The UK after the triggering of article 50

I've been asked how things are here in the UK after article 50 has been triggered. Well many of my friends were very upset by it as we have past the point of no return, but for me, I had accepted that it was inevitable. I suppose it is like when someone dies - do you cry when you find out that this person has died, or do you cry at the funeral? I would do the former because the latter is just a formality, a procedure that is the next step. I suppose we're now simply witnessing the funeral of the UK's membership of the EU. One does wonder what lies ahead for us outside the EU?

Let's start with the pound sterling. £££

Clearly I would have preferred that the UK remained in the EU, but things aren't too bad for me personally. I was worried that Brexit would mean a much weaker pound, but the pound has actually strengthened since article 50 was triggered when many have predicted that it would have done the opposite and plummeted. At the weakest £1 would get you 1.13 euros, but it currently stands at 1.18 and it looks like it is holding strong. Of course, we are a long way from when it was at its strongest at over 1.40 euros for £1 back in 2007, but many people were talking about the pound falling to parity or even below the euro - well, that just hasn't happened and it is a good sign. Currency exchange rates do vary over time, so such short term fluctuations are to be expected. We do import a lot of things and the weaker the pound, the more expensive our imports will be. I do travel quite a lot and I don't want to feel the pinch every time I have to pay in another currency, so this is actually quite reassuring for now. Fingers crossed for now.

How else does it affect me? 

Actually, a weaker pound has benefited me in a way that I didn't expected at all. I thought it would be bad news for me as practically everything I use or eat is imported but I work in corporate finance and we're offering fixed income products denominated in pound sterling. Since the pound has weakened since the Brexit vote, many investors are rushing in to invest in sterling fixed income products because they expect the sterling to be weak in the short run but for it to strengthen in the long run once the nitty gritty of Brexit has been sorted out. It is the uncertainty of what kind of trade deals we will be able to negotiate after Brexit that causes this lack of confidence in the British economy, but once that is sorted, then the pound would recover. We have two years now to start negotiating something with the EU and my company's fixed income products are designed to be held for 5 years - so imagine if a German investor invests in one of my bonds which pays 8.5% a year. The bond the denominated in sterling and if the sterling then regains some ground against the euro after 5 years - let's make a modest estimate that the sterling regains 5% against the euro, then that's an additional 5% gain that the German investor makes on top of the compound interest that the bond pays. As I work on commission, this situation has been extremely lucrative for me and this has truly taken me by surprise.

I have benefited from the weaker pound, ironically.

So whilst the pound has lost about 10% of its value since the Brexit vote, I'm earning a lot more than 10% this year compared to last year. Like holy f#ck, a lot more, because I happen to be in the right place at the right time to benefit from Brexit. I'm going to be earning so much more in the next tax year and will be able to pay my mortgage off a lot sooner than I thought. Ironically, whilst I am so pro-EU (like for crying out aloud, I speak French, Spanish, German, Italian and Welsh - culturally, I feel so much more European than your average monolingual English-speaking Brit) and I really wanted the UK to remain in the UK, Brexit has at least given me a short-term opportunity to make a lot of money over the next two years. Am I surprised? You bet I am. I wasn't expecting this at all, I thought that investors would have dismissed the UK as the basket case of Europe and we'll be as enviable as Albania and Moldova after Brexit, but guess what? The results speak for themselves. I am pleasantly surprised that I'll be a lot better off in the short run. So yes, the groceries in my local supermarket are slightly more expensive because of the weaker pound, but I'm earning so much more now I really am in a position to buy whatever the hell I like without giving a damn.

What about the UK economy then - what is going to happen? 

One of the key concerns of the government at the moment would be big companies choosing to leave the UK and relocated to the continent in light of Brexit. If this happens, then imagine how catastrophic that will be: businesses and factories will close, unemployment would soar, the UK would really then become the basket case of Europe. Except of course, that is not going to happen because the government would not simply allow the economy to go down the drain like that. What it will do is to offer huge tax cuts and all kinds of incentives to these businesses to entice them to stay in the UK whilst attracting other new companies to set up shop in the UK. The effects of Brexit will be mitigated - some companies will leave the UK, that is inevitable but many others will stay and new ones will emerge out of the wood work. You can't kill off the goose that lays the golden eggs. It won't be a complete catastrophe - rather, it will be a period of change and transition where there will be some winners and losers. The winners will be those in position of power, such as the big businesses would will benefit from all these incentives the government will have to offer them.

What about the losers then, I hear you ask?

