This year marks the tenth anniversary of an event that has proved to be of huge consequence for the UK stock market. No, not the Brexit referendum – 2016 was the year in which Japanese company SoftBank, led by founder and chief executive Masayoshi Son, acquired the UK's leading technology company, Arm, for £24 billion. Unlike American investors, professional UK fund managers became permanently disillusioned with the technology sector as a result of the collapse of the technology, media and telecoms bubble in 2000-2002, and so were delighted to be shot of its flagship domestic representative at a 40% premium to the prevailing share price.

With the yield on ten-year gilts at historic lows below 1.5%, pension funds were desperate to ditch equities and buy even more gilts, even leveraging up in their chase of the “liability-driven investment” delusion, which was to cost them hundreds of billions six years later. New solvency rules introduced after the 2008 financial crisis required insurance companies to invest in “safer, more liquid” securities, that is, short-dated gilts. Wealth managers could crow to their clients about short-term performance.

Only one major investor vehemently disagreed; James Anderson, the then manager of Scottish Mortgage Trust, bitterly criticised the sell-out on behalf of Baillie Gifford, with a holding of more than 10%. “We found it deeply depressing that Arm's management, and particularly its chairman, were so influenced by short-term shareholders.” Anderson said it was a premature sale of the UK's leading technology and intellectual property champions, “Britain's sole serious shot at building a global tech giant”.

In September 2023, Arm again went public when SoftBank floated the company on the New York Stock Exchange at a valuation of £40 billion, while retaining 90% of the shares. Unsurprisingly, pleas to list the shares in London were shunned, though Arm remains a Cambridge-based company. Since then, the shares have multiplied more than sixfold, although they are now down 17% from their early June peak.

Had Arm listed in the UK, it would be by far the biggest company on the London Stock Exchange. London is now only the world's eighth-largest stock market, accounting for just 3.1% of the MSCI All Countries World index. It has been steadily slipping down the rankings owing to its low exposure to the technology sector, which accounts for just 1% of the FTSE 100. This compares with 8%-9% in Europe, 27% in the US (not including Alphabet and Amazon) and 37% in Asia.

Britain's technology firms are condemned to stagnation

Also easily forgotten is the 2014 sale of Britain's DeepMind, a pioneer in AI, to Google for just £400 million. In 2006, US-based Illumina bought Solexa, the UK-based inventor of gene sequencing, for £315 million. It became the key building block in Illumina's climb to a market value of more than £50 billion (although the shares have fallen by two-thirds in the last five years). These and other examples show that Britain has a good record of creating and building technology champions, but that unambitious management, combined with uninterested and short-sighted institutional investors, means that they sell out rather than scale up in the way that American giants have shown is possible.

Without the “ecosystem” that results from successful technology firms, Britain's pool of talent will go elsewhere, there will be no pool of capital looking for the next potential breakthrough, a diminishing appetite for risk and no list of success stories to inspire future entrepreneurs. The London Stock Exchange has become a value trap – a shrinking pool of reasonably managed solid businesses with mediocre prospects. Such a market can have an occasional catch-up year of outperformance, but without a cadre of proper growth firms, is condemned to an ever-shrinking share of global capitalisation. Arm's sale to SoftBank, now Japan's largest company, didn't start this process, but it marked the point at which it became irreversible.

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In January 2013, the then-prime minister David Cameron announced that there would be a “very simple” referendum on whether Britain should stay in or get out of the European Union. The result would draw a line under the whole issue for a generation, he said, so that we, and in particular his party, could all stop “banging on” about it. As the tenth anniversary of the Brexit referendum approaches in June of this year, we might all now reflect on just how simple the whole thing proved to be and how joyful it is that everyone has much better things to talk about.

That reflection would at least help us appreciate that God does indeed have a sense of humour. The process of leaving the EU and judging its consequences has turned out to be anything but simple, of course, and the conversation about our membership of the EU has not ended – in fact, in recent months it has all been rather stirred up again.

Prime minister Keir Starmer is exploring a deal that would align Britain with the EU's single market for goods under his EU “reset” plans. He had already signed agreements to align with the bloc's rules on food standards and carbon emissions. The latest plan would force British manufacturers to comply with hundreds of EU regulations, says The Telegraph, without having any say in how they are shaped. It would, in effect, return Britain to something like the “backstop”, the former prime minister Theresa May's attempt to lock Britain into EU rules to avoid a hard border in Ireland. That idea was repeatedly defeated by MPs and ultimately scrapped by Boris Johnson when he became prime minister. The difference is that rejoining the customs union has been ruled out, to avoid breaking manifesto commitments and protect trade deals with India and the US.

The cost to Britain of Brexit

Those on one side of the Brexit wars – and even some of those in the opposing camp – will say that this is all to the good, at least in principle, as very clearly something had to be done. Brexiters at the time of the referendum argued that disentangling from the EU would unlock long-term economic potential as it would free British policymakers from EU red tape and give them more freedom for manoeuvre, as Ryan Bourne, a member at the time of the referendum of Economists for Brexit, said in The Times towards the end of last year. Yet ten years on, “we cannot pretend things have gone well so far” on that score. A review of the data from the National Bureau of Economic Research (NBER) has suggested that GDP per person is 6%-8% lower today than it would have been if Britain had voted to remain in the EU. Business investment is down 15%, and employment and productivity by 3%-4%.

True, the NBER's study has been loudly mocked. It requires us to believe that if only the vote had gone the right way Britain would have grown four times more than Japan and Germany, almost twice as much as France and Italy, and be performing as well as the US. “If you believe that I have a bridge to sell you,” as Andrew Neil put it on X.

But still, “let's not kid ourselves”, says Bourne. The facts show that the UK has grown more slowly than Italy, France and Japan, and the microeconomic, firm-level data are “crystal clear” that Brexit had a “significant, depressive impact”. The NBER study showed that the more exposed to the EU a company was, the more likely it was to cut investment and slow hiring in the wake of the referendum. By 2023, average business investment was 12% lower and productivity within firms 3%-4% weaker. Roughly half of firms listed Brexit as a top source of uncertainty for years after the vote.

Such evidence cannot easily be dismissed, whatever your political inclinations. “Brexit did not cause Britain's growth malaise, but it undoubtedly deepened it,” says Bourne. “Nor did it create our fiscal woes, although it worsened them too. Denial… helps no one.”

Indeed, Brexit was never likely to be a solution to the underlying complaints that provoked it, and “so it has proved”, says Jeremy Warner in The Telegraph. Ten years on, and the economy is in even more of a mess than it was back then. Immigration has “surged”, the public finances are in “a state of ruin”, many public services appear “broken beyond repair”, and voters are “angrier than ever”. This might not be the fault of Brexit as such, but nor did leaving the EU prove to be “the moment of national renewal that its cheerleaders promised”. Nor was it ever likely to be. “Economic salvation seems as far away as ever.”

Edging closer to the EU might be the best way forward

Brexit remains an issue for a reason. The most obvious impact of the decision to leave the EU was on trade. UK exports since 2019 have been much weaker than in other G7 countries, and trade is an important driver of productivity growth, which in turn is the most important factor in improving living standards. Some of that weakness may be a result of Donald Trump's tariffs, but that in itself just goes to show how much the world has changed since the Brexit referendum, as David Smith has pointed out, also in The Times. Tensions with the US and with China show that “dreams of a painless transition to non-EU trade were the wishful thinking of a different age”. The Iran war quickly brought changing global geopolitical realities into even sharper focus and has bolstered the case for closer cooperation with the EU. “It is increasingly clear that as the world continues down this volatile path, our long-term national interest requires closer partnership with our allies in Europe and with the European Union,” as Starmer has said. The opportunity to strengthen security ties and improve economic relations is, says Starmer, “simply too big to ignore”.

That's surely true, but reversing Brexit – or “resetting” relations – will be easier said than done, as The Economist points out. It would, for a start, be impossible to revert to the pre-2016 status quo. Britain would have to reapply for membership and negotiate its conditions, and would be unlikely to secure the opt-outs it had previously. It would not regain its special budget rebate, for example, and might have to agree to join the euro. The EU has also changed significantly in the interim and there is little desire to reopen a painful debate.

