How did the UK get to the situation that we are in now? The birth of Brexit is a fascinating tale that really can be said to have been started some 45 years ago….
Towards the end of the post-World War II economic expansion (~1945-1960), the treaty of Rome was signed which in a real sense established the European Economic Community (EEC). The same sentiment that drove so much of US post-war economics – a singular drive to foster cooperation and growth between nations in the spirit of rebuilding financial framework – drove the complicit nations to create the EEC. Certainly, the cultural lacerations of the war were felt for some period afterwards. Readers will perhaps recall the advertising of the era which heavily centred around the nucleic family ideals with large, family cars for all and traditional values being the main theme. It was proffered that nations who trade together probably won’t fight with each other so readily, and so the pre-cursor to the European Union was born.
The UK made an application to belong to the EEC in 1963, but this application was vetoed by French President Charles de Gaulle, believing that the UK would side with the Americans in all things political not truly being an advocate for European issues. It wasn’t for another 10 years that we finally made the cut and became a member of the Community. No sooner had the UK joined the EEC, than it was almost immediately reviewing the validity of the decision and a referendum was held. The answer was a resounding ‘Yes’ – 67% of the vote was positively committed to remaining. Interestingly, (as it is still doing today) the issue split the Labour party which fractured to evolve into two separate parties.
1984: Margaret Thatcher led the charge to renegotiate the terms on which the UK engaged with the EEC. This was a very different Britain on very different terms - at the time being the second or third poorest member of the EEC and paying an over-representative level of levies because of the comparatively few number of farms (at this time agricultural subsidies were hugely the majority of EEC outgoings). And so, the Iron Lady promised to change things and present a more fair trade relationship for the Isles and she can be said to have been successful as her negotiated reduction from around 20% contribution from the UK to around 12% contribution remains to this day.
As Tony Blair assumed his leadership duties in the late 90s with a pro-European agenda, he set about rebuilding the relationships and trade ties with the now-called EU. However, this period in terms of trade was tough and the conversations abrasive at best. ‘Mad cow’ disease prevented the UK from exporting beef to the EU and, following this, further trade vitriol manifested in the form of trade restriction battles, involving a range of goods to be exported to the EU (at one stage, it was claimed that Cadbury’s chocolate was not real chocolate and should be labelled ‘chocolate substitute’ or even ‘vegelate’). These trade difficulties lasted a long time but did eventually result in a victory for Britain in the European Court of Justice.
So, to the Global Financial Crisis in 2007, and the building of a shifting attitude towards EU membership. It is in this period of economic underperformance of the EU as a whole that David Cameron gave a speech identifying clear issues in the bloc and promising to renegotiate the terms of our involvement with the Union. These economic stresses and a burgeoning migrant crisis led to a slow but steady building of support for the idea that, perhaps, Britain might be better off on its own. It is in this period, in particular, that the ‘godfathers of Brexit’ Dominic Cummings and Daniel Hannan delivered their most compelling and tactical messages – including NHS based financial rhetoric (£350m-a-week…) and the slogans that now characterise the Leave campaign.
The turnout for the referendum was high. Voters that hadn’t voted in decades returned to register given that every vote mattered (by contrast to voting in, for example, Labour/Conservative party saturated constituencies) and 30 million people voted. The result was slim, 51.9% to 48.1% in favour of leaving.
And that’s when the real arguing began…
Major rates at the time of writing:
GBPEUR – 1.1309
GBPUSD – 1.2426
EURUSD – 1.0988
Rates have been largely range bound day-on-day with the majors printing rates that are almost the same today as we wrote on opening yesterday. There is not a great deal of economic data due out today, so the Labour Party annual meeting and Boris Johnson’s US visit could provide some hints toward fundamental changes.
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