Well, the losers will be the working class. Oh the irony. They were the ones who mostly voted for Brexit, whilst it was us liberal urban elites who wanted to stay in the EU. The key factor which resulted in Brexit was immigration: many felt that there were too many Eastern European migrant workers here taking away the jobs of British people and with Brexit, the UK can then kick out the Eastern Europeans and life would get better for the poorer, working class Brits who depend on these blue collar jobs. Well, that's not going to happen as well. Quite simply, the UK cannot cope without these migrant workers who are here doing the jobs that the local Brits don't want to do - can you imagine a place like Dubai or Singapore without any migrant workers? No, the UK cannot cope either, they have become such a vital part of our economy that removing them would result in the total collapse of our economy. Hospitals, schools, public transport, everything would just plain collapse. You would turn up at an A&E department and there won't be enough doctors and nurses to treat the injured without migrant workers from Eastern Europe. Or if supermarkets couldn't even function without the large number of Eastern European migrant workers running them - daily life would grind to a halt.

So what will happen of course is that the government will not allow this to happen: temporary measures will have to be introduced to ensure that vital migrant workers like teachers, nurses, doctors, bus drivers etc whom we need to keep life going in the UK would be granted work permits to allow them to continue doing their jobs in the UK. But you can't stop there: if you were to look at supermarkets in the UK, they employ a large number of lowly skilled workers to run them. Stacking the shelves in a supermarket isn't a particularly highly skilled (or highly paid) job, some of these jobs are of course filled by locals but it is a sector that does hire a large number of migrant workers. So sectors like that will also have to require some kind of transition arrangements which involves work permits to make sure that these businesses can continue to function after Brexit. What the government will promise is that these arrangements are just temporary, until they can train up enough locals to do these jobs, then we will no longer need these migrant workers.

Highly skilled migrants will always get work permits.

Taxes will rise, public spending will fall

Except of course, it will be an expensive process that will take a long time. The government will have to find some more money to fund a costly, extensive retraining programme to create even more skilled workers from the local workforce - taxes (income tax, council tax, VAT etc) will have to rise to raise that money but wait, that has to be done whilst the government slashes taxes for big businesses to persuade them to stay in Brexit Britain. So the government will have to slash public spending and an easy target will be benefits: it will be far less unpopular to slash benefits than to slash public spending on education or health. The result? The rich get richer, the poor get poorer. Duh. So the very people who voted for Brexit will be hit the hardest as they will see a rise in taxes and a sharp fall in benefits - at the same time, these migrant workers are still around for the foreseeable future, they may not have free movement of labour anymore once the UK is out of the EU, but they are still going to be here with work permits whilst there are gaps in the labour market that simply cannot be filled by the local workforce. Allow me to give you a case study on this.

Germany's Gastarbeiter programme

In the 1960s and 1970s, as West Germany's economy was growing from strength to strength, it was clear that there were gaps in the labour market that couldn't be fulfilled by the local work force. So the government then came up with the Gastarbeiter (guest worker) programme - the concept was simple: issue work permits to migrant workers from a poorer country like Turkey to come to Germany and do the jobs that the local Germans don't want to do. When their work permit expires, then they have to return to their country of origin after having worked their contract. Simple right? Except it didn't work out that way: these gaps in the German economy remained and grew bigger as West Germany became richer and richer. The relative affluence of the German society meant that there were some jobs that the locals just turned their noses up at - so these guest workers stayed on and on, many holding on to vital jobs that the Germans wanted them to do; but eventually it was clear that many of these guest workers had no intention of returning to Turkey. Many settled, became German citizens, married and had children, creating a whole new generation of German citizens of Turkish origin, the children of the original guest workers. Germany pretty much accepts that the Turks in their society are here to stay after so many of them have been in the Germany since the 1960s and 1970s.

Guess what? The UK will follow suit.

What will probably happen is that the UK will follow the same model: work permits will be issued to workers who are going to fill gaps in the UK labour market and despite the best efforts of the government, it will never be possible to totally replace these workers with locals and these migrant workers will just end up staying in the UK long enough to apply for ILTR (indefinite leave to remain, ie. achieve permanent resident status) - most will simply naturalized as British citizens in due course. The rules are pretty straight forward actually, a growing number of Filipino nurses (and others in the medical/hospital industry) have followed this route and achieved their British passports that way. To look at it purely from a mathematical point of view: you need to have worked for 5 years in the UK before you can get your ILTR, with an additional 2 years on top of that (so after you have worked 7 years here), you can naturalize as a British citizen. It will take the government a lot more than 7 years to fix the problems that have resulted in the gaps in the economy in the first place, so we're simply going to end up with the German situation - now whether our guest workers are Polish, Lithuanian or Filipino, they're here to stay for many years to come, Brexit or not.

Now, I don't mean to do an Anton Casey here by mocking the working class (although at times even I can see the similarity), but they fell for the lie that once you kick out the Eastern European migrant workers, somehow all the problems of the country will be solved. It doesn't work like that - Eastern European migrant workers have become a convenient scapegoat for all the very complex problems facing the UK and a lot of the blame have to be shouldered by successive incompetent governments who have failed to resolve these problems. Both Labour and Conservative parties are equally guilty at being incompetent whilst in government over the last few decades and governments are more than happy for the public to point the finger at a convenient scapegoat rather than take any kind of responsibility for the dumb mistakes of their past. In short, the Brexit that the working class were promised and had voted for is simply a piece of pulp fiction - they are not going to get it and I'm just waiting to for the day when they realize that. Heck, we're already see the same thing happen in America, where many of Trump's supporters are slowly realizing that he isn't going to deliver on so many of the things he promised, such as replacing and replacing Obamacare. 

