Brexit - what should have been done

Unfortunately, this suggestion for an optimal Brexit was never followed.


11 July 2016

Brexit - what must be done
By: Karsten Riise

Vision
Vision in this situation counts heavier than leadership. Without vision no leadership. I have seen no prime-minister hopeful present a vision for UK after Brexit. But the array of Prime Ministers the coming decade(s) should ideally continue a shared vision.

Leave graciously
Activate the clause for exit of the EU immediately. There is no going back. “Burn the ships”. Any attempts to drag on the feet, to gain “concessions”, will only be interpreted by the EU as attempts at extortion, and the payback will be bitter. The UK needs good relations with the EU for all time, so leave as a faithful partner - to be trusted for the future. Leaving quickly, will financially be a very “cold turkey”, but the great pain (though long) will be shorter than otherwise. Leaving quickly is the right thing to do – it will demonstrate leadership, and induce the country to march forward.

The Scots and the North Irish voted “stay”. The UK consists of different legal national entities. Explore, if there is a legal way for Scotland and Northern Ireland to remain in the EU, while England and Wales leave. There is a precedence the other way around: Greenland is a part of Denmark’s “Realm Commonwealth” (Rigsfællesskab), Greenland has its own rule, and Greenland left the EU while the remainder of Denmark stayed. So legally it is thinkable. The practicability of a legal model where Scotland could vote to stay in the EU while remaining in the UK, should be explored.

East-European workers in the UK pay triple for their presence: First, they perform valuable work. Second, they pay UK taxes – and third but not least: their home countries are the fastest growing markets in the EU for British products, helped by remittances from workers in the UK to their home countries. According to the UK’s National Statistics Office, Poland in 2014 was nearly as big a market for UK products as Denmark, but unlike Denmark, UK exports to Poland have from 1999 to 2014 been growing at a fast rate of 9.2% per year (current prices). If the UK had stayed in the EU, the East European countries would in 5 years (taken together) buy as much British exports as Italy, half as much as France, or one third of Germany. In a populist UK policy, it would be tempting to reduce the presence of East European workers as fast as possible.

But such action will come at a costly reaction from the EU, driven by East European members. As East European workers are one of the main issues of the “leave” voters, the dilemma that quickly reducing the number of East-workers will be legally difficult and largely self-defeating for the UK, this leaves (sic) the UK in as very embarrassing situation, where many “leave” voters must be disappointed.

To continue with access to the EU market, the UK Parliament will in the future (like in Norway) have to act as a rubberstamp for most EU legislation and EU standards to be introduced in the UK. In the world of exports, there are two dominating standards, EU and US; to further its exports, the UK should better keep EU standards. Except for drinking pints of beer, and driving miles-per-hour, as they already do, the “leave” voters may once again be disappointed by keeping EU sausages and the metrics system. Be honest about this to the public.


Setup council for EU-UK relations.
Losing market shares in the EU, it will be tempting for the UK to focus one-eyed on the other big world market, the USA. Exporting to USA is fine, but should not lead to a new dependency, where the UK will be more vulnerable to protectionist whims of the US Congress or of a Trump presidency. If Donald Trump is not elected, another Trump-alike can be president on a protectionist ticket bad for British exports in 4, 8 or 12 years. The “leave” majority voted for maximum independence. The UK should therefore not replace a EU dependency (though it will largely persist) with a big US dependency. Norway, Switzerland, Australia, and especially Canada also have UK export potential, but only to a certain degree.

Consequently, the UK must spread and diversify UK trade and interests to the non-Western world. Figures from the UK National Bureau of Statistics show that such a UK export diversification is already under way since 15 years. But after Brexit it must be forcibly accelerated. The UK can no more conquer or manipulate non-Western market-countries the way they did the Raj of India, the Ming of China, the Arabs, Persians, or the Africans – the UK must serve the non-West with products, services, and expertise.


Serve the World
The EU (ex UK) makes for nearly 20% of world GDP (IMF data). A rather fast and substantial loss of export-opportunities in the EU can of course over time be compensated in the other 80% of world markets. The question is, however, how slow, at how low prices (incl. exchange rates), and on what terms & conditions it will take to serve more to predominantly non-European buyers. Also high-paid specialists will see their jobs moving out of the UK. Hardship can become very dire, and for lack of social programs, social unrest and ethnic violence (individual acts and riots in neighborhoods) can become more common among those who feel underprivileged, before the harvest of new tough efforts can make up for the losses.

