We can already see a post-Brexit economy emerging. It’s grim.

Here’s a confusing financial press headline from today: German 10-year sovereign bond yields turn negative for first time.

What does that mean in plain English: it means traders are so worried about what the UK economy would look like post-Brexit, they’re pulling their money out of the UK, and actually paying the German government to let them lend it money. Read that sentence again to realise how deep the fear is.

You’ve heard the scaremongering. This is what the reality looks like, unfolding in real time. Until recently, there were only two big, safe, European economies still standing: Britain and Germany. Now Britain is dicing with, at best, three to five years of chaotic and bitter negotiations before anyone knows what it will look like as a long-term investment destination.

City traders, who don’t care about much except the size of the Ferrari their end of year bonus can buy, are ditching Britain and fleeing to the last safe economic harbour in Europe.

We don’t need to project what might happen to the economy after Brexit. We can look at what has already been happening, this week, as Brexit starts to look like a probability.

Higher spreads on HM Treasury bonds will mean Brexit puts up the cost of servicing Britain’s national debt, meaning even deeper cuts in services, and relatively soon after higher mortgage rates. Small businesses will pay higher rates on loans, choking expansion.

Sterling has been falling as traders ditch it. In theory, a lower pound might mean more competitive manufacturing exports, but in practice manufacturing supply chains are already hyper-globalised, so British manufacturing firms will pay more for their purchases. In practice, the incentive will be to move high-wage, high-profit, late stage manufacturing to cheaper Eurozone countries in eastern and southern Europe, and what survives in Britain will be earlier in the supply chain, with lower wages and lower profit margins.

Imported goods will become more expensive, including pretty much all your clothes, furniture and kitchen goods, and a hell of a lot of your food.

And whatever else is agreed in a potential future UK-EU trade agreement, retail financial services simply won’t be part of it, unless the UK is prepared to cede regulation of the City to European institutions it no longer has a vote in. For all the very good reasons seen in the American sub-prime crisis, financial services sold to ordinary consumers are regulated like crazy, with cross-border selling rarely allowed anywhere in the world outside the EU. So the entire London-based cross-border financial services business will migrate to Dublin, Frankfurt and Luxembourg, and tens of thousands of higher-rate tax-paying jobs will migrate with them. This is like killing the golden goose and allowing someone else to eat it for dinner.

This referendum has been an education for me. I’ve had strong views on elections before, but I’ve never actually been worried that the result might screw up my life. Single, no kids, good education and CV, I’m alright Jack.

But this time I’m really not alright. I’m scared. I’m six months into a 90% mortgage on an ex-Council house. Post-Brexit house price falls are pretty much assured, and they’re going to be dramatic in overheated Southern England, especially at the bottom of the market. I’m three years into a job that even my boss tells me that, for the sake of my own career, I need to move up from within five years. And I can see myself trapped, in a small town with a limited job market, in a stagnant economy, with a massive mortgage supporting negative equity.

If I’m trapped like that, so will hundreds of thousands of others be, mostly aged 25-40. The prime movers of innovation and sheer bloody hard work in any functioning economy, with a ball and chain of debt preventing them moving to where they can most benefit themselves and wider society.

If you’re in Northern Ireland, prospects are even worse: this a region that has a low rate of business formation, overdependence on fiscal transfers from UK central government, a weak private sector economy, and for the bits of the private sector that do work well, a high degree of integration with the Eurozone economy over the UK’s only land border.

Project Fear? I’m bloody terrified. And I didn’t need David Cameron or George Osborne to tell me that.

As John Hume said, you can’t eat a flag.

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  • mrstilton

    Indeed, Germany has bonds dropping to less than nothing! This does not mean what you think.

  • Kevin Breslin

    Project Fear from the leave side is boring. Afraid of Europe, Afraid of migrants, Afraid of losing, Afraid of . the world… where is its bravery.

    We’ve seen the death of an umdeniably brave politican who showed the courage and sacrifice the UK needs to show. Could that not inspire a better politics than what we’ve seen so far?

  • mrstilton

    Consider Turkey, whose currency has declined about 40% against the euro over the six years I’ve been doing business there, and that despite the euro’s own well-known problems.

    Now, Turkey famously struggles with a perennial current account deficit. Did the dramatic plunge in the lira’s value help them with that? It did and my granny. And why not? Because Turkey needs to source most of its higher-value inputs from abroad; most especially, nearly all its energy, for which it must pay in dollars.

    By contrast, Turkey has been helped (or perhaps more accurately, the damage that Erdoğan steadily inflicts on it has been mitigated to a degree) by the recent low oil prices. That is, of course, serendipity, whose blessings fall upon all who must buy oil, not only the Turks.

