The consequences of yesterday's vote by the British people to leave the European Union will be far-reaching, but there is no reason for global markets to panic.
Brexit is a vote against the European Union. Once heralded as the engine of a one-for-all and all-for-one economic growth, the EU is now seen by many Britons as an expensive, interfering and sclerotic bureaucracy.
Look for immediate downward pressure on the Euro as well as sterling, and on all European stock markets. These shifts offer significant buying opportunities for American, Chinese, and other investors. Some United Kingdom multinationals may relocate their headquarters to stay within the EU. The global attractiveness of British higher education will take a hit. But the city of London will remain an important global financial center; Frankfurt will try again to assert itself, but will not succeed.
To its credit, the Bank of England has clearly prepared thoroughly for Brexit. But few British or European businesses have any contingency plans. The Brexit vote will drive Europe into recession and highlight further the structural weakness of its social democracies. Populist EU politicians will blame Britain, push for protectionist tariffs, and demand their own national referendums. Meanwhile, opportunistic EU businesses will warn continental customers to shift their purchases away from British suppliers.
British business will more than ever look beyond Europe for customers. The special relationship with the United States will reassert itself. Likewise, the trade links among British Commonwealth countries will be revitalized. Look for the UK to also accelerate its expanding business links with China.
Brexit is not only bad news for the European Union, it is also bad news for the United Kingdom. The Scots will press for for a new independence referendum and, if successful, will seek to join the EU. British businesses with substantial EU interests might then relocate from England to Scotland.
The referendum was a bad political move. No sensible marketer goes to the public without new news. But the Remain camp offered nothing except the status quo. Anyone watching the national UK television debate on Tuesday could compare the hope and passion of the Leave campaign, led by former London mayor Boris Johnson, with the plodding, half-hearted economic arguments of the Remain team, led by new London mayor Sadiq Khan.
The political realities will quickly become clear. Look for Boris Johnson or Michael Gove to become the new British prime minister within 60 days. There is no point in David Cameron hanging around until October. He blew it...for himself and for his country.
