Brexit and the Domino Effect: What to Expect In the Year Ahead

Negotiation Dynamics and Timeline

• Panelists anticipate negotiations will be dominated by the UK government and the German government, with Angela Merkel's focus on remaining in power until after the German election.
• Howard Shaw predicts a "patchwork" deal will be finalized at the last minute (potentially 2019–2020) due to European慣性 toward temporary solutions, rather than a clean "hard" or "soft" break.
• Jim Mellon argues the UK should reject the premise of "divorce payments" (citing the EU's "fictitious" £50–60bn claim) and instead unilaterally declare an open-border, free-trade status without negotiating terms.
• Janet Thomas warns that the EU intends to prevent UK-based financial clearing and FX trading, potentially relocating 100,000–150,000 jobs to Europe or the US.
• Nick Candy suggests the process will take two years, with the outcome dependent on other countries (like France or Italy) potentially exiting the EU, forcing structural reforms.

Economic and Financial Risks

• Janet Thomas highlights specific risks to the UK's £5.7trn asset management industry and the $850bn daily clearing market, noting EU proposals in June could force industry migration.
• Mark Blyth describes the Eurozone as fundamentally fractured by the "olive oil/butter" line (exporters vs. consumption economies), predicting structural strain that could lead to Italy or Greece leaving the Euro within two years.
• Howard Shaw counters that the exchange rate depreciation (20% drop in the pound) is a necessary adjustment to correct a trade deficit and boost export competitiveness.
• Jim Mellon notes the UK is the world's biggest creditor nation, meaning a falling pound increases the pound-value of foreign income streams, potentially reducing the current account deficit by two-thirds.
• Nick Candy argues that deregulation is the primary lever for future UK growth, removing EU-imposed constraints on businesses to improve global competitiveness.
• Peter Mandelson (prior to leaving) warned that leaving the single market will result in incremental, long-term losses for British exporters and manufacturing jobs (e.g., Nissan) due to new tariffs and regulatory barriers.

Political Scenarios and Future Trajectories

• The panel unanimously agrees that Theresa May will secure a majority (likely 87–100 seats) in the upcoming UK election, solidifying her negotiating position domestically.
• Regarding the 2017 French election, the panel leans toward Macron winning, though with a potentially smaller majority than expected.
• Howard Shaw and Nick Candy predict Angela Merkel will remain in power in Germany; Jim Mellon predicts Italy and Greece will leave the Eurozone, creating financial chaos that would ultimately strengthen the UK's post-Brexit position.
• Janet Thomas expresses concern that a "hard Brexit" without a deal will lead to a long-term downward economic decline for the UK, particularly affecting low-to-middle-income households via inflation.
• The discussion shifts to the broader global trend of populism following the Brexit vote and the US election, with panelists noting that voter disillusionment with established parties is a recurring global phenomenon.
• Jim Mellon suggests that if the Euro collapses, London could become the primary safe haven for international capital fleeing continental Europe.
• The panel debates the viability of UK independence for Scotland, with the consensus being that Scotland lacks a clear economic strategy (e.g., currency devaluation) to support a rapid separation.

Key Disagreements and Divergent Views

• Bargaining Power: Howard Shaw, Jim Mellon, and Mark Blyth argue the UK holds strong leverage (due to the "too big to fail" nature of the UK economy and mutual dependency); Janet Thomas and Peter Mandelson argue the UK is vulnerable to EU regulatory power over financial services and access to the single market.
• Immigration: Jim Mellon and Nick Candy advocate for open borders with restrictions on welfare access; Peter Mandelson argues this ignores the desire for labor market protections and social standards.
• EU Viability: Jim Mellon and Mark Blyth view the Eurozone as inherently unstable and likely to fragment; Howard Shaw and Nick Candy believe the EU will survive and reform, though perhaps more slowly than desired.
• Inflation Causes: Janet Thomas attributes rising inflation primarily to the depreciated pound; other panelists argue inflation is a global trend caused by central bank misallocation of capital and energy imports.
• Future Outlook: Nick Candy sees a "soft Brexit" leading to a better deal as EU instability grows; Howard Shaw believes the UK should ignore the deal entirely, deregulate, and compete globally regardless of trade terms.

Real Estate and Investment Outlook

• Nick Candy views current real estate valuations in central London as a "once-in-a-generation" opportunity for Asian and US investors seeking a currency play.
• Janet Thomas notes that high inflation (currently 2.3% in the UK vs. 2.8% in Germany) and potential job losses in the financial sector are already impacting consumer sentiment and future investment confidence.
• Howard Shaw predicts the pound will significantly strengthen in five years as the UK adjusts to its post-Brexit economic reality.