The phoney war’s almost over, in a few days we will face the crunch. I am realistic about the complexity and pessimistic about the effect of the UK’s departure from the EU.
Last year I was sure that we would negotiate some sort of associate member status with the EU, perhaps remaining in the customs union and becoming part of EFTA within the EEA. This solves and simplifies a complex set of problems and might be achievable within two years. Now, if the Prime Minister isn’t bluffing and I don’t think she’s the type, it looks as if we are going to start from scratch negotiating our trading relationship not only with EU countries but every other country in the world.
Every single trade and industry has its own priorities and needs. Farmers, pharma and fishermen; finance, airlines, auto manufacturers all need to get a deal that works for them. As far as I can see none of them will be at the negotiating table. David Davis and his team will be in the unenviable position of having to thrash out some sort of bodged deal where, say, North Sea cod may be sacrificed to protect cars made in Swindon.
It might be instructive to ask Commonwealth countries like Australia and New Zealand how they got on when we betrayed them by joining the EU. They suddenly lost an important trading partner and had to forge new relationships in a hurry in the 1970s.
If you share my pessimism it is prudent to invest outside the UK and Europe. The American economy continues to be a success story, combining low unemployment and interest rates to produce robust growth. This cannot go on for ever so I’m betting that emerging markets offer the best prospect. I hold McInroy & Wood Emerging Markets, Aberdeen Asian Smaller Companies, Pacific Assets Trust, Worldwide Healthcare and Utilico Emerging Markets. Fingers crossed that they offer some protection against the mayhem that will come with the crunch.
Christopher, I believe we shared very similar views on the referendum and were brothers in our post vote gloom. I am however a little more optimistic in what might happen. I wouldn’t say TM is bluffing but I would say she is trying to have the best negotiating position when she and her team sit down with the bandits from Brussels. So give nothing away until you get something back. It will be, inevitably, a trade on the lines of cod for cars. I think that we will end up with something that looks like EFTA/EEA. Remember that each of the outliers have their own individual deals. The bandits need our money so it will more likely be immigration control and free trade for £30b a year. We will then continue to let the same numbers in bar a few gap yearing Australians and it wont seem such a bargain.
Obviously I have no idea what Brexit deal will be struck. I am rather Hannan and Rees-Mogg about things, so am fairly (if fearfully) cheerful.
But the Crunch is surely much more than a few days away? Somewhere between the referendum and our leaving the EU, and much nearer the latter than now, there will indeed be a moment when we can see what Brexit really looks like. Even then, the net pain and gain of Brexit may take so long to unfold that the UK exit from the EU may not be readily discernible as signal as against the noise of world events.
I do rather get the point of investing in emerging markets. It does seem very likely that the old Third World is about to out-compete the old First World. But what seems likely – even the blindingly obvious – so often doesn’t happen.
Of course, I speak as someone who has never knowingly made an investment choice.
I like the Roy Orbison clip with guest appearances from Bruce Springsteen and Elvis Castello (Nice Irish touch).