companies struggle to cope with the levels of uncertainty.

But, at least John Hammond would be happy to forgo that business: “It’s not what I would hope for”, he said with a grave tone. “I would not want to benefit from a Brexit.” Unfortunately, there are others, especially on the politics side of things, that don’t have this issue but that will be quite happy to benefit from vote for Brexit.

 

The UK media on Bremain vs. Brexit

Just as a remark in the beginning: No, I will not use this blog post for bashing my British colleagues and their reporting of the upcoming EU referendum. Sorry, I know that’s a spoiler. Instead, I want to do is to take a closer look at the role of the British media in this referendum and how far it differs from their German counterparts.

The keyword here is impartiality. Already in 2015, in the run-up to the general election, I realised that impartiality has a different meaning for British journalists than for German journalists. Weeks and weeks before the big decision, newspapers decided to endorse a party and one of the candidates for prime minister. All the big names took part in this: The Economist, the Financial Times, the Guardian, the Independent, the Evening Standard as well as the Daily Mirror, the Sun and the Observer all published an endorsement. A strong tradition in the US, endorsements are not that typical in the German media landscape.

The referendum coverage now seems to follow the same logic. Although there haven’t been many official recommendations and endorsements of either Remain or Leave in the editorials yet, the editors have already made up their minds. According to a study by the Reuters Institute for the Study of Journalism, the national newspapers are “heavily” skewed in favour of Brexit. Advocates for Brexit include the Daily Mail (highest number of pro-Leave articles), the Daily Express, the Daily Star, the Sun and the Daily Telegraph. Amongst the supporters of Remain are the Daily Mirror (highest number of pro-Remain articles), the Guardian and the Financial Times. Articles in the Times were evenly balanced with a slight preference for leave, the study found.

This is quite an interesting insight for me. Whereas I was taught during my journalistic training that your personal opinion did not matter unless you were writing a commentary or an opinion piece, British journalists seem to have been taught differently.”We have an issue in this country around the definition of impartiality”, said Carolyn Fairbairn, the head of the Confederation of British Industry (CBI)  and a former journalist, at a dinner at the British-German Association (BGA).

Although I am aware of the fact that objectivity and neutrality is more a great ideal in journalism than a depiction of reality, I still feel obliged to try to report in a balanced and even way. This approach has been helping my journalistic work a lot, especially in places like China where it’s easy to get things wrong because you only want to see certain parts of the truth whilst overlooking others.

The study had a second interesting finding. From the analysis of 928 articles between February and April, it concluded that although all papers published pieces that supported an opinion different to the one that the paper promoted, they did so to varying degrees. Out of the titles mentioned above, the proportion of pieces with a contrary opinion was the smallest in the Daily Express and the Daily Mirror. This is also something that I have been taught differently. Not only is it practice in German journalism not to take sides, but it is also not considered good conduct not to have the competing party have a say.

All that of course leaves the BBC in a toxic position. The public broadcaster is, different to the newspapers, obliged to strictly follow the principle of impartiality – a specification that sometimes makes the content a minor concern. “In broadcasting, this means if you have a Remain-voice for business, you also need a Leave-voice for business”, Carolyn Fairbairn explained.

During the last couple of months, the British Broadcasting Corporation has continuously come under fire from both sides for allegedly failing to provide balanced coverage of the referendum campaign.”The BBC is on tenterhooks”, Alex Spence commented, Politico’s media reporter. “Program editors are keeping track of interviews with In and Out supporters to make sure that they’re not giving one side more air time than the other”, he wrote. All BBC journalists underwent a one-hour online training course on the EU and its relationship to the UK.

I assume that the media war will increase, now that the referendum is only 18 days away and we have some high-profile TV debates in the pipeline. Will it matter? Probably yes, especially for those who are still undecided. For all the rest though, it might not make a difference. That’s at least the conclusion that I have drawn from the comments made earlier by Andre Spicer, Professor for Organizational Behaviour at Cass Business School.

According to him, people tend to make quick decisions about important issues on the basis of their past beliefs or the first pieces of information they are presented with. “We then search for information that justifies our decisions”, Spicer said. “Many members of the public have already made up their mind and now they are looking for information confirming their existing beliefs while ignoring any information that challenges them.”

So even if there is a surprise switch and a so far pro-Brexit paper supporting Remain now, it might not matter too much. That should teach us journalists a lesson.

 

 

Reporting the Referendum

Tomorrow, it´s just one month to go before the big day. On June 23rd, the UK votes on whether it wants to remain a member of the European Union or not. It´s a historical decision, for sure. Finance Minister George Osborne called it a “once in a generation decision“, while Prime Minister David Cameron has warned peace in Europe could be at risk if Britain votes to leave the European Union.

For journalists like me, covering the referendum campaign proves to be a tough one. The debate is becoming more heated, more vitriolic and less rational, the closer we get to referendum day. Both sides are making claims that are hard to check and prefer to talk past each other instead of precisely addressing each others arguments. During the next month, I will use this blog as a means to share my views and experiences on reporting the referendum.