Twitter summed it up best, with the man behind the grass roots Conservative website (Conservative Home) flagging up Boris Johnson’s declaration for the “Leave EU” campaign with: “UK’s most popular politician wants Out”. That’s the headline to bear in mind when it comes down to the impact this shift could have, and why GBP is under some pressure this morning as the probabilities of a Brexit increase at the margin.
1. Is this just a ruse for Boris to become PM? It is hardly news that an MP might want more power, so you could ascribe this motivation for many of their actions. The more important question is whether Boris’ PM plan matters to the Brexit vote; not right now, with the British people happy to listen to an entertaining politician who puts things into plain English for them. It may, further down the line, if that trust is put at risk because of any leeching of Boris’ credibility, with voters fearing his comments are self-serving rather than informative.
2. Can one person change the vote? Both sides of the argument are at pains to say No, simply because that channels too much power into one individual. But it certainly adds more credibility to the “Out” campaign – which is still yet to coalesce behind one group and has been riven by in-fighting. The polls so far do not reflect a fully motivated “Out” campaign.
3. Will we have another referendum? Upon reading Boris’ full artiarticle for the Telegraph, which explains his rationale for choosing “Leave”, some believe that he thinks we might get a second referendum afterwards, or at least the EU might welcome us back in a different form:
‘There is only one way to get the change we need, and that is to vote to go, because all EU history shows that they only really listen to a population when it says No. … It is time to seek a new relationship, in which we manage to extricate ourselves from most of the supranational elements. .. I would hope they would see a vote to leave as a challenge, not just to strike a new and harmonious relationship with Britain (in which those benefits could be retained) but to recover some of the competitiveness that the continent has lost in the last decades.’
It is certainly possible that as the vote draws closer, and if “Out” look to be succeeding, then the EU itself might capitulate to further demands to sweeten the deal to Remain. Don’t think that now we have the date, and now that senior politicians have declared, all of the facts have fallen into place.
The key point now is that Brexit is squarely on the agenda, as a risk that must be acknowledged and hedged. In just four months, we may have decided to leave the European Union. We may have a new Prime Minister. We may have stepped into a much more unknown universe. The risk premium now firmly exists, and this should now be the minimum, because things are only going to become more uncertain from here. On a basic probabilistic level, the odds are 50-50 that we will leave. After all, it’s actually down to the Great British Public, and who knows what mood they will be in, four months down the line. In the words of another old Etonian, beware of those “Events, dear boy, events” that can lurch probabilities down a very non-linear path. We are already experiencing increased volatility across all markets; UK assets just became a high beta version of that.