Article / 20 June 2016 at 10:00 GMT

Saxo on Brexit: The day after

Editor / Saxo Bank

Whitehall, London
As Britons rush to determine their country's European (or not) future, 
it is important to take stock of what is and isn't at stake. Photo: iStock

By Michael McKenna

The map is not the territory. As we approach the June 23 referendum in which Britain will decide whether it wants to remain in the European Union, it is important to remember that this is more of a legal question than an economic one. Whatever Britain is on June 23, it will still largely be on June 24, regardless of the outcome. All that will change is our angle of approach.

We have all seen these sorts of things before. In 1995, the French-speaking province of Quebec held a referendum on whether it wanted to remain part of my native Canada. I remember watching as, in the days immediately prior to the vote, the equivalent of the British ‘Remain’ campaign exploded into a florid mixture of sentimentality and spite.

While some boarded trains to Montreal in an effort to show support for Canadian unity (separatist newspaper Le Devoir called them “the tourists of federalism”), others muttered dark warnings about the nasty, brutish and short future that supposedly awaited the would-be nation of Quebec.

Quebec City
A banana republic without the bananas. Photo: iStock

What would have happened had ‘Leave’ – in that case, ‘Oui’ – taken the day? Doubtlessly there would have been a plethora of politicians on both sides willing to make much hay of the rancour and confusion that would have followed such a ballot. There would have been threats, and at least some of those threats would have become policy. That is how people are.

But the map is not the territory. Exports from the province of Quebec to the US, for instance, represent a trade worth about $45 billion each year. Imports hover around $27bn/year. Within Canada, Quebec's exports are worth about CAD$64bn; the province is responsible for just under 20% of Canada’s total GDP.

Regardless of spite, pique or other such harsh-sounding syllables, these figures represent the interests of some very wealthy, very powerful groups and individuals and the degree to which they would allow their balance sheets to suffer at the hands of fiery political rhetoric is limited. The same is true of Britain.

The worst of climes

To be fair, of all of the major EU economic powers, the UK is perhaps the least favourably positioned to exit the union. The British economy is financialised to a degree almost unheard of in the Western world, and a lot of this comes down to London’s position as an international point of entry into the EU.

In Britain, for example, industry represents 19.7% of total GDP while services account for 79.6%. Compare this to Germany, where industry represents 30.2% of total GDP with services at 69.1%.

Even when you compare the UK to France, whose balance of industry to services is similar at 19.3% and 79% respectively, further research exposes a dependence on the City of London that is not present with regard to Paris' banking centre.

According to the City of London itself, financial services – called “the indispensable industry” in a promotional document published in 2013 – represent a 9.6% share of the UK’s national economy, compared to 7.6% for the US, 4.9% for Japan, 4.7% for France, and a mere 4.2% for Germany.

Given London’s status as an international port of call for EU investors, this swollen percentage – the City claims that financial services were worth £63bn in tax revenues for 2011-12 – is certainly at risk of diminishment.

Millenium bridge
A steady stream of cardboard box-toting City boys is not 
outside the realm of possibility. Photo: iStock 

As we approach the June 23 ballot, AIG has stated that it is considering pulling out of London in the event of a Brexit, France’s Schneider Electric SA has said the same, and the governments of both Japan and India have expressed concern that London will not retain its international appeal should the UK vote to go its own way.

According to’s Pauline Loong, China would also view a Brexit negatively, as Beijing sees its friendship with the British capital as largely dependent on the “EU benefits” it provides. In Saxo Bank head of equity strategy Peter Garnry’s view, the City of London “may never be the same” if Britain decides to pull out of the union.

The limits of legalese

All of that said, however, we must recall for a moment that “departure” is merely a legal term. There is no proposal in which London attaches diesel engines to the cliffs of Dover and motors its way towards Iceland. The English channel will remain 32 kilometres wide, just as it was in the days of the Romans, and fog will only “cut off” the Continent in the minds of those looking to poke fun at Little Englanders.

In 2015, the EU accounted for 43.7% of UK exports (worth £223bn) and 53.2% of imports (worth £291bn). The EU is far and away the UK’s largest trade partner, with Britain’s EU exports worth more than double their US counterparts, and worth over six times the total of those sent to China.

Britain’s (over)reliance on its financial sector is a very real phenomenon, and it is indeed a cause for concern among Brexit champions. But just as in Quebec’s case, the £514bn worth of trade cited above represents some extremely powerful interests, not all of whom are able to be swayed by things like European Commission president Jean-Claude Juncker’s promise not to handle a newly independent Britain with “kid gloves”.

Let us speak of the facts on the ground. The map is not the territory. Not even the most ardent Brexiteer is calling for the sort of total isolation that characterised, say, Enver Hoxha’s Albania, and the relationships behind sums in the hundreds of billions do not always care what sort of gloves Jean-Claude Juncker wears or doesn’t wear.

Jean-Claude Juncker
"Louis Vuitton, I assure you." Photo: iStock 

The Brexit vote is both a watershed and an anomaly; prime minister David Cameron never thought he would have to follow through on this. He didn’t think he’d get a majority in the last election.

Similarly, while the referendum is in its strictest sense a vote on remaining an EU member, it is also a fragment of the popular frustration with the globalised, technocratic Future™ our leaders gather each year in Davos to promise us. In a sense, the Brexit is Trump, is the Front National, is Podemos.

Britain, however, is an island nation off the northwestern coast of Europe that has maintained extensive trade and diplomatic links with the continent since the time of Caesar. And when Britons wake to their result on June 24, amid all the hue and cry there will exist the same stubborn facts and figures.

At this point, Britons will need to summon that skill that is at once so humble and so central to their national self-conception.

They will need to get on with it.

Michael McKenna is an editor at


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