Brexit or Engxit?

Coverage of the impact of a possible Brexit focuses mainly on a possible EU split. However, there is a very real possibility that the UK itself will split up even sooner. Tensions on financial markets rapidly increase as the ballot on EU membership of today, Thursday, 23 June has arrived. During the weekend, some polls showed that the Remain camp has narrowly recaptured the lead of the Brexit movement. On Monday, that immediately resulted in an exchange rate rise of over three per cent on European stock exchanges. In recent days the pound rose by two per cent versus the Euro on currency markets. 

It is noticeable that news coverage of the possible Brexit focuses on the consequences for the EU, and how the relationship between the EU and the UK can be redesigned. Some people are already talking about a messy divorce, and a British departure could be the first step for more countries to leave, according to commentators. There is little focus on what might happen to the UK in this scenario.

Large parts of the country have a clear majority that is in favour of remaining in the EU. In late 2015 this bond with Europe even decided the Scottish referendum about whether to stay in the UK or not. It seems obvious that the Scottish call to join the EU independently from the UK would become louder after a Brexit. In other areas the population is not ready to say goodbye to the relationship with Europe. For example, many farmers in Wales are very much dependent on agricultural grants supplied by Brussels.

Northern Ireland is a completely separate case. Because the country borders on EU member Ireland, the region threatens to become the continent’s main smuggling area in one stroke. All sorts of goods and people could enter Great Britain via this back door, and hermetically closing the border would be very expensive. Besides, all sorts of new problems would then arise. Almost 30,000 Irish people work in Northern Ireland, and it would then become impossible for that group to get to work everyday. 

It is not a coincidence that those who shout loudest all come from England. Former London mayor Boris Johnson, for example, is the most prominent face of the Leave campaign, and Nigel Farage – leader of UKIP – was born near London and worked as a trader in the city for years. Their call for a Brexit barely echoes in Scotland, Wales and Northern Ireland. When politicians from these areas even make the news with statements about the referendum, it is almost always to plea in favour of remaining in the EU. You would almost start to wonder whether it might be best to vote on England leaving the UK rather than the whole country leaving the EU.

In an interview this weekend the French Minister of Economic Affairs, Emmanuel Macron, said the UK would be no more than a small, isolated trading nation on the fringes of Europe after a Brexit. He compared the country to Channel Island Guernsey in this scenario. Although Macron was obviously exaggerating, proof that the British economy would suffer from a Brexit is becoming more evident.

The International Monetary Fund (IMF) warned that the country’s economy would shrink by five per cent in the three years following a Brexit. That estimation is not even considering the possibility of the UK falling apart because Scotland might secede, or because of the problems that might arise in Northern Ireland. Looking at the potentially enormous consequences and developments in the polls, a relief rally of the British pound on Friday might currently be the most probable scenario.