A second referendum would be a disaster

There is a perfectly respectable political case for holding a second Brexit vote, says Matthew Lynn. But to do so would be a disaster for business for these three reasons.


John Major and Tony Blair want a re-run, but business would suffer
(Image credit: 2016 Getty Images)

John Major. Tony Blair. The Lib Dems. About half of Twitter. The list of people who want to hold a second referendum on our membership of the EU is growing all the time. As we wait for the prime minister finally to get around to triggering Article 50, and formally begin the process of negotiating our departure, there is a growing clamour of voices making the case that once the deal is done, the whole thing should be put to a second vote.

True, there is a perfectly respectable political case for that, but there is a problem. A second vote would be an economic disaster for three reasons.

First, it will only stretch out the uncertainty even longer. Businesses won't actually know whether we are staying or leaving for another two or three years. The government will be negotiating the terms of the exit, but then after all that people might vote down the deal in the referendum after it was concluded.

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And then what happens? Do we stay in the EU on the existing terms, or do we negotiate our way back in presumably without a great deal of goodwill on the other side by then. That could take another couple of years at least followed, perhaps, by yet another vote. At that rate, we could still be having this argument in the 2040s, at which point even Nigel Farage might have got fed up with it. For businesses, that means it will be impossible to plan ahead and that is surely the worst possible outcome.

Next, if we concede that we will have a second vote, it means we will get a worse deal. The EU would prefer that we stay in, not least because we contribute 14% of its budget, and make the second largest net contribution after Germany.

In the run-up to a vote, the EU will have every incentive to offer as bad a deal as possible because that will make it more likely that the UK will decide to stay. Against that, if we are definitely on the way out, they might as well offer us reasonably good terms, because we are a major market for their companies and there is nothing to be gained from treating us unfairly. A second vote actually makes a worse deal more likely.

Finally, it will only encourage special pleading. Every Brexit lobbyist will argue for a concession for this or that industry. We have already seen that with the special deal Nissan negotiated to keep car manufacturing in the north-east rather than shifting it to France or Spain. We will see the aerospace companies, the pharmaceuticals giants and, of course, the big American investment banks based in the City, demanding that they get this or that tax break or subsidy as part of the package for leaving. It will be very hard for the government to resist that, for the simple reason that it will need business onside to win the second referendum.

Brexit is a challenge for the economy, there is no question of that. You don't need to have signed up to Project Fear to appreciate that some sectors will find life a lot harder outside the EU, and while the majority of the economy will sail on as before, some businesses will suffer.

But for the economy, it is far better to simply get it done and move on. A second referendum makes sense for die-hard Remainers, in much the same way as it is always better to get a replay in a cup tie than to get knocked out. It gives them a chance to re-run the campaign, and maybe win it this time although now that the economy appears to be doing fine after the decision to leave it is hard to see the result being any different. But it will be very damaging to the economy and the political leaders calling for a second vote should at least have the honesty to admit that.

Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.