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A brief Brexit blog

25th July 2016

There is a natural tendency in the real estate industry to want to move on from the referendum vote, to make the best of the situation in which we find ourselves and to talk up the market. This is a course of action fraught with danger.


As a child I remember a cub scout trip to see Billy Smart's circus. I was particularly impressed by a scantily clad young lady riding two horses at once, standing on their backs. This reminds me of the political challenge facing Theresa May at the moment. For the avoidance of doubt the analogy is to the equine rather than the sartorial aspects. I have no urge to imagine Theresa May in a diamante bikini. In the case of the Prime Minister, she has two very cantankerous mounts, one called “the middle ground” and the other called “UKIP”. At the moment she is passably maintaining a foot on each. As soon as any detail on our proposed exit from the European Union becomes apparent, this is likely to become very challenging.  “The middle ground” did not want to leave the EU. The Leave vote was delivered by a loose consortium of the disaffected of the left and right. Much has been written about Labour voters in areas most affected by de-industrialisation and of the Poujadist elderly in the shires railing against the 21st century. The Leave campaign told them that they could control immigration, save the cost of our gross contribution to the EU and retain our access to all of the benefits of the single market.  All of this delivered a small majority for an EU exit.


In view of the closeness of the result, it is inconceivable that there was a majority for any particular model for exit. This is where the horse-riding challenge arises for Theresa May. “The middle ground” that did not want to leave the EU in the first place might accept a Brexit lite that still provides access to the single market for exports and passporting for financial services.


Norway’s position in the European Economic Area would deliver this, but is politically challenging to explain to the British public as it is clearly what we have at the moment without the ability to influence the rules. “UKIP” and the right wing of the Conservative party are already pushing for a hard Brexit that sacrifices all of the benefits of the single market in order to control immigration from the EU. The two horses beneath Theresa May are already starting to move apart. The longer she tries to maintain a position that covers the both, the greater the likelihood that she ends up in an unedifying splits down the middle. She will no doubt recognise this, at which point it is enormously important for our industry that she chooses “the middle ground”.


Before the referendum, I wrote a blog on the EU – why we are stronger IN, which you can find here. All the disadvantages of leaving the EU remain, as does my view that a hard Brexit that removes access to the single market would be catastrophic. In our newsletter on 27th June (see here), we described the damage that was already taking place. The resignation of Jonathan Hill as EU Commissioner for Financial Stability, Financial Services and Capital Markets Union covered in the newsletter has already eliminated British influence in a key area of importance to the country.

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