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Britain lobs a bomb. But it wont explode.

The British people have made the decision to take a different path and as such I think the country requires fresh leadership.

Britain lobs a bomb. But it wont explode.

The people of Britain, not its political masters, have voted to exit the European Union.

The reactions have been swift and fast.

Prime Minister David Cameron has put in his papers.  In a candid statement he said, “the British people have made the decision to take a different path and as such I think the country requires fresh leadership.”

The pound lost 10 per cent against the dollar. Global markets have gone nuts. Many are wondering if the empire on which the sun had once never set has committed economic suicide. Will it kill the world’s 5th largest economy?  Experts say: “fat chance.”

Yes, quitting the EU would mean Britain will now not have automatic access to the EU's trade barrier-free single market.  But will that matter? Will Britain not be able to strike a deal individually with each member country? Experts say Brexit is no big deal.  Here’s why.

In immigration, Britain may seek to restrict the number of low-skilled workers entering the country and shift towards attracting more highly skilled workers. This migration will work well for the British. There is an increasing son-of-the-soil phenomena working.

In trade, a majority of British exports happens to the EU.  Will the exit matter?  “No,” say the experts. The exit will not matter as both parties have an axe to grind in the continuance of trade. You can divorce, but you can also do a live-in after that appears to be the suggestion.

In financial services, London may find itself short-changed in the short-run, but it is not as though the heavens will fall. Remember: Britain’s competitive advantage does not flow merely because it has free access to a single market. If that were so, every country in the EU should be an economic busybody.

Brexit is only likely to have a limited impact on Britain’s productivity. Remember, improvement comes from increased business investment.  And increased investment has only a microscopic connection with political developments.  So the country can breathe easy.

Brexit isn’t going to stop the inflow of foreign direct investment, aka FDI.  Remember, people invest in Britain not because it's a member of EU.  They invest because Britain is a happening place and offers a plethora of opportunities. If it were

otherwise, then there would have been a queue for investing in other EU nations.

 

Why Brexit is exciting?

Personally, I am excited by the fact that it went through a referendum to take a call on this although I am not sure whether it was a referendum on the EU continuance or the Prime Minister. Do people have the knowledge and expertise to take a decision on such a crucial matter?  Yes, in one way it shows political maturity though I am uncertain whether it makes for economic maturity.  By opting for a poll, did Cameron show dereliction in leadership? Did he end up playing safe and shift the responsibility to the people?

Lest you thought that everything is hunky dory, let me sound the caution bell.  For sure, the Brexit means uncertainty in the market. Investments might chase gold.  In fact, gold futures rose by 8 per cent today.  

The referendum had a massive turnout. Close to 72 per cent, that is about 30 million people voted. And 52 per cent of them said, “Let’s get out.”  It may not have been a massive mandate to call it quits, but for sure was a slap in the face of the redoubtable David Cameron.  Britain stands divided right in the middle just as some months back Scotland stood.

At a very different level, can you imagine such a referendum in India on any matter?

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