They think it's all over ......

The UK voted on Thursday in a referendum that resulted in 52% of those voting deciding to leave the EU.  There has been no end of posts on what this means for the UK economy and even for the EU and the global economies.  I have yet to find a good outlook, but suffice to say, that aspect has been thoroughly covered. 

Also of note is - what are the next steps from here?  Well, we now know that there will be a leadership election within the Conservative party.  The winner will become PM.  The new PM will then have the power to invoke Article 50, just as Cameron could have done last week.  And the power to not do so, just as Cameron did last week.  Cameron has already reneged on his promise to invoke Article 50, and done a runner.  He did not follow the “will of the people” and nor is any subsequent Prime Minister required to do so.  The new PM probably will at some point, but if he or she has even an once of wit, they will use the one card they have left to negotiate with the EU, either to get better terms to remain or to get better terms on leaving.

In the meantime the UK is still part of the EU.   Jean-Claude Juncker has already said he wants the UK to leave quickly.  Well, guess what?  The UK has just said it is not going to be pushed around by Eurocrats, and handed a red hot mandate to the next PM to tell the EU, and associated representatives, where to go.  Mr Juncker,’s currency is worth less than the pound right now, so he might want to step down before making any more of a fool of himself.  Merkel, ever an ally to the UK has slapped him down.  It seems to be contagious.  However, this just gives the next PM an even stronger hand in any negotiations, be that to negotiate better terms to stay or to negotiate better terms to leave.

Hollande has already had to meet Le Pen, and Euro-sceptics in every member state are queuing up to stake their claims.  If the EU is to avoid a series of referendums, then they need to manage the UK and its exit.  France and Germany in particular will be highly motivated to renegotiate terms to encourage the UK to remain.  So, the game is not yet over.

The new PM haas a range of options when he or she comes into office.  

1. The new PM invokes article 50 and begins he process of leaving the EU.  From this point there is no way back.  The UK will leave the EU and begin a new era for itself, and quite possibly, for the whole of the EU.  This is probably the most likely outcome if Michael Gove is elected to lead the Conservative party.
2. The new PM returns to re-engage and renegotiate with the EU.  He or she will have two more cards than David Cameron had in that he can invoke Article 50 at any point, and more importantly, he can remind everyone at the table that they have agitated people at home who are looking for a referendum of their own on EU membership.  This can not be ignored forever, and even Joncker is beginning to understand this.  Bojo stated from the point of his declaration for Leave, that a vote Leave would provide a stronger negotiating tool to confront the EU, and so he might well be interested in this approach.  From here the new PM has a range of options:
• Come back to the public and say that there has not been enough compromise, and move to invoke Article 50.
• Come back to the people and say that there has been enough of a compromise and decide to continue with membership.
• Go to parliament for a decision.
• Hold another referendum.  There is a strong case for this outcome.  Millions in the UK have already signed a petition calling for a further referendum.  Farage had stated that he would continue to fight for a further referendum if he lost with 48%, so has little moral ground to oppose it, which doesn’t mean he wont.  However, Farage has little power at Westminster and wasn’t even fully engaged in the Vote Leave team.  This leads to two possible outcomes
1. In this case there is a strong possibility of a Remain result.  Then the UK would stay in the EU.  Until the next referendum.
2. There is obviously a possibility of a second Leave vote.  More people could be drawn to vote Leave in response to being “bullied” into a second vote.  In this case there would be no choice but to take the UK out of the EU.
3. The new PM does the honourable thing and calls an early election.  Why is that the “honourable thing”?  Well, mainly because that’s what the Conservative Party called upon Gordon Brown to do, when he took over.  Of course, there is no obligation to call an early general election, and this probably wont happen.  However, if the new PM does, then from here anything can happen.  
• The Conservatives could win a larger majority, taking votes from UKIP and even labour, and take us back to options 1 and 2 above
• There is a hung parliament or Labour are returned.  In either case it is unlikely that the UK would leave the UK without a further Referendum, which is covered in 2 above.
4. Whilst the least likely, it is entirely possible that the new PM says that the UK is staying in the EU.  It is difficult to envisage this scenario, but it is technically possible.  The referendums no authority in UK law.

The point is that this is not the end.  There are a whole range of options open to the next PM, who would be advised not to rush into anything.  The EU, if it were not already, is now in disarray.  Stay or Leave the next PM has an obligation to operate in the best interests of the UK, and that means holding back on Article 50 to get the best deal from the EU.  We also need to be very clear here too.  The EU has a strong incentive to make leaving as difficult for the UK as possible.  They genuinely do need to demonstrate to their respective electorates that leaving the EU is economically damaging.  Many EU states are under pressure to hold referenda on membership and they want to a) avoid such a vote and b) at least win the vote.  If they can point to declining UK GDP growth and increasing unemployment, then that will help to make their case.  If that hurts them in the process, well they can blame it on the UK leaving.  This is not spiteful, or malicious.  It is not self-defeating if they genuinely believe that a breakup of the EU is a bad thing.  It then becomes the responsible thing to do.

They think it is all over, but this is only half time; and there is only one score in it.