Starmer's attempts to find pragmatic ways quietly to edge closer to the EU might be the best way forward. The EU is more open than it was to allowing non-members to cherry-pick bits of the single market and “new forms of partial membership, Swiss-style, may seem more acceptable to the EU as it considers its further expansion eastwards”, says The Economist. Different types of relationship with the EU could emerge from the reopening of debates about Norway and Iceland joining, or from forging closer links with the western Balkans, Moldova and Ukraine, which “might suit Britain better than a hard Brexit”.

“In retrospect, the 2016 referendum may come to be seen not to have permanently settled Britain's place in the European project,” says The Economist. The relationship will keep evolving, sometimes in unpredictable directions. And for the next few years, that is likely to push the two sides closer together, not further apart.”

What David Cameron got right about Brexit

Whatever happens, Cameron was right about one thing. On one level, the issue voted on in the referendum ten years ago was a simple one. Economics is mostly common sense and the issue at stake and the likely consequences should have yielded to some simple logic. Britain was on the doorstep and a member of one of the largest free-trade blocs in the world. Making a decision that would certainly make trade with that bloc more costly and raise barriers would, all else being equal, surely leave Britain worse off.

All else is never quite equal, of course, hence the arguments that Brexit could conceivably give the country more freedom to make better arrangements that would be more conducive to growth. In other words, alongside the fact that Brexit would probably make us worse off there was a judgement to be made about whether Britain's elite and bureaucracy would in the long run prove more effective than the one in Brussels. A relatively simple matter of judgement on both counts, if ones that have had, as we have seen, some rather more complex ramifications.

There is no point relitigating the matter. We are where we are. But in the years since the vote we might draw two lessons from the experience of Brexit. The first is that Britain's historical tendency to “muddle through” rather than plan might not be such a bad one, as Paul Cornish, a professor of strategic studies at the University of Exeter, points out in the Financial Times. As Charles Lindblom put it, “Policy is not made once and for all; it is made and re-made endlessly. Policymaking is a successive approximation to some desired objectives in which what is desired itself continues to change under reconsideration”.

What could be more appropriate, says Cornish, in “a time of seeming chronic volatility and complexity, particularly in matters of national strategy and international security”? Breaking free from the EU and setting out alone as “Global Britain” on the high seas of freedom and opportunity might have seemed like a great plan to some and far superior to all the muddling and compromise of EU membership. Following a raid from the pirates of reality, we're back to the muddling.

“Populists” unwittingly make the case for a stronger Europe

The second lesson is that the EU may be less bad than all the alternatives, as Janan Ganesh puts it, also in the FT. At the time of the referendum, victorious Brexiters were fond of predicting that other countries would soon follow our good example and fall like dominoes out of the EU. A decade on, all of the EU's 27 other dominoes stand and, despite having entered an “era of ardent nationalism”, no one really wants out of the “supranational club”. If anything, nationalist politicians on the continent go out of their way to reassure voters that they have no intention of leaving. Europeans still trust the EU above their national political systems, and support for the euro has grown.

“Few things are stranger about modern politics,” says Ganesh, but the explanation is not hard to find. Nigel Farage, Vladimir Putin and Donald Trump have all unwittingly helped to make the case for a stronger Europe and have “given a multilateral, technocratic and liberal institution a sense of existential purpose that it was starting to lack”. Moreover, the “debasement of our own political elite” post-referendum has “brought the UK closer to the European experience”. As Labour edges closer to the EU, Conservatives may “scream betrayal”, but “voters shrug”. “Through their comportment in office, Brexiters have forfeited the benefit of the doubt.”

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It is nearly ten long years since the British people voted for Brexit and to leave the European Union. The latest opinion polls show that a majority now believe that Brexit has gone badly. Too much time has been wasted searching for a satisfactory halfway house that does not exist. The additional uncertainty has delayed business investment and dampened economic growth. The increase in friction at the border has hampered the UK’s trade with the EU, at least in some goods. The politics has also remained toxic. In particular, net migration to Britain has surged, rather than being brought under control. The carving out of Northern Ireland has undermined the integrity of the UK.

On the other hand, even this “botched Brexit” has not been the economic disaster that many predicted. The UK still leads the rest of Europe as a destination for foreign investment. Domestic investment is rebounding as uncertainty fades. There has already been some good progress in lowering barriers to trade with the rest of the world. Meanwhile, trade in services has boomed. The City of London continues to flourish and is now a champion of the benefits of smarter regulation. Susan Langley, the new lady mayor, has said that the prospect of realigning financial rules with the EU has passed and warned against linking regulations to any single jurisdiction.

On the money front, Britain has already saved tens of billions of pounds in contributions to the EU budget. Some argue that this has been more than offset by the loss of tax revenue as a result of weaker economic growth. However, it is still hard to separate the impact of Brexit from other shocks, notably the UK’s relatively high energy costs. Overall, the performance of the UK economy has been similar to that of France, and much better than Germany’s. The really big divergence has been between Europe’s persistent economic weakness and America’s strength.

Finally, just to chuck another uncertainty into the mix, many argue that the creeping isolationism of the US under Donald Trump has strengthened the case for Britain to realign more closely with the EU.

Is Brexit being reversed by Keir Starmer?

This is the complicated backdrop against which many of the old debates about Brexit are now resurfacing. Thus far, Keir Starmer’s Labour government has attempted to steer a middle course, with some success. Under Starmer, Labour has stuck to the “red lines” in the party’s 2024 manifesto. This explicitly ruled out a return to the EU’s single market or to the customs union and said no to the restoration of “freedom of movement”. In the meantime, the Labour government has developed the new global trade deals started under the Conservatives and continued the gradual decoupling from EU rules in areas such as financial services and animal welfare (both for the better). Until recently, the long-scheduled “UK-EU reset” also looked like something that most people could happily support. The government was simply proposing to tidy up parts of the post-Brexit arrangements that could easily be improved. Examples here included the mutual recognition of veterinary standards and professional qualifications, and making life a little easier for touring artists.

This strategy has had some real benefits. Brexit has dropped way down the list of concerns for the public and, at least as importantly, for businesses. The Bank of England’s “Brexit Uncertainty index” had already fallen sharply since 2019, but it has remained low under Labour. Yet, this “middle way” now appears to be unsustainable. Labour had framed its position as accepting Brexit as a settled fact. But 2026 could be the year when this starts to change.

This partly reflects internal Labour party politics. The days of Starmer’s premiership appear to be numbered. Potential leadership rivals, notably Wes Streeting and David Lammy, have already broken ranks by backing a new UK-EU “customs union”, at least implicitly. This followed YouGov polling that suggests that 80% of Labour voters would also be in favour. Prominent figures in the trade-union movement and in the media are banging the drum for the customs union, too.

This echoes a wider debate. Could renewed and closer ties with the EU help to address Britain’s economic problems? Some say that forming a new customs union would be a good first step. Others argue that we could also improve our access to the single market by accepting more EU rules. But scratch just a little deeper and it becomes clearer that the choices are not that simple.

In a nutshell, a “customs union” is an agreement to remove tariffs on most, or all, goods traded between member countries. To make this work, all members must apply a common external tariff to goods imported from outside the union. It is not possible for a non-EU nation state, such as the UK, to join the EU’s Customs Union (capital “C”, capital “U”). But it would be possible to enter some more limited form of “customs union” with the EU, as Turkey has done, and as then prime minister Theresa May initially proposed as part of her Withdrawal Agreement.

Would a customs union with the EU work?

However, there are three compelling reasons to oppose this idea. First, there would not be much to gain in terms of lower tariffs. Most UK-EU goods trade is already tariff-free and quota-free under the terms of the existing deal (the EU–UK Trade and Cooperation Agreement). Admittedly, EU tariffs are still charged on some imports from the UK where the appropriate “rules of origin” are not met, including some high-tech manufactures, or where it is too costly to prove compliance with them, such as some low-value goods. But any remaining tariff benefit from a new customs union would still need to be set against the UK’s obligation to apply the EU’s tariffs on goods that we import from the rest of the world. These EU tariffs are often higher. The UK would probably also be obliged to share customs revenues with the EU, and to allow countries that the EU has trade deals with to access UK markets with no guarantee of reciprocity.

Second, there is not much to gain in terms of non-tariff barriers either. Crucially, there would still need to be checks at the UK-EU border, especially if the UK remained outside the single market and the Schengen free-movement zone. These checks could only be reduced by accepting a raft of other European regulations – with no say on how these are determined.

