As the campaign resumes following the dreadful murder of Jo Cox by someone calling themselves Death to Traitors Freedom for Britain, there is evidence that the surge in the polls enjoyed recently by Leave is ebbing. According to experts who follow referenda around the world, this is normal. Often, but not always, people flirt with change, then shrink from it. Nevertheless the result either way looks close and difficult to call. So it could still be a Brexit win.
That could be very messy, which is why markets are worried. In the UK a referendum has no constitutional authority and the result is only advisory to parliament. Parliament must pass legislation to put the outcome into effect if it is Leave. The snag is there is a significant cross party majority among MPs for Remain. If the result were close, say 49.5 Remain, 50.5 Leave, parliament may not endorse it. In any event there is likely to be a political crisis threatening Cameron and his Chancellor, Osborne. If there is a big majority in the country for Leave and parliament decides to accept the verdict, the Cameron government would almost certainly fall and be replaced with Leave ministers who might not themselves survive a vote of confidence.
The negotiations to disentangle from Europe and negotiate a new trade deal could take two years, possibly four and the worst estimate is fifteen, because all business regulations, emission controls, criminal codes etc are EU wide. Just walking away and pushing through Parliament new legislation in contravention of EU treaties would expose the potential for massive legal challenges at political, corporate and personal levels. Of course this is GB and it might all sort itself out smoothly over a cup of tea, but the potential for both political and financial chaos is very real. It is that which is spooking the markets. They are geared for that sort of thing in the likes of Greece and even Italy, but not GB. Even the Fed is concerned.
Remember this is all happening in a country with no codified constitution, where absolute sovereignty rests with parliament. Technically that is ceded from the monarch, but in this case that is irrelevant. Essentially parliament is the constitution and can change it as it goes. But for once nobody is sure where it is going or what will happen. Cameron was wrong to call this referendum to try and head off UKIP as well as to appease his right wing. It has been hugely damaging to the social and political equilibrium and unless he wins big, not only will his leadership be challenged, probably successfully, but he will go down in history as a name to remember for all the wrong reasons.
And then there is Scotland. There is a real possibility that Scotland, which is legally a separate country in a voluntary Union with England, will vote Remain. This could lead to legal challenges as to what Scotland’s status actually was, if it wanted to stay in the EU. It could also deal the separatists the card they have been waiting for. So whatever government is trying to survive in London would have to try and hold the Union together and negotiate an exit from the EU as well as new trade deals across the world. But who would sign without knowing the longevity of the entity to which they were being asked to commit? If anyone supposes that markets will like all that, they need to think again. A vote for Leave may be a vote afterwards regretted. Patriotism is noble and leads to worthy things but nationalism has a dark heart and most often ends in disaster.
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