Sebastian Mallaby is a senior fellow at the Council on Foreign Relations and a Washington Post Global Opinions contributing columnist. He is an editor at InFacts.org, a website campaigning to keep Britain in the European Union.
For the first time since the start of Britain’s referendum fight over Europe, the polls predict “Brexit.” The four most recent national surveys put the “Leave” side ahead with margins of between one and 10 percentage points. Most people, including many disaffected Britons who want to shake up the system by backing a Brexit, understand that this would mean a political and economic shock. But they underestimate its severity.
The morning after a “Leave” vote, Britain would find itself in a political, legal and constitutional limbo. Having staked his credibility on a “Remain” victory, Prime Minister David Cameron would probably be forced out, despite his recent protestations to the contrary — his senior Conservative colleague, Ken Clarke, says he “wouldn’t last 30 seconds.” Choosing a new Conservative Party leader is a two-stage process, with the second stage involving party members voting by mail. It could drag on for three months or so.
Britons — and British businesses, especially — would confront a nightmare of legal uncertainty. Large swaths of British regulation derive from E.U. rules and would have to be rewritten. Britain’s commercial relationship with its main trading partners would be up in the air, with no clarity about whether, or on what terms, Britain would retain membership in the E.U. single market. Global businesses with London headquarters would be scrambling to figure out if they should move. Fully 40 percent of Europe’s top companies and 60 percent of non-European multinationals have chosen London as their E.U. base. Their departure could trigger a real estate bust, clobbering consumer spending.
The United Kingdom would find itself considerably less united. A majority of Scots want to stay in the E.U. and might seek to do so by demanding a referendum on independence from Britain. The last Scottish independence vote, in 2014, went in favor of the union because Scots were persuaded that the economic price of breakup was too high. But if Britain quits the E.U. and succumbs to a recession, the economic case may become too weak to trump Scottish nationalism.
Northern Ireland would also be destabilized. The Catholic half of the population wants to stay in the E.U., alongside the Irish Republic. If Northern Ireland were dragged out of the E.U. by voters in England, Catholics would be resentful. Meanwhile, the basis for Northern Ireland’s economy — a porous border with the south — would take a whack. A business on the north side of the border would face greater hassles in recruiting workers and customers in the south, because the inter-Irish frontier would have to be subjected to passport and customs checks.
This uncertainty could last anywhere from a couple of years to, say, seven — the number plucked out of the air this week by a senior E.U. leader. The only precedent for Brexit was set by Greenland in 1985. But Greenland’s population came to a grand total of 53,000, the only issue Greenland cared about was fish, and even then the divorce proceedings took three years to settle. Britain is Europe’s second-largest economy. A breakup would be altogether messier.
What’s more, Britain’s E.U. partners would not make the exit easy. Governments in Germany, France and elsewhere fear anti-E.U. populists at home; they would need to punish Britain to send a message to their own electorates. They would also want to profit from the mess — for example, France hopes to lure French bankers and their money from London back to Paris. And even if, through some miracle of generosity, the leading E.U. members wanted to make divorce easy, they would not be able to do so. The terms of the exit would have to be agreed upon by 27 fractious member states that face distractions ranging from refugees to Vladimir Putin. Brexiteers may soon discover that, if there is one thing more frustrating than being in the E.U., it is trying to get out of it.
Facing a political vacuum, legal and constitutional uncertainty, and the prospect of a nightmarish negotiation with the E.U., the British economy would probably suffer a deeper recession than the mild one foreseen by some forecasters. There is a Lehman quality to this: Fear and uncertainty are hard to quantify in a model, but they can be devastating to flesh-and-blood economies. And Britain’s vulnerability is especially acute because its trade deficit as a share of gross domestic product is by far the largest among the world’s advanced economies. To pay for its imports, it relies on daily infusions of capital from abroad. If the voters go for Brexit on June 23, the infusions will sputter and the pound will probably collapse, cutting the spending power of workers.
A week is a long time in politics, and Britain may yet step back from the abyss. But it is good to be clear now that the abyss is a deep one.
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