Third, the ability to do independent trade deals with other countries would be severely limited. The UK might still be able to negotiate a few agreements covering some aspects of trade in services, but not trade in goods. At the very least, the government would have to renegotiate all the new trade deals it has done since Brexit – as Starmer has rightly stressed. The UK may have to cancel most of these new deals altogether, making the UK look like a very unreliable partner. For instance, UK goods exporters currently face lower US tariffs, on average, than those from our competitors in the EU selling the same products. This advantage is partly due to Brexit – and it would be lost.

Any support for rejoining a “customs union” would surely fall away if these costs were properly explained. Indeed, other polling by YouGov last summer found that only 9% of Labour voters would be happy for the UK’s tariff policy to be decided by anyone other than the UK government itself.

Single market would bring few benefits

There have also been many dodgy claims about the economic benefits. In particular, the Liberal Democrats have argued that a new customs union with the EU could boost the UK economy by 2.2% and tax revenues by £25billion. These figures are attributed to a February 2025 study by the consultancy Frontier Economics. In reality, this study relied on some heroic assumptions about the impact of small changes in trade openness on productivity.

Moreover, the report modelled something that is simply not on the table, namely regulatory alignment based on “mutual recognition”, with the most favourable results assuming that this applies to both goods and services. So this was not, in fact, the same thing as a “customs union”.

Some supporters of a new UK-EU customs union also still claim that the EU would be willing to offer relatively favourable terms. But this is a triumph of hope over experience. The recent negotiations over a limited UK-EU reset have stalled in several areas precisely because the EU wants to extract every possible concession. For example, the UK is being asked to overpay to rejoin the EU’s Erasmus student exchange programme and even for the right to contribute to Europe’s defence. Adopting the EU carbon-emissions scheme and imposing additional carbon taxes will raise energy costs even further.

There is also little evidence that realigning with the single market would provide much of an economic boost. EU policymakers are experts in “managed decline” and masters of overregulation.

It might be argued that the EU is a worse place without the UK to support other more instinctively market-liberal countries. But the counter-argument is that it would be madness to seek to realign more closely with a failing economic bloc. The euro debt crisis and now the need to ramp up spending on defence have put modernisation of the EU on hold.

The UK could do more good by demonstrating the economic advantages of supply-side reform and smarter regulation outside the EU. If other European countries then want to follow, all the better. Indeed, Europe’s biggest banks and insurers have already called for EU regulators to copy the example of the UK with a formal objective to support economic growth and competitiveness, intensifying the sector’s drive to ease the cost and complexity of its rules.

A more positive vision of Brexit

This would support a more positive vision of Brexit, based on going back to basics. The vote to leave the EU in 2016 was essentially a vote to regain control of borders, laws and money. Polling shows that the British people still want their own government to make policy in a wide range of areas, not just trade. This is surely incompatible with giving sovereignty back to the EU. Viewed this way, the UK must be able to diverge from European regulations, especially in growth sectors such as AI and life sciences. The UK also needs to be able to run its own trade policy and choose who comes to live, work or study here.

This more positive vision of Brexit may seem hard to square with the academic studies that suggest that the departure from the EU has had a large and negative impact on trade, productivity and growth. But just like the headlines from opinion polling, it is worth digging a little deeper. This can be illustrated by dissecting two numbers – 4% and 8% – which are widely quoted by those arguing that the UK should rejoin the EU, or at least the single market and customs union.

The 4% is the assumption made by the Office for Budget Responsibility (OBR) about the long-term impact of Brexit on UK productivity. Clearly, any analysis from the government’s own fiscal watchdog needs to be taken seriously, but this figure is widely misunderstood. For a start, the 4% is simply an average of the results of 13 external studies, rather than original work by the OBR. These studies, all done before the final shape of the exit agreement was known, used a variety of different models and assumptions, most of which now look far too pessimistic. Even then, nine of these studies put the impact at less than 4%.

Moreover, the key driver of the 4% hit to productivity is assumed to be a sharp fall in the “trade intensity” of the UK economy. Specifically, UK imports and exports are both assumed to be 15% lower than if we had remained in the EU. This covers total trade, both goods and services, and with the whole world, not just the EU. These assumptions are only weakly supported by the actual data – if at all. Falls of 15% had always looked pessimistic given the relatively favourable tariff terms in the initial UK-EU trade deal. In reality, the overall “trade intensity” of UK GDP has continued to track that of our peers in the EU, rather than collapse.

Most economists agree that UK trade has held up much better than expected after Brexit. The UK’s trade intensity might be a few percentage points lower than it would otherwise have been. This is unlikely to make much difference to productivity in a large, advanced economy that remains relatively open. Moreover, any drag is likely to fade over time as businesses adjust, the full benefits of new post-Brexit trade deals start to come through, and the major EU economies continue to underperform against the rest of the world.

Last but not least, the OBR’s 4% does not take account of any potential benefits of Brexit, including new trade deals, smarter policies on immigration and better regulations at home. This omission is partly because the OBR judges that these benefits will be small. But it is mainly because it does not usually incorporate the impacts of policy changes that have not yet been made.

Applying the smell test

But one of the most extreme estimates of the “harm done by Brexit” comes from a Working Paper published in November last year by the US National Bureau of Economic Research (NBER). This study estimated that Brexit has already shrunk the UK economy by as much as 8% since the vote to leave in 2016, which would indeed be nothing short of a disaster.

However, the 8% figure fails a simple “smell test”. For context, the UK economy has grown by about 12% since 2016, outpacing Japan, Germany, Italy and France. If you add another 8% the UK would have been the fastest growing economy in the G7 – bar only the US – and left its EU peers far behind. This would not be impossible, but it is surely unlikely.

So, how did the authors of the NBER paper arrive at an 8% hit? They compared the UK’s per capita GDP growth since 2016 to that of a wide range of other countries and assumed that any underperformance must have been due to Brexit. There are a number of problems here. But briefly, any GDP-weighted comparison is dominated by the US. Over this period the US economy has benefited disproportionately from low energy prices, a large fiscal stimulus and the boom in artificial intelligence.

The NBER paper also uses a computer program to find the weighted group of countries (or “doppelgänger”) whose performance was closest to that of the UK before Brexit. This control group can be a very odd bunch. The NBER doppelgänger gave the highest weight (61.4%) to the US, followed by Estonia (10.9%) and Greece (9.5%). Latvia, Iceland and Hungary also featured. There was no place for Germany or France, which are more obvious benchmarks. More fundamentally, the best fit in one period and in one set of circumstances may not be the best in another, especially where there have been many other shocks (not just Brexit) which could be expected to hit the UK differently, including Covid and the energy crisis.

Finally, Canada is the laggard among the G7 group of major advanced economies in terms of growth in per-capita GDP, not “Brexit Britain”. That perhaps has something to do with Canada’s very high levels of net immigration – a feature shared with the UK. But clearly it cannot be blamed on changes in trade relations with the EU.

Which way should Britain jump?

In summary, the mainstream narrative on Brexit’s economic impact relies on many dodgy assumptions and selective use of data. While it is important to acknowledge the negative effects, it is equally important to question the magnitude and duration of these effects, and to consider alternative explanations.

Looking forward, the UK needs to decide which way to jump. Many will continue to argue that Britain’s economy can only thrive again if properly unbound from the EU. However, it is increasingly easy to imagine Labour heading into the next election with an explicit commitment to realign much more closely, even if this stops short of full membership. That would at least be a more honest position than the current fudge. But reopening the “Brexit wars” could increase uncertainty again and do more harm than good, especially as many in the EU seem as determined as ever to punish the UK for daring to leave.

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JPMorgan Chase could have chosen Paris, Frankfurt or even Amsterdam. Yet the giant US bank has decided to build a new £3 billion European headquarters in London’s Canary Wharf instead. That is a huge vote of confidence in London and the City at a time when faith in the British economy has reached its lowest point in recent memory. It is also a sign that the Brexit wars have finally been won – and the City will remain the key financial hub for Europe.

Given the UK’s recent dismal track record of delaying any kind of new project, and allowing costs to escalate with dozens of unnecessary regulations, it may be a few years before the diggers and cranes actually get to work. Even so, with 12,000 square feet of space, it will eventually be a huge addition to the Wharf’s existing floor space and it will be home to 12,000 staff, making it the bank’s major hub for Europe and the Middle East. Canary Wharf has been struggling since the pandemic as firms adapted to working from home. A major new tower will boost the Wharf after a difficult few years.

