Cor Blimey! Brexit…? EU fragmentation?

As readers will know, at Awbury, we like to scan the horizon for risks that may seem remote; but which, if they were realized, could cause significant disruption or losses.

So, we keep an eye on political developments that could have a material impact.

The recent election of Jeremy Corbyn as leader of the UK’s Labour Party is one such event. At 66, Mr. Corbyn is an unredeemed, hard-left Socialist (who approves of Marxism). He is, therefore, the “real thing”, as opposed to what many in North America or elsewhere view as a “socialist”; with some views and “friends” that will quite properly give many pause for thought.

As long as he leads the Labour Party, it is almost certainly unelectable in UK terms; but that is not what concerns us.

Because of somewhat foolish prior undertakings by the ruling Conservative Government, the UK will be having a referendum within the next 2 years (and perhaps as early as 2016) on whether or not the UK should remain a member of the European Union. The last time that question was asked was some 40 years ago, in 1975, when the response was a fairly solid “yes” to staying “in”, although it seems that Mr. Corbyn then voted “no”.

One would have thought that, despite all its faults, most in the UK would see that remaining part of a structure that has brought many economic and personal benefits makes sense; and that the consequences of deliberately leaving would be unpleasant and damaging. However, “most people” thought that the risk and probability of Scotland seceding from the Union was laughable, until it wasn’t.

While Mr. Corbyn has now stated that under his leadership, Labour Party policy would continue to support and campaign for a “Yes” vote in the referendum, nevertheless, apparently, he has also been reported as finding the idea of a sharing a platform with the Government and “big business” distasteful, as they represent odious capitalism. Thus, the message he sends is not unequivocal. Such are the potential consequences of a political leader’s personal views.

Put all this in the context of the fact that the EU currently faces a “triple crisis”: of Euro-fragmentation à la Grecque, managing immigration and xenophobia (with the Schengen system at serious risk), and “Brexit”. Ironically, all the uncertainties and rhetoric that the first two factors engender may have an impact on the probability of the last occurring. Immigration is a contentious political issue in the UK, even though its economy and society have benefited for centuries from successive waves of immigrants and refugees; and, being an island and outside the Schengen system, it has much better control of its borders than elsewhere in the EU; while, as the UK is a not a member of the ERM, it is not constrained by the ECB’s antics. And yet, ultimately, voter preferences and intentions can be influenced by emotions and short-term perceptions.

Much can and will change over the ensuing months within UK politics and EU policies; but, while the risk of “Brexit”, or EU institutional paralysis, or even the beginning of its disintegration remains remote, it is not negligible. Therefore, such risks need to be factored in to any risk-acceptance or -management decisions that could be materially impacted if one or more of these scenarios comes to pass.

The “summer holidays” are definitely over!

The Awbury Team

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