Different regions will be affected differently. 

The British economy is going through a difficult, stressful period with Brexit. However, imagine if a big car was driving across an old wooden bridge that simply wasn't designed to take the weight of a vehicle. Where would the cracks first appear in the bridge? That's right - the weakest points would be the ones unable to take the strain of the burden. By the same token, the strongest parts of the bridge would be the ones where the car would be the safest. There are poorer, more deprived parts of the UK which are very dependent on EU funding to fund projects and create jobs - once the UK leaves the EU, these areas will be the hardest hit as there's no guarantee that the government in London would be able to pour the same kind of money on these areas. Remember the government would be struggling to make ends meet in the years after Brexit as they would spend a fortune on Brexit itself, public spending would be slashed at a time when these poorer regions realized that they are no longer going to receive a penny from the EU. On the other hand, more affluent areas like central London on the other hand, which have never received any EU funding, would not be affected by the same token. London has always subsidized the rest of the country in any case. In fact we start seeing more economic migrants from the poorer parts of the UK in London, but that would only mean leaving the most deprived parts of the UK even more desperate should their most highly skilled professionals head for the bright lights of London. Oh dear, that would leave some parts of the UK really depressed.

Different sectors will be affected differently. 

The obvious sector that is going to suffer is the public sector - the more senior civil servants are fine, it is those lower, much lower down the food chain who are going to suffer from pay cuts and redundancies. So for example, there are local councils all over the country dealing with very basic services and issues - they are the ones who will feel the pinch the hardest because they will have their budgets slashed. There will be some sectors which export to the EU, those would be badly affected too if they face higher tariffs as a result of Brexit. However, I am currently dealing with clients outside the EU - Chile, Mexico, America, Mauritius, Switzerland, Thailand etc. So for those who are either mostly dealing with domestic or non-EU clients, well then Brexit is going to have far less of a detrimental effect on our business. This however, might be the shock to the system that could kill off businesses that are unable to adapt and innovate, whilst those who are able to spot gaps in the market will be able to thrive in this new environment. Think about what happens when there is an ice age: certain species just go extinct whilst others evolve and adapt - well, the same thing is going to happen to the British economy as Brexit happens. Get ready to adapt quickly to the new conditions, or risk getting left on the scrapheap of society. I'm willing and able to adapt, but not everyone will be.

So, change is coming but ironically it is not what the people voted for. 

The irony is that the bulk of the people who voted for Brexit were older folks who remembered the days before the UK joined the EU and some were even thinking of the glory days of the British empire. These people voted for Brexit out of nostalgia, they wanted to turn back the clock and return to those days. Well, change is definitely coming but turning back the clock is one thing we can't do. For example, the Chinese will be keen to invest in the UK and the British government will be giving the Chinese government all kinds of incentives to persuade them to do business here. This will lead to the Chinese buying up everything from property to infrastructure to companies - quite possibly, this will lead to an influx of Chinese foreign talents who will come to make sure that their new acquisitions are run the Chinese way. Ironically, taking the UK out of the EU will be pushing the UK into bed with the Chinese. Are the older Brits who voted for Brexit prepared for this influx of Chinese money, influence and people? Clearly not - it is something that is going to take them by surprise. So instead of getting rid of the Eastern Europeans, you open the door to the Chinese - oh the irony. They really should have thought this through before voting for Brexit. Oh well, too late.

How do I feel personally about the situation? 

Well, it's not something that I spend too much time thinking about. Sure I was upset with the referendum result as I voted for us to stay in the EU and admittedly, the result did take me by shock - but I've gotten over that initial shock and I've moved on. I'm more concerned about the tasks I have to do on a daily basis at work, I know that even in a worst case scenario, say should the pound lose even more value, I've got a good job and as long as I work hard, I can make more money. So yes, I have accepted what is going to happen to the UK in light of Brexit and yeah, I'm moving on with my life and focusing on my work. I look at my left-wing friends who are moaning about it on social media (yes, still) and I don't say a word. I know I will be alright in the long run as I am adaptable enough to thrive in whatever new conditions Brexit will bring to this country - I can't say the same about everyone else, but hey, it is every man for himself. I have very realistic expectations, I'm not optimistic but that means I'm highly unlikely to be disappointed by that same token. I think those who are hoping for Brexit to usher in a new age of glory for the UK are going to be bitterly disappointed the same way Trump supporters are ultimately going to be disappointed in his presidency. 

OK so that's it from me for now,  I could go on but I think I have covered most of the points about the issue - do let me know if you have any further thoughts or questions about Brexit, leave a comment below. Many thanks for reading.