In the aftermath of the UK’s departure from the EU, Paris and Frankfurt, with the help of officials in Brussels, made a huge effort to replace London as the key financial centre for the continent. In Paris, president Emmanuel Macron introduced special tax deals for bankers fleeing across the Channel, and the French regulators even translated all their forms into English to make the paperwork easier.

Meanwhile, Frankfurt created promotional videos selling the lifestyle to be enjoyed there to London-based finance workers. Huge amounts of money and energy were poured into the campaign and there was lots of speculation that one or the other would become Europe’s main financial centre, with London reduced to little more than a regional outpost.

We don’t hear very much about that any more, and for good reason. In reality, both cities have become less appealing over the last few years. The bankers who moved to Paris have found that promises of lower taxes have turned out to be illusory. With a huge deficit to finance, the French government is desperate to raise money any way it can, and “the rich” are an easy target. It has already introduced extra taxes on anyone earning more than €250,000, hardly a fortune at JPMorgan, and it is now threatening a wealth tax as well as a plan to force the rich to “invest” in government bonds at zero interest.

The country is so politically unstable, it is hard to know what might happen next. But one point is clear. It would be a very risky place to locate a major banking headquarters right now.

The Brexit wars have been won

Germany is not much better. Its industrial slump has made it the worst performing of all the major European economies. Government spending and borrowing is soaring as it starts to rebuild its military in the face of Russian aggression, and its political system is trapped in permanent coalitions that makes significant reforms impossible, while the far-right AFD rises in the polls. Germany is not in as much of a mess as France, but it is hard to see Frankfurt becoming a major financial centre any time soon, even if it is home to the European Central Bank.

Both cities have blown the opportunity. In the end, both were too bogged down in domestic politics and their own economic decline, while the EU carried on imposing more and more regulations on finance, ignoring the opportunity to deregulate. It has been a long time since we read a report about bankers relocating to Paris or Frankfurt, and we certainly won’t be hearing about many over the next few years.

The UK is hardly in great shape. London has plenty of challenges if it is to survive as a major global financial centre. It needs to find a way of reviving the IPO market to reverse the decline in the equity market, to stem the exodus of entrepreneurs, to persuade the government to stop raising taxes all the time and to embrace new technologies to stay ahead of its rivals. And yet, it does have one thing going for it. Despite leaving the EU, it has won the battle to remain Europe’s main finance hub. JPMorgan’s new tower will prove it.

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The City is meant to be leading the world in the drive towards “green finance”. But over the past few weeks, it has become clear that it has found reverse gear. Patrick Tiernan, the new CEO of the Lloyd's insurance market, a sector where London is still a world leader, last week indicated that syndicates would no longer be pressured into refusing to cover fossil fuels.

He stressed that the market wanted to be “apolitical”. Earlier in the month, the Net Zero Banking Alliance, a UN-sponsored initiative of which the former Bank of England governor Mark Carney was one of the founders, said it was pressing pause on its work after a whole series of major banks, including Goldman Sachs, HSBC and Barclays, decided to leave. Likewise, a lot of environmental, social and governance (ESG) funds are going to be looking a lot less healthy as the share price of Orsted, one of the favourite stocks for the sector, collapses. Shares in the Danish wind giant have halved in the past year. It turns out it’s a lot harder to make money from windmills than was first predicted. Add it all up, and one point is clear. The “green transition” investment story is turning very sour.

The City's bet on green finance fails to pay out

Much of it was virtue-signalling nonsense from the start. Whatever you think about climate change, fossil fuels are likely to be around for at least a couple more decades, even on the most optimistic scenarios, so it’s hard to see the point of not insuring the companies that produce them. It just meant there was no money to pay out compensation if something went wrong. Likewise, if the major banks refuse to finance fossil fuels, then the companies will just be forced to turn to hedge funds and private credit instead, and the risks will be far harder for central banks to monitor.

At the same time, it was all very well to mobilise the fund-management industry behind green investment, but as Orsted has shown, just because you stamp “climate change” on a project doesn’t mean it will make any genuine profits. As subsidies get wound down, much of the sector turns out to be fundamentally unprofitable – and if the banks are too heavily exposed, they will only find themselves in trouble.

The City’s bet big on “green finance” driving its growth over the next couple of decades. Everyone knew that leaving the EU would pose a challenge to London as a financial centre, even if it was sometimes exaggerated. The City was the key financial hub for the bloc, financing government and corporate debt, and managing bond and equity issues. As some of that business drifted away, as it inevitably would, London was meant to turn itself into the global centre for “green finance” instead. It would become the place where the hundreds of billions that would have to be invested to transition from oil and gas to wind, solar and nuclear power would be financed, and where environmentally friendly companies could list, and where ESG fund management would flourish. It would be the world’s green finance centre, not just Europe’s. Cheerleaders such as Mark Carney predicted that green finance would be a $5 trillion market. It was the City’s future.

Green finance turns sour

This bet has not worked out well. Over the past five years, the City has stagnated. The number of new companies listed in London has shrunk to almost nothing, very few major bids have been launched, and there is not much sign of the green boom we were promised. That is about to become a lot more apparent as many of the deals struck over the past few years turn sour. We have already seen the best years of green finance, when governments were pouring unlimited sums of money into industries such as wind and solar. We are now seeing a retreat, and that will expose a lot of dud projects.

There has to be a reset. The City needs to start growing again and to replace the markets lost by Brexit. It is not going to be green finance, that much is now clear. London’s financial markets need to ditch the green delusion and move on as quickly as possible – and get back to businesses where they can actually make money.

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When the UK voted to leave the European Union, French president Emmanuel Macron devoted a huge amount of energy to luring banks across the Channel.

He quite rightly saw an opportunity for his country.

Many financial firms are required to trade within the EU, and with its depth of expertise, vibrant culture and good schools, Paris was a natural alternative to Britain.

Special tax deals were on offer, along with exemptions from onerous employment laws and even regulations in English instead of French. Macron rolled out the red carpet.

To some degree, that worked out well. The finance industry added 25,000 jobs from 2017 to 2023, according to the French National Institute of Statistics and Economic Studies.

Morgan Stanley raised its head count in the city from 150 to 450; Goldman Sachs from 170 to more than 400; JPMorgan from 250 to almost 1,000.

Far more than Frankfurt, its main rival, Paris started to emerge as the main eurozone trading hub, with all the wealth and tax revenues that it can generate. It was a smart strategy, and it was starting to work.

Now, it is in full-scale retreat. None of the major banks are going to come out with a big public statement that they are leaving France – it’s not worth the political controversy.

Instead, they are just slowly scaling back, freezing hiring and winding down contracts. It is not hard to understand why. With a caretaker government facing a fiscal crisis and with borrowing stuck at more than 113% of GDP, taxes are going up.

The budget is still in flux, but it includes a corporate tax surcharge of between 3% and 9% for companies with more than €1 billion in revenue and an extra levy on anyone making more than €250,000 a year.

Neither are huge sums in the banking or hedge-fund industries and many may be caught out by the new rules.

The Senate has voted in favour of a new wealth tax, and even if that does not pass, the government is planning a “minimum tax” that would be much the same thing.

One thing is clear: the days when Macron, himself a former investment banker, could cut sweetheart deals with finance are in the past. France wants to tax the rich, and bankers can’t expect any special favours. They’re a target.

How the City can grab the opportunity

There is an opportunity here for the City – it should start tempting those bankers back.

When London was in trouble after Brexit, France aggressively targeted the banks. Now that the tables have been turned, we should be just as aggressive in trying to lure them back.

Sure, some trades still have to be made within the EU to comply with its rules, but many of the other executives and traders can be based anywhere, and London remains the pre-eminent trading and financial hub in Europe and the obvious alternative to Paris.

There are plenty of things that the City, working with the government, could do.

It could redraft the rules on non-doms (people who live here but are not registered as residents for tax purposes) so that finance workers are given an exemption from British taxes for five years.

It could tweak the windfall tax on banks to exempt any institution or office moving from France to London. Or it could offer a lighter-touch regulatory regime for any bank making the switch.

It could also start making a forceful case, using investment summits and promotional tools, to argue that London is now a more attractive place to base a financial business and that bankers are still welcome in the City.

