BREXIT – WHAT NOW?

Ten years ago I was invited to attend a modest office in London, just yards from my London apartment at Westminster. There I was to meet Britain’s Shadow Secretary of State for Education and Skills. Our paths had first crossed in the early 1990s while he was at the Conservative Research Department and I was working for the Secretary of State for Health and Social Security in Parliament.

David William Donald Cameron, young and ambitious and first elected to Parliament in 2010, wanted to canvass opinion on a leadership bid following the resignation of his mentor Michael Howard in the wake of the 2005 General Election defeat to Tony Blair. As I sat at that meeting I inevitably wondered where it would all end.

On 23rd June, just over a week ago, it ended in spectacular failure – following a run of success against the odds. This politician whose meteoric career had been defined by luck – had just ran out of it. But most, if not all political careers, ultimately end in disappointment; it’s usually what happens in-between that defines the legacy, but David Cameron will enter the history books tagged by Brexit.

Winston Churchill said, “politics is about predicting what will happen tomorrow and then explaining why it didn’t”. David Cameron wasn’t able to do that and he quit after getting the wrong answer to his own Brexit question, one he himself chose to put to the British people. It was not a complicated question and there were only two possible answers, neither was more than three letters long; in or out.

The 2015 General Election saw a Conservative Party manifesto promising that very in-out vote, with anti-EU candidates polling the highest recorded vote ever. David Cameron, with his EU Referendum promise, achieved an overall majority and formed a Government against all predictions.

But it never seems to have occurred to an otherwise sharp-minded Prime Minister that the British people might well vote for Brexit, or that his promise of a Referendum accounted in part for his own victory against the odds. People clearly wanted this now infamous plebiscite, but what did the Prime Minister think that the public wanted it for? Hardly as an opportunity to vote for the status quo.

Quite why so many others were also unprepared for a Brexit result remains a mystery. The outcome to me never seemed to be in any doubt. Indeed when asked by Saint Lucia’s Prime Minister, six month ago, for my own opinion, I told him the UK would be leaving the EU. Last month I repeated that prediction again to Dr Anthony and also to then Leader of the Opposition, Mr Chastanet.

But more than that, in 2010 I took a wager with a business partner in Europe, that by 2020 neither the Euro nor the EU will exist. I still believe that to be the case. This institution will either be so fundamentally changed from the one that we know today so as to be unrecognisable, or that it will be gone altogether.

And if the EU is to completely disintegrate, then it is better that we have a controlled dismemberment, rather than the entire edifice collapsing at once. Brexit may just turn out to be the least worst option in the face of the inevitable.

The crisis we now all face is one of the EU’s own making. The institution has become a political structure not fit for purpose and it is unaccountable. The reason they never saw the writing on the wall, or addressed a need for fundamental change (which would have offered an alternative to Brexit) is because the EU has become delusional. The organisation is no longer about free trade but about empire building; without government by consent it believes and behaves as if it is a state or a nation, but it is not; it has assumed the decadence of every empire in history that inevitably collapsed.

The EU still behaves as though it is immune to public opinion and that the same sentiments that were expressed in the UK last week are not echoed elsewhere on the Continent. They are sentiments the EU will soon face again from many of the other member states. They remain completely oblivious to the phenomenon of an anti-establishment revolt by electors around the world, epitomised by a rather crude but succinct banner carried by a protestor in Brussels this Tuesday – Politicians, it proclaimed, “are like sperm – only one in a million turns out to be human!”

Europe’s political class is ill-advised to ignore this revolt amongst its own citizens, a spontaneous and general uprising against the ruling elite, both commercial and political, against banks, multi-nationals and the establishment. The way to respond now is to respect the verdict of the British people, like it or not. Neither the EU nor the House of Commons can afford to do anything but accept that verdict and it should not try to interfere with it.

We can but reflect on the fact that the EU was no friend to the long-established Caribbean banana industry. It presided over the destruction of that trade in this region. The world’s most traded fruit – a life-line to thousands of families in Saint Lucia – was decimated at a stroke when the European Union and 10 Latin American countries signed a “historic” agreement to end the “banana wars”, to the benefit of South America. There was nothing either the UK or Saint Lucia governments could do about it at the time. So what now! Now we must move forward.

Politicians have to perform like they have never performed before. That begins by accepting that we are not going back. Britain is out and others will follow, how they leave and how Britain is allowed to leave will determine the speed with which the world adjusts and moves on. This is no time for the EU to try to exact revenge, it is a time for statesmanship.

Earthquakes are bad for business, but the EU will have to accept that it is dealing with the will of the people. It is going to have to compromise, this means putting the theatrical rhetoric of the last week behind it and finding a solution that will give Britain continued access to the European market (which European industry needs in order to prosper) and at the same time accepting that the UK can also now create its own new unique trading arrangements with non-EU nations like Saint Lucia.