Outside the EU, the UK will be hard pressed to earn an increasing share of exports from the growing non-white, non-Christian, Muslim, Asian, and African markets, and the British will be the ones to ring the door and hat-in-hand ask for permission to enter. England must adjust. India and China with Japan and Korea will become indispensable. Russia was, before sanctions, a very important growth market for the UK. Pressed for alternative markets to the EU, even with Russia, the UK must face a time for adjustment.

In Japan and Korea, UK exports are, according to data from the UK National Statistics Office, going well forward. But compared to the relative size of the individual markets’ economies (IMF data), UK exports are underperforming in important markets like Indonesia, Taiwan, Brazil, México, and even Canada. Given time, sufficient effort, and maybe a needed new attitude to speaking other languages (e.g. Portuguese, Spanish), large potentials around the globe for UK export increases to counter future EU-export difficulties, do exist. Strategic alliances must be built out, with a non-imperial selling UK attitude. China, and not least India, are evident partners. Africa is growing fast, so an African alliance with the UK is also called for. Learn French, Arabic and read the Quran to socialize with big parts of Africa. Not least, the City of London should in the finance sector make itself the driving force of a world-wide alliance on confidential overseas banking with countries like Cyprus, Panamá, the Caribbean, Singapore, and Hong Kong.

The UK is world class in science, international business leadership, finance, professional services including lawyers, architects, engineers, and medicine, music, fashion and IT (to some degree), pharmaceuticals, and diplomacy. Also, with its airports and sea-lines, the UK is one of the main hubs to the world. Continue to improve communication lines. Improvements also must be addressed in production, foreign languages, and general education. Keep taxes low. Given the right development in attitudes, this leaves the UK with many long-term options.

Growth in the world really does not happen in the EU or the USA, but in those places which the UK will now be forced to serve more intensely, including Muslim countries, Asia, and Africa. If Brexit for many years will have a down-side of losses, being forced to diversify to non-Western markets can for the UK become the long-term up-side of the coin.

The positive prospects of Brexit are, that when the UK’s forced reorientation has gone on for 10-20 years, the UK (or what remains of it) can have a much broader and therefore more robust and flexible export base, and a more open relationship with the world than any other country on the planet. These are rewarding perspectives – but they must be earned.


Prepare the Public It is going to be a tough journey, with no immediate net-advantages coming for years. EU-legislation will continue to be a dominant part of Parliament rubber-stamping. More East-workers will stay and serve England, than the “leavers” promised. Great dependence will continue to be on exports to the EU, and these EU-exports will be severely hampered. Nobody in the world is waiting with open arms to compensate the UK for self-induced losses of business in Europe. The pound must fall (more than it already did), real estate will be depressed, the City of London may panic, and a financial and economic crash and flight of work places is likely. Hardship will be deep, long and difficult. Prepare the UK public for a rough ride.

One attitude of probably many conservatives and “leave” voters may be “scratch the back of an Englishman, and you’ll find an imperialist.”. Any “imperial” arrogance is defunct and must be discredited. If the UK wants to replace lost EU exports with more business in the developing markets after Brexit, an attitude of serving the world is needed.

Inspire the public. With hard work, perseverance, creative thinking, and a more open view embracing the world, especially in that developing part of the world which belongs to other religions, cultures and ethnicities, which many of the “leavers” have tried to turn their back on, there is a future for the UK. Gone is “empire”, it will be no more. But by serving the whole world, with more sensitivity to “non-Protestants” and “non-Whites” and perhaps 1% of humbleness – on a more equal footing, there IS a future. That will be a future worth winning.


Karsten Riise
Partner & Editor


CHANGE NEWS
CHANGE MANAGEMENT

The biggest Loss

1 July 2016

England’s biggest Loss after Brexit

By: Karsten Riise

The biggest loss for England after Brexit is their pathetic lack of direction - lack of leadership.