The opportunity is there for the taking. If the City doesn’t grab it, another European financial centre will.

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"The French economy has been getting away with fiscal murder for a very long time,” Raphaël Gallardo of Carmignac Gestion tells Bloomberg. For much of Emmanuel Macron’s pro-business presidency, France has been something of a market darling. But with a debt-to-GDP ratio of 111% and an annual budget deficit worth 6.1% of GDP, the country faces a stunning fall from grace. French government bonds have spent the past 15 years in a sweet spot, says The Economist. Global investors are keen on European debt. But the continent’s troubled southern economies were perceived as too risky, while tight-fisted northern states such as Germany and the Netherlands don’t issue many bonds. French debt fitted the bill. 

How does the rest of Europe compare to France? 

Things have changed. Southern Europe has been benefitting from a tourism-led growth boom, helping Greece, Portugal and Spain to get their spending in order. Once regarded as a proxy for ultra-safe German bunds, French debt is now priced less favourably than that of Spain or Portugal. In a more competitive European debt market, France’s “weak growth” and “volatile politics” are not very attractive. Its state spending equates to 59% of GDP, the biggest share in the OECD club of rich economies. Paris is paying €50 billion a year to service its debt load, a figure that could hit €80 billion come 2027, says Liz Alderman in The New York Times. The fiscal deterioration has been driven by spending sprees in response to the successive blows of Covid and the 2022 energy shock. An economic slump in Germany hasn’t helped. 

Macron’s decision to call early parliamentary elections this summer triggered a market re-think. The vote resulted in a hung parliament, with a national assembly split between mutually loathing left, centre and right blocs. Conservative prime minister Michel Barnier, who leads a “fragile” minority government, has an unenviable task. He needs to pass an austerity budget totalling €60 billion in cuts without displeasing either Macron’s centrists or Marine Le Pen’s party, on which he depends for tacit support. Barnier says that two-thirds of the “adjustment” will come from spending cuts, with a third from tax hikes on businesses and the wealthy, says Jean Pisani-Ferry on Bruegel.org.  

France’s fiscal watchdog disagrees: it calculates that, in reality, 70% of deficit reduction will come via new taxes. Tax hikes have been a red line during Macron’s presidency, but now that legacy risks being squandered. Equivalent to 1.2% of GDP, the planned retrenchment risks sinking an already “precarious recovery”. Growth is projected to hit just 1.1% next year, a far cry from the 5% figure France enjoyed during the post-1945 years of the Trente Glorieuses, or even the pre-financial-crisis norm of more than 2%, says Jean-Marc Vittori in Les Echos. Since 2008, growth has averaged a mere 0.9%. France hasn’t endured such a prolonged peacetime slump in living standards since the 19th century. After the economic “roller-coaster” of the pandemic and Ukraine, the French economy has returned to its baseline condition: “gloom”.    

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High in the hills above Kandy, the tea planters of Sri Lanka have a problem. An ageing society, and a lack of willing younger workers, mean they haven’t got enough tea pluckers. Those who will work want to see a sharp rise from their current (very low) income levels and the managers are resigned to seeing their wage bills double. But they are also looking for ways to improve productivity – to pay for those wages. Everyone is looking at machinery that can double or triple the amount of tea each worker can pick in a day. 

This all seems pretty obvious. If you haven’t enough workers, you need to find a way to do the same with fewer, and you need to pay the workers you do have more. There is nothing like a labour shortage to make the lives of those who do labour better. 

This is not necessarily a thought that moves easily from the micro to the macro. Across most Western economies the more common idea is that a shortage of workers must be met with measures to find more workers. We need them to work in our care and hospitality sectors and to pay the taxes that will keep our fiscal show on the road as our population ages. On current trends, the percentage of the UK population that is over 65 will move from 19% to 29% by the mid-2070s. That’s why immigration is a good thing – and why the fact that it has been the main driver of UK population growth in recent years is also an obviously good thing. 

If our population is not growing organically, we have no choice but to ask people to move here from other countries, something we are really pretty good at. Net migration to the UK is at record highs – up from around 200,000 a year just after Brexit to 672,000 in the year to June 2023. 

There are all sorts of problems with this. Is it morally sound to import other country’s young people, and in particular their trained nurses and doctors? And where does it end? As each new generation ages, do we import more and more to plug that gap? And if so, might the place eventually, as the Institute of Economic Affairs has put it, “get a bit too crowded”? Is it a short-term solution to a long-term problem that will gradually (or, given the level of political irritation, maybe not that gradually) cause its own new problems? Given that it is the most contentious political issue of 2023, perhaps.

What has immigration ever done for us?
But the real question to ask is, does immigration improve the standard of living for the population that is already resident? Maybe not. GDP growth is nice, but the thing we should really care about is GDP per head. GDP growth since Brexit (when net migration really picked up) has been adequate. GDP per capita has been more or less flat – it has barely budged since 2016 (and is barely higher than in 2007). Rising net migration is not exactly the only thing that has happened to the UK economy over the last few decades, but the flatlining in GDP per head, even as GDP as a whole has risen, does chime with the results of various studies over the years. Most note positive effects on GDP as a whole, but small or negligible effects on GDP per head. Into this comes the discussion about productivity – which is particularly bad in the UK. 

Might it be that expanding the labour supply is holding down wages at the bottom end of the income level (again, most studies show that what impact on wages there is from immigration is at the lower end)? Does that then put employers off investment in new systems that might increase productivity in the long term – and also push up GDP per head?

They don’t bring the new roads with them
There is still a lot of thinking to be done here, but a new entry to the (fraught) conversation came earlier this year from Professor David Miles, chief forecaster at the Office for Budget Responsibility (OBR). He suggests that, while we are mostly obsessed with rising populations, it may be that a falling population might be better for the UK. That’s because much of the conversation around population growth does not fully take infrastructure into account – the marginal additional cost of housing, hospitals, schools and roads for each new member of the population. Add that in and it might be that population growth improves the immediate fiscal position (which is good), but also cuts the quality of life for the existing population (not so good). 

New arrivals, says Miles, bring often much-needed human capital with them, but they do not bring “schools, roads, hospitals and houses” (all things that are prohibitively expensive to build in the UK) with them. A mildly declining population – one that gets its economically inactive back into work and somehow gets productivity up too – might be better for the UK than one that sees constant growth. This is not an argument that is yet won – and it seems unlikely either way that, in today’s geopolitical world, the UK population will decline. 

But if you need something to argue about with relatives (who doesn’t?) over lunch, the changing conversation around immigration, fertility and population will definitely do the trick.

French vineyards won’t have to worry about cheaper Aussie merlots squeezing them off the shelves at Carrefour. Italian mozzarella makers won’t have to fret about southern hemisphere rivals. After years of talks, a bid to agree a free-trade deal between the EU and Australia has collapsed. 

“I came to Osaka with the intention to finalise a free-trade agreement,” said the Australian trade minister Don Farrell. “Unfortunately we have not been able to make progress.” 

There was just too wide a gulf between the two sides on agricultural exports and the EU was unwilling to lower the steep tariffs it puts on Australian food. There is little chance of talks reopening again. Australia and Europe will still trade with each other, but there will be cumbersome tariffs and quotas in the way.

The contrast with the UK could hardly be more clear. After leaving the EU, we negotiated a free-trade deal with Australia fairly quickly, and it came into force in May this year. A few farmers and hardcore Remainers complained that we gave away too much. But the UK stopped trying to protect its farming industry in the 1840s. Cheaper Australian food and wine will be phased in over several years, which will help many families cope with the cost-of-living crisis. It was a win-win for both sides.

Why the EU can’t do trade deals
The bigger point is that the EU is no longer able to do trade deals. An agreement with the Mercosur group – made up of Brazil, Argentina and a host of other South American countries – has been in the works for 20 years, but still hasn’t been signed off. A deal with the US, Europe’s largest trade partner, was put on hold indefinitely back in 2019. Even a deal with Morocco, eight miles from the EU’s mainland border, was frozen by the European Court last year. It managed to get a deal with tiny New Zealand over the line. But that is about it. Nothing else is on the horizon.

