So, devil's advocate here: Can someone explain to me why this is a bad thing? I feel like most educated people seem to think this is terrible (and the markets seem to agree), but to me, the European union seems like an anti-democratic institution that doesn't really provide much value. I mean, don't me wrong, removing trade barriers is probably good. But won't the UK just be able to pretty quickly renegotiate basical…
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Economist here. This is what a recent poll of economists on this issue looks like [2], we have a pretty good idea of some of the things that come next and they are not good.
There are four major areas of concern;
• London is the financial center of the EU because the UK is both in the EU and is relatively friendly to financial services. Absent the UK having a regulatory treaty with the EU (which they can't without being part of the EU) financial services will be forced to move to the mainland. Even prior the vote there was work underway on this, the first movements will begin to occur in a couple of weeks. Several other sectors are similarly at risk.
• When the UK leaves it has no trade treaties with any other country in the world. This means all British goods will incur new or higher tariffs in all trading partner countries, British goods become more expensive when compared to comparable goods produced elsewhere. There is not a magic button here, it typically takes decades to either create new treaties or join an existing one.
• If the UK decides it wants access to the single market it also needs to adopt single market rules, effectively accepting all EU regulation but without having any voice in that regulation. That's assuming France & Germany don't just block UK access to the single market out of spite.
• The UK no longer has visa free access to EU states and the same is true of the EU to the UK. There are enormous numbers of British ex-pats who live on the continent and enormous numbers of non-UK EU citizens who live in the UK. Even if the UK & EU manage to push through a very hasty set of reforms allowing those who have lived there for n years to remain we are still talking about pretty significant labor displacement & disruption.
When every major central bank in the world have brought in extra staff and have prepared their emergency liquidity facilities you are going to have a bad day. I expect the pound to hit dollar equality tomorrow, its going to be the ERM disaster on steroids.
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[1] https://www.reddit.com/r/worldnews/comments/4pkt3k/bbc_forec...
[2] http://www.igmchicago.org/igm-economic-experts-panel/poll-re...