Brexit and the future of Europe
What a way to unwind for summer: Britain is leaving the European Union and making world history in so doing. What will the consequences for European financial markets and economies be? Let us start with seeing when and how the UK actually leaves. When (if) they do there are some potential reflections to be made.
The balance of power in European financial markets will tilt towards continental Europe, as the UK’s position as main hub for trading in euros will likely disappear. London as financial centre will clearly feel the indirect effects of a cut-off (at least partly) from the single market. Financial services will move away from the UK across the sea to mainland Europe and out into the rest of the world – but it remains to be seen the shapes and forms that this transformation will take. It is unlikely that future European financial services will be as concentrated in one place as it is today in London. As business starts to move across the English Channel, the race will begin between financial institutions and centres eager to grab market share from their disadvantaged British competitors.
For the European economies, the short-term effects include worsened investment and growth prospects. Businesses hate uncertainty, and uncertainty is the primary consequence of the British leave-vote. What will the deal (if any) look like between the UK and the EU? Will other countries be inspired by the UK example and follow suit? All of the above depends in the end on the kind of exit deal that the UK is able to strike with the EU.
The reasons for the leave vote is worth considering. A rift has opened within the UK, as it has in many advanced Western economies. On the one side we have those that have benefitted, or believe they will, from European and global economic integration. On the other side we have large groups who have experienced stagnating income and more precarious jobs and life chances during the last 20-30 years. There are many reasons for this development – but as European societies we need to close this rift and make sure that all are aboard the ride towards the prosperity that trade and economic cooperation can bring. Unions of course play a central role in this process to guarantee fair wages and working conditions. Strengthening labour and union rights is therefore one of the key ways forward for stronger unity and prosperity in Europe. But the EU should also play its part by reinforcing the social dimension of the European project.
As the dust from last week’s turmoil settles, we can see the summer holidays approaching. For my part, I will spend the summer preparing for a big adventure that lies ahead: going on nine months’ parental leave in September together with my little baby son. He will most definitely keep me as busy as ever before, even though he doesn’t care about Brexit or finance or trade unions.
I wish all our readers a relaxing time off during the summer, and see you again in August!