It is not hard to work out why. First, under French influence, and with the British out of the way, the EU is getting more and more protectionist. We can see that in the constant demands for huge industrial subsidies, for “secure supply chains”, and for making sure that domestic production is prioritised over any other consideration. An EU-Australia trade deal was meant to allow farmers greater access to European markets, in exchange for French and German firms having easier access to Australian minerals. Any deal involves compromises, but the EU is no longer willing to make any. Incapable of any sustained growth, the EU is shrinking all the time as a percentage of global GDP. It is down to 15%, half the level of 30 years ago, and getting smaller.

Small economies can do deals, as the UK has shown. But they have to be willing to open, and the EU refuses to do that. Its regulatory systems are becoming more and more cumbersome. From the GDPR data rules to new laws on artificial intelligence, gene editing and carbon emissions, a deal with the EU involves taking on board a vast number of new laws over which you have no say. It is no longer worth the bother for other countries.

Why the UK is better off outside the EU
During the long process of leaving the EU, we kept being told that it was a far more effective trade negotiator than the UK could ever hope to be on its own. Its sheer size, and the formidable skills of its officials, meant that it could conclude many more deals, and on far better terms, than the UK ever could by itself. 

It hasn’t turned out that way. We managed to get a pretty good deal with Australia and have joined the CPTPP trade pact that covers most of the emerging Asian nations as well as Canada and Mexico, which the EU is still not a part of. We should soon have a trade deal with India, the fifth largest economy in the world and heading for the top three.

Membership of the EU has become a barrier to trading globally. Remainers, and the leadership of the Labour Party, can carry on insisting that getting closer to Brussels would be better for British trade if they want to. The reality is that the UK is better off out of it.

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We thought it was all over. After years of wrangling, stand-offs, walk-outs and arguments, the UK and the EU finally reached a trade deal just before Christmas, and with only days remaining before the transitional arrangement expired at the end of the old year. And yet, just when you thought we could safely forget about wrangling with Michel Barnier, it turns out the arguments are set to continue.

Talks will start this week between the UK and the EU over a deal for financial services. There will inevitably be lots of pressure to make concessions and secure access to the European market for the UK’s banks, insurers and asset managers. That should be resisted. In truth, the same hardball “no deal is better than a bad deal” stance will work as well for the City as it did for the rest of the country.

Playing hardball makes sense

Over the next couple of months, British officials will have to try and negotiate “equivalence” rules that will allow City firms to sell their services across the EU. That matters a lot. Financial services are one of the UK’s largest exports industries, and one of the most lucrative. The EU market has been hugely important, allowing the City to become the dominant financial centre for the whole of the continent. There can be no argument that losing access to that market would come as a huge blow.

It is not going to be easy to strike a deal. Plenty of European countries are suspicious of the UK’s role in finance. The French, Germans and, increasingly, the Italians as well, would like a share of that trade. Many of them will be uneasy about the main trading and debt centre for the euro being outside their regulatory control. Plenty of them will calculate they should make life as hard for the UK as possible, not least because it will increase the chances of banks relocating to mainland Europe.

At the same time, many City banks, lobbyists and asset managers will be desperate to secure access to the single market, and they will be urging the government to make whatever concessions are necessary to secure it. We can expect to see lots of scare stories about the huge losses the UK economy will face if it doesn’t reach a deal. The trouble is, we could easily find our finance industry essentially regulated from Brussels forever. The City should instead back the UK’s negotiators to be robust and ready to walk away without a deal if they have to. Here’s why.

First, the strategy works well. The EU is not as powerful as it pretends to be, or as its more enthusiastic supporters claim. Sure, it is an important market for British financial firms. But it also depends on the City to raise the vast amounts of debt that eurozone governments and companies need. In the main negotiations, the EU became a lot more willing to compromise as soon as the British government made it clear it would walk away without a deal if it had to. The same will be true for financial services.

Europe is not the only game in town

Second, there are plenty of markets outside the EU where the City can grow instead. The eurozone accounts for 16% of the global economy, and with slower growth, and accelerating development in Asia and Africa, that is getting smaller all the time. The City has always done best as a global finance hub rather than as merely a domestic or regional one. It might well lose some business over the next few years to Paris, Frankfurt and Amsterdam. But it can more than make up for that by expanding across the rest of the world. As an offshore, lightly regulated hub straddling time zones, and connecting Europe to the rest of the world, it might well find it can do a lot better than it ever did inside the EU.

It is important that the City gets these negotiations right. The City is one of the most important sectors of the British economy. The last thing we need is to commit ourselves to an EU rule book that will be hostile to artificial intelligence, robot trading, app-based insurance and banking, and all the other new technologies that should turbocharge the finance industry over the next decade.

I haven't talked about Brexit here for a while. I mean, that’s probably not a terrible disappointment to any of us. But as the year-end approaches, I thought I’d quickly check in on it all. And believe it or not, I’ve got some good news.

I have no insight into what's going to happen as regards the current round of Brexit negotiations. My rule of thumb when it comes to second-guessing human beings is to look for the path of least resistance and minimum short-term pain, because on average, that's the path people will choose (note the focus on “short-term” – human beings discount future discomfort at an incredibly high rate, particularly if it's pain that will end up being inflicted on other people). The tricky bit then is to work out which path that is.

The path of least resistance on Brexit is hard to make out

For central banking, it's always been easy. It's a binary choice really – tighten monetary conditions or loosen them. And cutting interest rates and printing more money will almost always be the path of least pain, right up until inflation is getting us to the wheelbarrows-for-wallets stage. With politicians, it's a bit harder. They have far more influences operating on them, and their incentives are a bit different. There's what voters want. Then there's what they think voters want. Then there's what they think their voting base wants. Then there's what their party wants. Then there's what their pals want. Then there's what their ego wants. And you can throw in power, sex, money and legacy, in roughly that order, as an overlay on that little lot.

In my view, one of the smartest people writing about this just now is Helen Thomas of Blondemoney.co.uk. She makes the point I've tried to make above far more pithily: “The best political result can be far from what looks like the best economic result.” Even more importantly however, the key point is that Brexit is an ongoing process. The biggest risk, she argues, is a “fuzzy Brexit” – one where the negotiation process just keeps rolling along, with a series of “OK, we'll park that and hammer out the details later”-type agreements, with temporary compromises and ongoing returns to the table.

The point is that this process doesn’t end as such. Even if you get something approaching “no deal”, then all that really means is that a return to the table will be on the cards at some point in the future. And all the while bearing in mind that the political calculus for the individuals involved will keep changing over time, with "distance to the next election" perhaps the biggest issue for most of them.

The UK is cheap however you want to look at it

So the bad news for anyone hoping that Brexit will disappear from the news forever, is that you're set to be disappointed. Rumbling on, with the occasional flare-up, is likely to be the “new normal”. However, there is good news for investors – and that's that it doesn't matter. There are two main reasons for this.

The longer that this has gone on for, the longer that companies have had to prepare. As a result, they're much more ready for potential disruption scenarios. So you reach a kind of equilibrium level of assumed disruption. Expectations on all fronts have been lowered – as you can see from markets. So if things go even a bit better than expected, you’re nicely placed for a rebound.

Secondly, and more importantly, UK equities are one of the few genuinely cheap assets out there right now. Put it this way – unlike with the US, you don’t have to invoke “low interest rates” or “this time it’s different” arguments to justify valuations of UK stock markets at their current levels. UK stocks are just plain cheap. As Vitali Kalesnik of US asset manager Research Affiliates points out, based on the cyclically-adjusted price/earnings ratio (still one of our favourite valuation measures) that “UK equities are priced cheaper than emerging market equities”.

Of course, lots of people have compared the UK to an emerging market in recent years, but, while that’s a fun line that will get you fulsome “likes” in some quarters, it’s also basically stupid. Fundamentally, the positive about emerging markets is that their economies promise rapid growth and development. The negative is that property rights tend to be insecure. You can’t realistically say either of those things about Britain. Anyway – the point is that the UK is cheap, and while some of this is to do with Brexit, it’s also got a lot to do with “industry composition representing largely traditional sectors that have been left behind in terms of valuations.”

With value making a comeback; vaccinations against Covid-19 being rolled out (and thus lockdowns on borrowed time, despite the Christmas controversy currently occupying the front pages); and the potential for more Brexit clarity in the next few weeks, then as Kalesnik says, “The UK equity market has an unrivalled implied forward-looking return-to-risk ratio.” Put more simply, “in the current low-/negative-yielding environment, it is a very attractive asset class."