The whole English people’s lack of knowing themselves, lack of facing the situation THEY themselves and nobody else has created for them.

Ever since they went into EEC (later EU) the English have ballyhooed craving a “special status” for England in Europe. For no particular reason, actually, except that the English believed that they of all people on the Earth were sooo special.

Now they got their way – and they crack up.

The Labour party is cracking up. The conservative party is cracking up. And even more telling: The loud-shouting “nay-sayers” are cracking up, not wanting to face the responsibility of their own “leave” campaign - even with big-Boris quitting.

Gone is the “stiff upperlip” – nowhere to be seen.

Imagine the lack of respect this self-made chaos and pathetic run-for-the-door in England engenders in the world. Particularly among former colonial countries in Asia and Africa. Like China, India, South Africa, Nigeria, Malaysia, Singapore, Iraq. Exactly those markets which England now for lack of the EU will depend more upon.

Face-saving is always important – especially in Asia and Africa.

Englishmen (and women!) right now are more than anything not losing money, or wealth, but something much more important – they are losing face.


Karsten Riise
Partner & Editor


CHANGE NEWS
CHANGE MANAGEMENT

Irish Chances

25 May 2016

Irish chances with Brexit

By: Karsten Riise


I newly attended a conference about the possible exit of Britain from the EU. One of the speakers, a guy from Oxford, claimed to have calculated an effect of ‘Brexit’ of “between 0.1% and 3.9% reduction” in British GDP as far away as 2030. I am always amazed by the hubris of my own profession.  To tell 200+ dignitaries that you can calculate any effect with that precision 15 years into the future requires more than economic insight – it requires that you have a telephone line to God or a crystal ball.

The effect of a ‘Brexit’ to many countries (including Denmark) were according the Oxford-wizard fractions of meticulous calculated decimal-percentages. I would have preferred to say “no measurable effect” - but the illusion of economic wizard-precision obviously had to be showed-off on a slide.

Interestingly, the only country in the world, for which the economic wizard from Oxford could point at a severe effect of ‘Brexit’, was Ireland. Because Ireland has a lot of trade with Britain, the Oxford economist believed in a significant negative net-effect on Ireland of a British exit from EU.

How shortsighted economists can be. Too often, they just project past knowledge into the future instead of looking at new potential developments.


As I see, a ‘Brexit’ will give Ireland at least two great chances to exploit –  at the expense of England:


Ireland can attract more non-European investments

Non-European companies, which seek to enter the EU, will often have preference for an English-speaking country. Especially if they are from USA. Until now, US-American investors had two English speaking EU countries to choose from: the smaller Ireland and the much bigger Britain. After a ‘Brexit’, Ireland will be the only English-speaking country left in the EU. Great for Ireland. ‘Brexit’ for Ireland will mean back to basics. Ireland grew rich by being a base for US American firms wanting to enter EU, and after a ‘Brexit’ Ireland will the next coming 30 years additionally be also one of the most logical places in EU to start for all the up-coming Asian companies which will want to enter the EU.


Ireland can build ‘City of Dublin’

The ‘City of London’ is the biggest capital market in EU. Apart from its size, two of the attractions of the ‘City of London’ are the English language, liberal tax and finance rules, plus of course an infrastructure. If Britain leaves EU, ‘City of Dublin’ should go for the kill – take market shares from ‘City of London’.

The ‘City of Dublin’ has the English language, the islander’s outlook to the whole world, and the ‘City of Dublin’ can copy the tax and financial rules, and the infrastructure, that made ‘City of London’ great. The physical distance is short, and the internet is instantaneous.

I do not envision that ‘City of Dublin’ will overtake ‘City of London’ after a ‘Brexit’. I just believe, that if ‘City of Dublin’ after a ‘Brexit’ can just pick 10% of the enormous financial volume of the ‘City of London’, that would be a fantastic opportunity for Ireland.


‘Brexit’ can be a win for Ireland.

For Britain itself, ‘Brexit’ may have much more negative political and economic impact than the moderate “-0.1% to -3.9%” which the ‘wizard’ foresaw. But that is different story, which I described in harsh colors long ago.

Karsten Riise
Partner & Editor


CHANGE NEWS
CHANGE MANAGEMENT