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New Zealand, Britain and the Brexit

June 25, 2016

Once the dust settles, the silver lining of this defining moment in world history will come into sharper focus. Although businesses usually look for stable markets in which to invest, volatility marks opportunity. No matter what the scaremongers keep peddling, there is an opportunity here, not just for the people of the United Kingdom, but for the entire world to embrace. This post is just my attempt to vent some frustration at the over zealous reporting of the issues and the scaremongering surrounding this historic event.

 

The people of the United Kingdom have proven their nation to be one of the greatest democracies on the planet and voted to leave the European Union. It is now time for the divisive campaigning to cease and the reality to sink in. There is no point in people continuing to scaremonger over global economic collapse, adjustments to the markets are necessary, the size of the EU economy is set to shrink by about 18% while the UK is set to regain its position as one of the largest and most powerful independent political and economic powerhouses on the planet. Under such circumstances the status quo is an impossible position to sustain.

 

The dramatic effect of the stock market sell-offs of the past 24 hours has been a self-fulfilling prophecy. The global media has been whitewashed for weeks with scaremongers peddling their fear of global collapse if the outcome of the referendum was in favor of the leave campaign. The British Pound is still the most valuable currency on the planet, although you may be forgiven for thinking it was comparable with the Zimbabwean currency given the rhetoric being flung around by some.

 

I recently had the opportunity to spend a few weeks in the UK and on many occasions the discussion turned to the topic of the referendum and the potential of the 'Brexit'. Following these discussions, with people who work across the EU and benefit in one way or another from the common market, I am not at all surprised by the outcome. One such discussion centered on the frustration of farmers being told by the EU bureaucrats what shape and size of hay bales they could use to feed their stock. With many having made the same switch as New Zealand farmers to the larger and more efficient round bales, they will be forced to spend millions converting back to the smaller and less efficient conventional bales. The financial impact of this and similar rulings will put additional pressure on a once proud and profitable industry already feeling the squeeze under continued EU regulation on every facet of their businesses and livelihoods.

 

There is real anxiety among the people of the UK regarding the impact the EU is having on their country and the ability of their elected officials to have any real influence with the bureaucrats in Brussels. The EU has failed the people of the UK.

 

New Zealand and the EU

For decades the EU and the EEC has had a massive impact on New Zealand, our economic and social policies in particular. When Britain first joined the EEC we were in a similar position to that facing the UK today. We had only a couple of short years to completely cut the apron strings and pivot away from mother England to develop new economic ties and secure or national prosperity. This forced successive governments to make some very tough decisions and we may still be dealing with the fallout from the resulting social policy and economic changes implemented in the turbulent decade or so that followed but we eventually thrived under the pressure to change tac and are in a more economically diversified and overall stronger position for it. I have no doubt that as the process of 'Brexit' moves forward the benefits will come into sharper focus for all, including New Zealand. There will be short term upheaval but the UK will undoubtedly be more prosperous down the road once out from under the shadow of the EU.

 

The EU is one of the most protectionist and heavily regulated markets on the planet. The suggestion by some that the decision for the UK to leave is a backward step in global free trade couldn't be further from the truth. The UK now has the freedom to pursue market access on its own terms, to source products and talent from wherever it wants on terms that best serve its consumers and producers. It will be a nation reborn, capable of expanding its global influence while pursuing all possible opportunities for its national growth and prosperity without being chained to the backward anchor states of the EU.

 

Looking Forward

The UK and the European Commission will soon have to start proceedings under Article 50 of the Treaty on the European Union. This gives the UK, the EC and its remaining 27 member states up to two years to come to some agreement as to how the departing member will continue to interact with the EU. The scaremongers would refer to this as a volatile period of uncertainty. The reality is that all EU Treaties currently applicable to the UK will continue in force until the new agreement is put into force. If no agreement is reached by the end of the two year negotiating period (which can be extended if the negotiators feel like dragging it out longer), the UK leaves with no agreement to replace the Treaties. However, it is in the political and economic interest of all of the parties for there to be an agreement at the end of the negotiating period or as soon as bureaucratically possible.

 

Once out of the EU, the United Kingdom is set to be the fifth largest economy on the planet, the power of such a position can not be understated. They may no longer have preferential access to the EU markets but they have gained the freedom to negotiate with whomever they wish, including former key trading partners, such as New Zealand. The impending volatility is an opportune time for New Zealand and all our local producers to break into trillion dollar market with tens of millions of consumers with billions to spend on our products and services.

 

I look forward to the opportunities for the UK and New Zealand with great anticipation. This is an opportunity to improve the global economy into one with greater choice and prosperity for all. All economies around the world are stronger with more opportunity, not less.

 

The EU has stifled the UK for long enough. Its time for the lion to wake and define a new era in global opportunity and prosperity.

 

 

Any views expressed in this post are strictly those of the individual writer named above and may not necessarily reflect the views of Mercer Business Partners Limited, the MBP Group, its Shareholders or Directors. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

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