We've looked at a number of ways to invest in UK assets via funds and individual stocks over the last few months, and there are more ideas in our Christmas double issue, out next week. Subscribe now if you don't already and you can get your first six issues free.

With only three months left, and with the Covid-19 crisis still absorbing our leaders’ energies, the chances of a trade deal as our transitional agreement with the EU comes to an end seem more remote that ever. Britain appears to have reconciled itself to leaving without any kind of arrangement. Most of the EU is slowly coming to the same conclusion. The gulf between the two sides looks too wide to be bridged. The EU wants Britain to remain within its legal and regulatory control, while the UK wants to make its own laws, and set its own standards. Both sides would prefer not to do a deal than compromise on those principles.

Some much needed competition

That is reasonable. The British have rightly concluded that the cost of tariff-free access to the EU market is too high for the rather minimal benefits. Most of the tariffs are fairly minor, and can easily be absorbed by the exchange rate, and while there would be some benefits from eliminating them, that can more than be made up for by growing new industries free from European regulations. And, in truth, if it was thinking straight, the EU should see that it too has a lot to gain from a successful no-deal Brexit.

First, the UK would provide some much needed regulatory competition. To listen to the centralising bureaucrats in Brussels you might imagine that a close neighbour with a slightly different regulatory, legal and tax system is a threat. It would lead to “social dumping” (code for “making things a little cheaper than the person next door does”), hand power to unchecked corporations, and undermine their labour and environmental standards. But that is not true. Competition is a good thing, and that is just as true of tax and regulation as it is of anything else. A free-market neighbour would be a check on the centralising ambitions of Brussels, and a model for innovation, which is just what the EU’s economy needs. It would make it slightly harder for eurozone governments to raise taxes and impose new rules, and it would force them to think harder about which ones worked and which didn’t.

Second, a no-deal Brexit might well turn Britain into an offshore hub, with a deregulated, low-tax model. But would that really be such a terrible outcome? Much like Hong Kong for China, or Singapore for the rest of southeast Asia, a deregulated, freewheeling UK could funnel a lot of trade and investment into the rest of Europe while not being bound by its rules. Singapore and Hong Kong have done a lot to boost their whole regional economies. The UK could play the same role for the rest of Europe.

Finally, surely it is in everyone’s interests for the UK to be as successful as possible after it leaves the EU. The UK is one of the largest markets for the rest of Europe, so the richer we are, the more we will import, which means EU companies will be able to grow more quickly as well. At the same time, with no deal, and with regulatory divergence, it is inevitable that some companies will have to move operations to different countries to stay within the EU and preserve full access to the single market. Those countries will gain some extra jobs that wouldn’t exist if there were a trade deal.

Sure, there is a big downside to a successful no-deal outcome: it will show that leaving the EU can work. If the UK departs without any formal arrangement, and does so at least reasonably well, then it may well encourage a few other countries to wonder if they shouldn’t follow suit. To hardcore federalists in Brussels, that may be too high a price to pay, and they will remain determined that Brexit should be as catastrophic as possible. To everyone else, though, it should be clear that leaving without a deal should be hugely beneficial. The UK will be richer. It will be a conduit for investment into the rest of the EU. And it will discipline the EU’s mania for over-regulating and over-taxing its economy. The UK should start persuading the rest of Europe that an amicable no-deal exit is the best deal for both sides – and to concentrate on making an economic success of that.

We don’t yet know what Britain’s trade deal with the EU will look like once the transitional arrangement runs out at the end of this year. One thing is starting to become clear, however: Boris Johnson’s government, with a secure majority in Parliament, will refuse alignment with future EU rules and stick to that position, even if it means that a deal is not possible and we have to trade under WTO rules instead. Big business groups are not going to be happy about that, but it doesn’t make much sense for an economy the size of Britain’s to allow its regulations to be set permanently by an organisation it is not a member of. This creates an opportunity for investors.

The losers

The hit will be taken by any major manufacturing business with supply chains that stretch across Europe. The carmakers will be in trouble (although a few, such as Nissan, may be able to ramp up sales in the UK to make up for it). Rules of origin, tariffs and quotas will mean that logistics freeze up, just-in-time production systems have to be scrapped and tariffs of up to 10% may be faced in some markets. That is going to hurt. Car manufacturers are going to suffer, both in the UK and in Europe, and so will the parts suppliers and dealers who depend on car sales.

Chemicals and drugs makers might get hit and so might clothes, shoes and textiles manufacturers. And there may be losers in financial services if passporting rights for the City are lost as a result of failing to reach a deal: it won’t make a lot of difference to the banks, but fund managers and insurers may find themselves frozen out of lucrative European markets or forced to open units in Paris or Frankfurt.

The winners

The losers will do a lot of lobbying and make a lot of noise. But there will also be some big winners if we free ourselves from the rules that come out of Brussels. Such as? First, and most obviously, technology. Over the last decade the EU has pushed through ever-stricter controls on tech companies. It is still hitting them with a constant round of fines and restrictions – a potential ban on facial recognition, a hugely exciting new technology, is just the latest example. That may protect privacy, to some degree, but it also makes it harder for companies and entrepreneurs to innovate. The UK already has the leading tech hub in Europe. With lighter regulations, our tech firms can flourish, as can all the venture-capital houses that put money into them.

Next, finance. Sure, some of the big traditional asset managers and insurers may lose out. But the EU has also been imposing round after round of rules and regulations on finance. The City has always thrived as a global centre of innovation and excellence. From fintech, to cryptocurrencies, to crowd-funding, to financing emerging markets and new technologies, the smaller, nimbler finance firms will find business a lot easier if we set our own distinct rules from the EU.

Thirdly, retailers. True, there may be problems with supply chains. But shops will benefit hugely from being able to source the cheapest goods from around the world. We have been so used to EU quotas and tariffs – 16% on oranges, for example, or 8% on coffee, even though both are remarkably hard to grow in this country – that it will probably come as a surprise when we see how much cheaper products can be bought elsewhere. A round of price cuts may tempt people back into the shops again.

Finally, food production and agriculture. The industry has grown used to EU controls, but they never worked for the UK. We were stuck with a food industry hooked on subsidies and dominated by controls. And yet from lab-grown and substitute meats to vertical farms, agriculture is about to go through a technological revolution. The giant agri-businesses of France and Spain will oppose that fiercely, but freed from their lobbying the UK can pioneer those industries – which makes sense for a country that gave up on self-sufficiency decades ago. Farming will look very different with rules set in the UK, but it will also be a lot more profitable.

What changes are proposed to Britain's immigration system?

Like much of what the Johnson government has got planned, the broad outline is visible, but the detail is hazy. We know for sure that once the Brexit transition period is over (which the government says will be at the end of 2020) EU nationals will no longer have the automatic right to live and work in the UK. Freedom of movement will end. Instead, “Global Britain” will treat potential immigrants from all countries equally, deploying what the government calls an “Australian points-based system” to assess applicants. Although the government has now abandoned the Conservatives’ previous promises to bring net immigration below 100,000, it is clear that it wants the level to fall. “We are not going to fix on an arbitrary target,” said foreign secretary Dominic Raab during the election campaign. But “by exercising a points system you bring it down year-by-year”.

What is this points-based system?

Under the Australian system, foreigners applying for a work visa are assessed and awarded “points” based on various “economically relevant characteristics” such as education, language skills and work experience. Typically, an applicant picks a “skilled occupation” from a list, and needs to score a certain number of points to be accepted. Of course, that doesn’t necessarily bring immigration down: it depends how liberal or how restrictive you make your criteria. In the case of the UK, the stated goal of the system will be to attract lots of high-skilled workers, and workers in key shortage areas such as education and health, while deterring low-wage, lower-skilled workers – and gradually reducing overall net immigration. However, not everyone is convinced that such a system will work, or that it’s in the best interests of the UK.

Who’s sceptical?

The CBI for one. They and other business lobby groups worry that the Conservatives’ plans, under which the vast majority of migrants would need a job offer, could lead to skills shortages in key industries, such as construction. If you want to build houses, you don’t just need “the architects and designers”, says CBI director-general Carolyn Fairburn. “You need the carpenters, the electricians, the labourers. We need people to come and help us renew our economy. It’s not just the brightest and the best, it’s people at all skills across our economy that we need.” Even more awkwardly for the government, the Migration Advisory Committee (MAC) – an outside panel of experts tasked by government with analysing the issue and offering guidance in a report – is also sceptical. Launching its report last week, the MAC’s chairman, Professor Alan Manning, dismissed the idea of a “points-based system” as a mere “soundbite” – and advised the government to have a rethink.

