The world that we all knew before, could wake up in feeling safe… now it seems that everything has been turned upside down. —Tori Amos
Upside down. That’s the only way I know how to explain what is happening to the world this morning.
Normally, I wouldn’t bother writing about matters of foreign politics. We have more than enough trouble here in the US with complete ineffectiveness of our own political system. However, what Britain has done in voting to leave the European Union (EU) is not only a move that has devastating consequences for the island nation, but a ripple effect the covers the entire globe. Because the British Empire was once so extreme, everywhere they once touched is now affected by what has been termed the “Brexit.”
This may well be a warning for other countries considering any kind of selfish, “Make __________ Great Again” nationalistic-motivated action. As we watch what is only the beginning of a flood of consequences, perhaps we now realize just how interconnected the world is. One country’s mistake has devastating effects for every country with which it conducts business, accepts visitors or is an ally. Yet, because no other country dares interfere with the domestic politics of another, we have no choice but to sit by and watch.
By the time most people read this, business in the UK will have closed for the day and won’t resume until Monday. Announcing the results of the vote on a Friday gave markets and people a chance to react but, hopefully, the weekend provides an opportunity for some of the shock to fade so that cooler heads prevail when markets open on Monday. Still, as I’m typing, here’s what’s happening.
- The pound has fallen to a 31-year low against the dollar. A renegotiation of all major trade treaties seems necessary.
- The Financial Times Stock Exchange (FTSE) index opened with a straight-line drop of -9% but has recovered to an overall loss of -4.5%
- Germany’s DAX is off -6.16%
- France’s CAC index is in the red – 7.73%
- Spain’s IBEX is taking the biggest hit at -9.98%
- British stocks have lost an estimated value over £122 billion
Take a deep breath. This is going to hurt. If there is a silver lining in all this chaos, it is not making itself visible at this point. England’s GDP could fall as much as 3%. Pensions for younger workers could be completely erased. This upside down condition is not a happy place to be.
Fashion Takes A Hit
One business that is extremely concerned about the Brexit is London’s fashion industry. Business of Fashion lists Burberry, Mulberry, and Jimmy Choo among the victims in early trading. Luxury clothing markets were already having a rough year and the volatility the Brexit brings to the market isn’t going to help any. Many of Britain’s major labels are likely to find they have to severely cut expenditures and manage cash flow carefully.
What this means is that London Fashion Week coming up September 16-20 is likely to be even smaller as designers whose margins are already thin opt out at least for the season. For those who do stay in, collections are likely to be smaller and presentations will almost certainly be less extravagant. Frugality is the name of the game for those who hope to survive. Getting British goods off the island just became a lot harder. There is no upside here for fashion
There was an overwhelming support from our designer survey for the UK to remain in Europe and there will no doubt be upset and dismay at today’s result that will prompt an outreach to our friends, partners, business colleagues in Europe. We now have a role to play in keeping the government updated on our industry’s priorities and keeping the designer community updated on any likely impact to business as our country prepares to leave the EU over the coming years.
A Warning For America
As the United States considers the possible election of a Republican nominee whose personality and concepts share many traits with UK Independence Part leader Nigel Farage, we need to watch carefully and consider how our own election might have similar results.
The United States doesn’t exist in a cocoon where it takes care of itself with no attention to the outside world. Our levels of global trade are higher than ever. We cannot simply back out of agreements and treaties that make business possible for hundreds of thousands of American companies. Our dependency on trade with Mexico is one of the highest. If we build a wall, that trade is destroyed and American companies and consumers suffer most. The same applies to China, Japan, and the EU.
Furthermore, our standing in the international community would erode further. England is just beginning to see how their Brexit vote puts them at odds with the rest of Europe. Several companies have announced plans to leave England completely, dumping thousands of employees onto the unemployment rolls. Britain will lose its last AAA credit rating when it next comes up for review. Prices for goods produced outside Britain rise as higher tariffs are anticipated.
One bad judgement call started it all.
Not Much Left
We are seeing now just how severely this vote divides the UK, much as our own country is divided. Scottish first minister, Nicola Sturgeon, says that Scotland will almost certainly hold another referendum on leaving the UK, given that the whole of Scotland voted to remain with the EU. Members of Ireland’s Sein Finn also made statements this morning that the vote will likely fuel an effort to reunite Northern Ireland with the rest of the country. In the end, the UK may have nothing left but England and Wales by the time the Brexit is complete.
Such waves of populism are one of the primary arguments against democratic forms of government: there’s no way to stop the stupid. Every intelligent voice both inside the UK and around the world warned against the Brexit, but nationalistic-minded conservatives, fueled by an unrealistic fear of immigration, paid no attention to the warning.
A full exit from the EU will take approximately two years. There will be a lot of negotiation between the UE and the UK regarding trade, travel, and currency exchange. We have no way of knowing which direction those talks might go. However, when there are 28 countries teaming up against one that was always cantankerous, complaining, and acting like a bully, it doesn’t seem likely that Britain comes out on top.
The mighty have fallen. The world is upside down and twisting in the wind. Our best hope at the moment is that Americans don’t make the situation worse come November.