Article / 07 July 2016 at 1:19 GMT

Why Brexit's 'disastrous economic consequences' could be left on hold

First in Business Worldwide. /
  • The stay camp's warning of dire consequences from a Brexit vote look correct
  • Predictions of trouble in the banking and real-estate sectors has been borne out
  • Some tweeters want a vote on the terms for the UK divorce from the EU
  • The next Tory leader may try to postpone the exit or even avoid leaving altogether


We know who won the Brexit vote on June 23: the Leave camp. But if we were to run a contest of whose side's predictions were the most accurate, I think the clear winner would be the stay camp.

First, there is the issue of cost savings, one of the leave camp's main arguments: the reported £350 million that the UK gives to the EU on a weekly basis, and which would be transferred to the UK's health system. Soon after the referendum result was announced, Nigel Farage, leader of the Independence Party, admitted on Good Morning Britain that it was a mistake for the leave campaign to make this inaccurate claim.


Farexit ... EU president Jean-Claude Juncker called Nigel Farage, above, an "unpatriotic quitter" for resigning from his role as head of UKIP following the Brexit vote. Photo: CNBC

By contrast, the Stay camp's prediction of trouble in the banking and real-estate sectors largely has been borne out: bank stocks are down by 20% to 30%; and only today we heard that a third UK property fund has halted withdrawals. More generally, the sentiment that uncertainly and volatility are on the rise suggests that the stay camp's dire economic predictions were not too far off the mark.

This is the background against which we should analyze the news of  "exit" decisions by prominent leave camp figures Boris Johnson and Nigel Farage. Johnson has decided that he will not throw his hat into the Tory party-leadership ring, whereas Farage resigned as head of the Independence Party.

I wouldn't necessarily agree with EU president Jean-Claude Juncker, who called Johnson and Farage "unpatriotic quitters;" but they are certainly hedging their bets: now that reality is hitting hard, the responsibility of taking Britain through a difficult and highly uncertain process is not something they are attracted to.

Signs of regret

The "Borexit" and "Farexit" announcements also reflect a general sentiment of "second thoughts" among a significant share of the Leave camp. Looking over social networks, we find multiple entries of Brexit voters who thought the referendum was just going to be a sign of protest; or voters who think they voted based on false claims (for exampled, increased National Health Service funding).

Some tweeters are even hoping that a second referendum will take place where they will vote on a precise set of terms for a UK-EU divorce.

 Second thoughts ... Don't be surprised if the next Conservative leader tries to find a face-saving way to dodge an exit from the EU and its costly consequences. Photo: iStock

There is no shortage of UK leaders willing to pull the Article 50 trigger and lead their country in the Brexit negotiations. But given the current cold-feet environment and the Johnson and Farage decisions, the negotiating power of whoever steps up is likely to be considerably smaller than expected, both within the UK and with respect to the European Union. 

For all of these reasons, I would not be surprised if, in the next few months, the new leader of the Conservative Party were to find a nice face-saving strategy to escape the Brexit process, or at least postpone it sine die. In some way, that might be a win-win outcome: supporters of the Brexit vote would have made their protest loud and clear, whereas the rest of Britain — and the rest of the world — would be saved the disastrous economic consequences of a costly divorce.

– Edited by Robert Ryan

Commentary by Luis Cabral, the Paganelli-Bull Professor of Economics and International Business, and chair of the Department of Economics at New York University's Stern School of Business.

CNBC is a recognised world leader in business news, providing real-time financial market coverage and business information to more than 340 million homes worldwide. Visit for more financial news and information.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail