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My Lords, some voting for Brexit were sincere British nationalists, opting for the romance of freedom and independence. For most, however, it was a vote of pure protest against an elite that has let them down. Our failure in the UK, as elsewhere, effectively to regulate the financial sector and to be prudent with government finances has brought nearly 10 years of austerity.
Immigration is vital to our economy, it enriches our culture and society and I support it wholeheartedly. But the biggest surge in immigration in our history has, in recent years, brought incredibly rapid change to agricultural centres such as Boston in Lincolnshire, and to our older, poorer industrial areas, and it has placed a heavy strain on our social fabric. In the past three years, for instance, Peterborough’s maternity unit has been closed on 41 occasions to women about to give birth—a traumatic experience—for want of capacity in one of the UK’s fastest-growing cities. That is an unpardonable failure of government to forecast need and to provide.
While it is easy to understand the frustration and anguish that has prompted the Brexit protest, the vote is a catastrophe for the UK and for its people. One of the EU’s most important achievements, alongside other international institutions, has been to foster a stable, collaborative environment in Europe after centuries of destructive conflict. This is especially poignant for me at this moment because, 100 years ago last Friday, my grandfather Joe went over the top on the first day of the Battle of the Somme. As a child, I knew him well and was transfixed by his many tales of that horror-laden and wasteful war. Weakening the ties that bind Europe together cannot be in our long-term interest.
For our economy, the consequences are immediately adverse. I have witnessed that for myself in the first full working week since the Brexit vote, and old and trusted colleagues in the finance sector have shared their own direct experiences with me. I will give some examples; I could give more. I have had a briefing on a major Asian financial institution pulling out of a done deal to acquire a major and valuable British company. I know of another sales process involving a major British-owned company which trades heavily all over Europe that was stalled because of buyer unease over Brexit, and because debt financing was now uncertain. If negotiations within the EU are prolonged, our economy will be racked by uncertainty for years to come. The Chancellor has already been forced to withdraw the targets for reducing our still massive indebtedness. We risk a recession and a further shock to our system when we are not yet over the last one, and we risk 20 years or more of continuing austerity, not just 10.
Our only hope is to negotiate terms to remain full members of the European single market. The notion of some in the Brexit camp that we should not want to be an equal participant in the biggest market in the world beggars belief. They appear not to have the slightest notion of how global markets work or of how complex are the activities of leading British businesses. We are paying a high price indeed for their naïveté, for the professionalisation of our political parties and for the diminishing life experiences of some of our leaders. Nor do the most buccaneering of the Brexiteers appear to have the slightest notion of how global investors operate: how professional and how aware of risk they are. It will be entirely rational for global investors to be extremely cautious about investing in the UK until there is crystal clarity about all our circumstances.
But negotiating to remain part of the single market will not, of course, be easy, for our negotiating position is now weak. We need access to Europe’s markets far more than Europe needs access to ours. Some EU members will want the UK to pay a painful price in negotiation in order to discourage exit or secessionist movements in their own countries. Some sectoral interests in Europe will press to advantage themselves over their British counterparts. Some electorates, wounded by a sense of British rejection, will want their leaders in turn to reject us. I work a great deal in Europe these days and I had many pained emails last week from European business friends and colleagues. One senior German industrialist recounted an exchange he had witnessed in his local bakery, with an overexcited shopkeeper shouting that Germans had to accept as a reality that the British hate Europeans. Local Mercedes workers in the same queue joined in angrily to assert that Mercedes should find other markets to sell their vehicles. Being nice to the Brits may become bad politics.
Yet we must hope and we must strive. Britain is already a member of the EU on special terms—absent from the euro, absent from Schengen—and there is a mutual interest in the UK remaining in the single market. While other countries will not easily give up the notion of the free movement of labour, perhaps all will recognise the advantages for all members of qualifying that freedom to gain the economic benefits while reducing social friction. Let us hope that we can find an accommodation. If at all possible, we need an exit negotiation which is not prolonged but rather is simple and quick and reduces uncertainty for all. Without that, the white-water ride ahead could be very rough indeed.