As the rest of the world watches, it is worth bearing in mind that the European Union does not hold all of the trump cards, it is going to have to be flexible. There are a number of issues that it must urgently mitigate and the fall in the value of both sterling and the euro during the last few days is one that cannot be ignored. The euro is not backed by a single economy or central bank and is highly susceptible, particularly because of the risk posed by many of the under-performing economies within the European Union: Portugal, Italy, Greece and Spain (unflatteringly known as P.I.G.S.). Another Eurozone crisis in any one of these states, each of whom has unresolved and deep-seated issues, could spell the end of the European single currency.

For all of the tough talk coming out of Brussels this week, they still ultimately have to face the reality that the UK will no longer be obliged to make future contributions towards the EU’s budget. It will soon cease to be a net contributor. These contributions exceed the amount that the EU spends in the UK, even after the rebate on its contribution that the UK has enjoyed since 1984. The UK’s current overall net contribution (around £5.7 billion in 2014) will no longer be paid after exit. For this reason the EU cannot afford to exclude the UK from a single market – European exports are more valuable than the alternative imports into Great Britain. The EU simply cannot afford a double hit.

Prime Minister Allen Chastanet was right to express the need for a new strategy to address concerns on the effects of a fall in the value of sterling to the performance of the tourist industry on the island. It is right for his government to address that threat now. For sure the medium to long-term economic impact could be felt if sterling and the euro continue to fall against the US dollar, although given the unprecedented surprise that the Brexit result seems to have dealt the financial markets, the reality is that they have weathered the shock so far.

It is worth bearing in mind that long-haul tourism has always been at the exclusive end of that business sector and that its participants are drawn from those with higher than average disposable incomes. If the bottom falls out of any market, the top is last to go. As an investor in the tourist industry in Saint Lucia, Boka Group’s post-Brexit risk assessment is that this continues to be an extremely attractive market, one worth investing in, and one that can adapt to this most recent challenge.

We only need look to recent history to see how the regressive policy of air passenger duty, imposed by the British Treasury some years ago, actually did little in reality to diminish the number of tourists arriving, or the amount of money they were spending on their Caribbean vacations generally. Most of the aircraft landing from European destinations already sell their more expensive seats first, something that is indicative of a strong luxury brand and product, exactly the kind that is offered by Saint Lucia.

That is not to say that we do not need to be aware of the effects that may be felt by airlines having to pay more for fuel or a pound sterling now buying fewer Eastern Caribbean dollars. We are still dependent on airlift to deliver tourists to this destination and should be on top of this issue.

This is a challenge that the practitioners of tourism in Saint Lucia, both in government and in business, have to address. One way of doing that is to look at increasing market share from those countries outside the European Union, a plan B.

The two-year Brexit process before Britain leaves the European Union allows some breathing space to adapt to a new global environment and it is highly unlikely that the effects of this decision will be anything like the economic shock of 2008. Central banks and governments learned lessons from that cataclysm the hard way and they do things differently now.

But this month the world changed and the way we do business with the world needs to change as well, both for commerce and for politicians. The Foreign Policy Review undertaken by the last government also matches the priorities already expressed by the new government of Saint Lucia, where the importance of commercial diplomacy has been identified. That means putting Saint Lucia’s economic aspirations and priorities at the top of its diplomatic agenda. High commissions, embassies and envoys around the world need to be equipped to focus on promoting this island’s economic potential while at the same time identifying new investment bases and opportunities while the Brexit dust settles.

It is important now, like never before, for Saint Lucia to have the ear of political and financial institutions around the world and particularly in the markets that produce the most economic benefit for the country. These include new markets where the Saint Lucian flag has not yet been raised. At the same time Britain will be free to enter into new bilateral arrangements while Brussels itself cannot be ignored as focus for a new concerted commercial-diplomatic initiative.

Now is the time to take stock of both the risks and opportunities arising out of the new European political
landscape so as to be well prepared, but it is also a time for optimism, to be equipped to take advantage of each of the new opportunities that will arise.

As investors in Saint Lucia, Boka Group has confidence in the quality of what this island has to offer. This is a message that we continue to convey to our present and future investors and one that we impart upon the political decision-makers in the United Kingdom. Both the UK and Saint Lucia are looking for new opportunities for closer cooperation and soon Great Britain will be better able to forge closer links with its traditional and historic partner nation states, independent but joined together by a historic bond. The UK and Saint Lucia can and must take advantage of that change.

John Kennedy is the CEO and founder of Boka Group which has invested in Saint Lucia and is the owner of the Mahaut Estate and Belvedere Plantation at Canaries. Kennedy is the President of the British Caribbean Chamber of Commerce Saint Lucia, but writes here in a personal capacity.