The UK is in a mess. It woke up on Friday with a massive self-inflicted hangover following the surprise vote to turn its back to the European Union in a referendum that was from the very beginning the result of internal feuding, divisions and personal political ambitions in the ruling Conservative Party. The pound crashed to its lowest levels in three decades, the stock market slumped, Scotland is threatening a new independence referendum of its own and the new mayor of London, worried about the repercussions of leaving the EU, has suggested that the capital may also seek to break away from the UK and become a Singapore-style city state. In short, the UK is deeply divided, anxious about an uncertain future and facing a profound constitutional crisis. Prime minister David Cameron called the referendum because he believed he would win and thus silence his party's Eurosceptic members. Boris Johnson, the former mayor of London and the main standard bearer of the Brexit campaign, quite clearly used the referendum campaign as a cynical ploy to unseat Mr. Cameron and take over as prime minister and leader of the Conservative Party. Many suspect he believed the Remain camp would ultimately secure a narrow victory that would have suited him very well as he could then bank on the support of Conservative Eurosceptics in a future Conservative leadership challenge while ensuring that the status quo remained between Britain and Europe. Mr. Cameron thought he had the support of the opposition Labour Party. Unfortunately, its old fashioned leftist leader Jeremy Corbyn conducted a reluctant and feeble campaign to the dismay of his own shadow cabinet. The Remain campaign's economic scare tactics also back fired as the Leave camp increasingly shifted the attention on immigration and controlling the inflow of migrants to the UK. The campaign turned nasty and as Shakespeare would have said into a tale of ''sound and fury signifying nothing'' with palpably phoney arguments and untruthful propaganda being banded about by both sides. That Shakespearean quotation comes straight out of the Scottish tragedy of Macbeth. But this time, the outcome of the referendum does signify something pretty crucial for Scotland whose First Minister Nicola Sturgeon has already announced she intended to keep Scotland in the EU and call a new independence vote if necessary.
The repercussions on other countries, a threat for the EU
The fallout of this perverse referendum is far from over. Both the Conservative and Labour Parties are in turmoil and facing leadership contests. There is the wider risk of contagion in other parts of Europe with French, Dutch, Italian right wing parties seeking to capitalize on the mood of popular discontent against the so-called elites to make domestic political inroads at the same time as undermining the European construct. Small wonder that EU leaders are seeking a quick resolution to the UK vote and urging the British government to invoke Article 50 of the Lisbon Treaty to start the two-year exit process. But the UK is in no hurry. Mr. Cameron has shifted the problem to his eventual successor in three months’ time. The Leave campaigners are also procrastinating as they want to make sure the UK negotiates a favorable deal with the EU whereby it still has a foot in the single market. That would imply a Norwegian solution but the problem right now is that such a solution would give the UK access to the single market but would also impose on it the freedom of movement of EU citizens – just the issue the Leave camp purportedly claimed it wanted to stop in its anti-immigration campaign.
What remains to be seen: timings, exit method, European strategy
So far, the outcome of the referendum has continued to raise more questions than answers and uncertainty is what economic agents and financial markets dislike most. Here are the three key questions that have yet to be answered. First and foremost, when will the UK leave the EU? Some are even suggesting that it might not even happen as Mr. Cameron's successor, who would be left with the task of invoking or not invoking Article 50 of the Lisbon Treaty, would be reluctant to exercise this as it could well mean presiding over a recession and the dissolution of the UK, should Scotland and Northern Ireland look to secede. That would go against the wishes of the 52 per cent pro-Brexit popular vote but then there is likely to be a general election in the next 12 months with some parties calling for a new referendum to reverse last week's outcome. This could be a possibility given that the protest working class vote that swung the victory to the Leave camp could quite easily swing to the other side once they feel the pain of recession with petrol, cigarette and beer prices going up sharply as a result of the slump in the pound - not to mention the likelihood of higher taxes. The second question is what kind of exit the UK would wish to pursue if it does eventually exercise Article 50? Already splits have emerged in the victorious Leave camp that can be summarized as the proponents of an international, global, free trade vision and those of an isolationist vision. It is far from clear that any new UK government would be prepared to accept freedom of movement in exchange for membership of the European Economic Area. Again, the answer would only come after a general election. The third question is what strategy will the EU pursue with the UK in its efforts to keep the Union united? Will the hawks prevail with a harsh approach to negotiations or will Mrs. Angela Merkel's more conciliatory and constructive approach be adopted? In the meantime, uncertainty will continue and this is exactly what markets and industry do not like. This is also the case of the UK oil and gas industry which to all intents probably faces a more moderate impact from Brexit than other industrial, financial and service sectors, The North Sea oil and gas industry would clearly like to know what sort of freedom of movement and trade deals a non EU UK would be able to establish with the European Union as well as the implication of an eventual Scottish independence referendum. This uncertainty could lead to delays or cancellation of major North Sea projects although at the end of the day the future of a mature oil and gas play such as the UK Continental Shelf will ultimately hinge on the price of oil. And if the US dollar keeps strengthening as a safe haven against the pound and the euro because of Brexit induced turmoil that will certainly not help.