  • Kevin Breslin

    How is it inevitable that the UK government and all the governments in Europe are going to kowtow to the Leave’s sides opinions.

    There was an Open Europe simulation of the Brexit negotiations and Malcom Rifkin representing the UK was struggling because other than migration, he found it dificult to tell the other nations what its priorities were.

    The first nation in the EU the UK has to deal with is itself. A Brexit is just a policy decision… a lot of the economic and political consequences comes from how it is done

  • Kevin Breslin

    Isnt this just uncompromisingly stupid?

    If the UK wants things the EU doesnt want, they wont get them. If the EU wants things the UK doesn’t want they wont get them.

    A few treaties will be broken, a few favours wont be granted and finally an equilibrium will be reached.
    That’s how diplomacy works. .

    How are we supposed to believe in this fantastic diplomacy Leave is promising us if we havent seen it at work?

    What nerve do they have to attack a European Union they feel has let them down and be so egotistical to think that if the UK has a mandate to leave the EU the EU will put the UK on some sort of pedestal

  • Chingford Man

    Oh so now you’re trying to bring a recently slain MP into the mix? Disgusting.

  • Kevin Breslin

    Not what I was saying, I’m saying it should be a opportunity to every campaign to show courage and respect.

    For the sake of balance, I will include the Remain side that is letting its worries get the better of itself as well, just like the Leave side is.

    People know what each side is afraid of, every possible fear and inhibition has been expressed to the open public. The general public are being deprived about what these camps are hopeful about. It’s all pessimism and aggression.

    I’m sorry I wasn’t trying to associate the Leave camp with that even in a casual association. The use of scary agitprop should be put aside for decorum, and listening to opponents rather than trying to shout them down, which both sides have been guilty of.

    I don’t see any reason someone who is from the Leave side can’t take as much inspiration from the life of Jo Cox as someone who was on the Remain side with her.

    And at the end of the day this isn’t just about Leave and Remain, but what these politicians will do to serve the people after this result.

  • Randy McDonald

    “How are we supposed to believe in this fantastic diplomacy Leave is promising us if we havent seen it at work?”

    You really should not.

  • Randy McDonald

    “This was something no sovereign country (Remainder of UK) would allow another country to do.”

    Exactly. Why would the European Union allow a former member state to continue to enjoy the privileges of membership without at least some of the responsibilities? There’s no reason for it to do so.

    “What would a trade war between the UK and EU mean if both parties placed 10% tariffs on the other’s exports?”

    Who says there would be a trade war? A simple reversion to WTO tariff rules would impose significant burdens, to say nothing of the City of London no longer having any lobbyists inside the EU. Neither would profit, but the UK as the smaller partner would inevitably suffer more than the EU.

  • whatif1984true

    You are comparing apples and oranges re currency point.

    Why would WTO tariff rules apply between 2 such strong trading countries?

    Too many assumptions is the problem with this whole debate.

  • Randy McDonald

    “Why would WTO tariff rules apply between 2 such strong trading countries?”

    Because there that would be the default situation for two member economies of the WTO who lack other arrangements.

  • Brendan Heading

    How often do we have to tell people like you that we do not have to be within the EU to trade with countries within the EU.

    Who is claiming otherwise ? Not me. Happy to have a productive discussion based on things I actually said.

  • Brendan Heading

    As chrisjones2 pointed out in another thread, what’s to stop people buying BMWs that are assembled outside the EU?

    Nothing. They’ll just, like for like, cost more than they do now.

    Alternatively, for how long would people pay a premium for overpriced German-built cars?

    People already pay a huge premium for overpriced German-built cars so I don’t think this is going to be an issue. But that doesn’t change the fact that they’ll be paying more than they otherwise did for the same thing, which is inflationary.

    But that doesn’t mean there is a rule that a weak Pound and the higher cost of imports cancel each other in their effects.

    I agree that there is not a “rule” as such; any number of things could happen. We are both speculating about what is likely, based on what we know. It’s just a sad reality that the UK’s zeal for manufacturing and exported goods has been stripped out. The idea that this will change when we leave the EU implies that there are nascent industries waiting in the wings, straining to be let off the leash when Brussels’ baleful influence is finally expelled.

    I’m getting a lot of deja vu here, as I often find myself explaining to nationalists and republicans who, like you, firmly believe that our connection with another country is the cause of everything that is holding (Northern) Ireland back.

  • whatif1984true


    FYI JEO was 535p on the 13 June. 480p on the 19th, 520p when the above article was published and is now 529p.

    Brendan you knew a week in advance , you read my comments. The point is that a 10% increase from the 19th to today is spectacular and not gambling, read the above article. I bought at 482p.

    Certainly it could have gone even lower and yes it could go back down again, my point would be if it did how long would it take to recover.