What did the MAC report say?

It basically recommends a hybrid arrangement: a points-based system only for skilled workers coming to the UK without a job offer (in practice a minority), plus a minimum salary threshold for people who do have a job to come to. Currently, unless they’re applying for an “exceptional talent” visa (capped at 2,000 a year), would-be immigrants apply for a so-called Tier 2 general visa, which requires them to have a job offer paying at least £30,000 a year. The MAC recommends cutting that threshold to £25,600, making it easier (for example) for teachers, NHS workers and younger professionals to qualify. The government doesn’t have to accept any of this – and its response has been non-committal, simply re-iterating its existing commitment to a points-based system to be introduced in 2021.

What would the effect be?

According to the MAC’s analysis, the effects of its proposals compared with the current situation would mean lower overall immigration, lower economic growth and lower population growth – but a bit less pressure on public services and housing. Overall, Professor Manning thinks the changes would lead to “very small increases in GDP per capita and productivity, slightly improved public finances, slightly reduced pressure on the NHS”, schools and social housing, but slightly increased pressure on the already stretched social-care sector.

Does everyone agree with this analysis?

No. The lobby group Migration Watch UK, for example, which campaigns for lower immigration, argues that failing to put an explicit cap on skilled migrants – and scrapping the promise to cut net inward migration to tens of thousands – are likely to mean a post-Brexit surge in the numbers coming to the UK. “The electorate, including those who don’t usually vote Conservative, will expect Boris Johnson to keep his word on reducing immigration,” said the group’s chairman, Alp Mehmet. What’s likely to happen in practice, says The Economist, is that the government will accept most of the MAC’s recommendations for a hybrid model, but call it a “points-based system” anyway.

What do the public think?

What’s most striking is the extent to which immigration has fallen down the list of voters’ concerns since the 2016 referendum, says Sunder Katwala of the British Future think tank. Where once it topped electors’ lists of priorities, it now ranks a lowly ninth, according to a new ICM poll. That poll found that 79% of voters want the number of high-skilled EU workers to stay the same or increase. That proportion is 65% for seasonal EU workers, and 77% for high-skilled non-EU workers. Only a slim majority (51%) want to cut low-skilled EU immigration, with 31% thinking it should remain at the current rate. In short, the UK public is pretty relaxed, wanting a “balanced” system of immigration that secures its benefits while managing its pressures. Brexit is looking “less like it will make a decisive turn towards restricting immigration”, says Jonathan Portes in The Guardian. “Instead, consistent with the more benign aspects of our history, it may signal a different form of openness.”

Now that we’ve left the EU, the talks can begin. The talks formally begin in March, and the transition period (during which nothing changes, even although the UK has left the EU) ends at the close of this year. But today, both sides set out their initial stall.

For the UK, prime minister Boris Johnson called for a Canada-style free trade deal, or else the UK will revert to the Withdrawal Agreement (which is basically World Trade Organisation rules). The choice, said the prime minister, “is emphatically not ‘deal or no deal’. The question is whether we agree a trading relationship with the EU comparable to Canada’s – or more like Australia’s. In either case, I have no doubt that Britain will prosper mightily.”

A Canada-style deal would imply most tariffs on goods being eliminated. The flow of services is more restricted, but the UK would aim to have a better deal on this front. A Canada-style deal would also imply less need to abide by EU regulation. An Australia-style deal – well Australia doesn’t really have a deal with the EU yet, so it’s arguably just another name for “no deal” or “WTO deal”.

On the behalf of the EU, chief negotiator Michel Barnier said that there was a “highly ambitious trade deal” on the table, but that in effect, the more access Britain wants, the more it will have to abide by EU rules. Put very simply, as Helen Thomas of Blonde Money puts it, “the UK position is zero tariffs, but also zero alignment” whereas "the EU position is [that] zero tariffs requires full alignment.”

In short, it’s going to be a tricky negotiation, as you’d expect. Fisheries and financial services are among the first issues to be tackled, and while the former is much less important to the UK economy than the latter, it’s quite possible that there will be a lot more headlines about fish than about funds.

A lot of pre-Brexit discussion has gone on around the question of who holds the most cards in these debates, with the EU normally being depicted as the most powerful player. That smacks of a simplistic "win/lose" mentality rather than the understanding that trade deals are meant to be “win/win” – where both parties get something out of it rather than trying to beat each other down.

But one interesting illustration that the traffic may not be all one way is that motoring group Nissan has – according to the FT, although the company denies it – come up with a contingency plan which puts the UK’s Sunderland plant front and centre in its strategy. In the event of a Brexit deal that results in tariffs being imposed on car exports, the contingency plan apparently involves Nissan shutting its factories in France and Barcelona, in order to “double down” on its UK plant, which employs 6,000 staff and is the biggest such site in the UK.

The idea is that being made in the UK would give Nissan a massive advantage over its Europe- and US-based rivals (such as Ford and VW), enabling it to grow its market share from the current 4% to as much as 20%. According to the FT, the drop in demand for diesel cars has whacked demand for Nissan’s vehicles in mainland Europe in any case. Meanwhile, Peugeot has indicated that it would boost its own presence in the UK in a “hard" Brexit scenario.

Clearly a lot of this falls under the category of “who knows how this could all pan out?” But the FT is not known for being an ardently pro-Brexit publication and if nothing else, it does show that things aren’t as clear cut as some might have argued before the UK withdrew.

We’ll keep you up to date as the talks evolve. Oh, and do subscribe to MoneyWeek magazine for more in-depth analysis – you can get your first 12 issues for £12 right now.

So today’s the big day. Tonight, at 11pm, Britain leaves the European Union. What does it mean for your money? The short answer (and the short-term answer) is: nothing.

The UK might be leaving the EU, but we move straight into a transition period during which the rules all stay the same. We now have 11 months (until the end of the year) to come to an agreement, or else the UK leaves on plain old World Trade Organisation (WTO) rules.

So is this just yet another fake deadline, like all the other fake deadlines over the last three or so years? No. This one is very different. The main difference boils down to clarity.

The one big difference between yesterday and tomorrow

I wrote about this more in the current issue of MoneyWeek magazine (you can subscribe here). But what’s really changed now is that everyone knows that Britain is leaving. After tonight, there is no going back (not without reapplying at least). There is no stopping the process – it’ll already have happened.

It's absolutely fair to say that we still don’t know for sure exactly how the details will pan out. There’s a lot of negotiating to do and a lot of that will depend on what the UK prioritises, what the EU prioritises, and what approach the US takes on trade over the year ahead (which will almost certainly be dictated by Donald Trump’s electioneering, and therefore probably not high up the agenda).

However, businesses (and individuals, and government departments) both in the UK and in the EU now know that Brexit is definitely happening. So businesses know they have to plan ahead, whether they were for or against Brexit. And politicians and negotiators can focus their energies on doing a deal, rather than trying to scupper one.

In turn, that implies that Britain has probably already seen its Brexit-related nadir. The pound might not soar this year. The chatter over “no deal”, and battles over fisheries and finance between now and the end of June promise to generate lots of headlines that could have sterling yo-yoing along. But it’s probably seen the worst.

The UK stockmarket has lagged other markets badly. Fund managers might still be wary, particularly as “growth” remains the paradigm, whereas the UK and the FTSE 100 in particular are arguably more along the lines of “value” investments (big dividends, for a start). But with uncertainty less pronounced, we’re likely to see the valuation gap close.

Oh, and there is an almost immediate bonus coming our way. From 6 April this year, National Insurance contributions will be cut. Chancellor Sajid Javid has confirmed that the threshold at which we start paying NICS will rise to £9,500. That will save the average employee about £100 a year.

This of course has nothing to do with Brexit directly. It’s more a statement of intent. Still, it’s nice to see at least some taxes dropping rather than rising.

Don’t imagine that everything will go right

Please note – none of this is to say that things can only get better. The global economy looks fragile. China was already wobbly, and coronavirus is an unknown quantity. The monetary system remains extremely out of whack, what with negative interest rates, money printing and the cult of the central bank still firmly in place. There are a lot of things that can go pear-shaped.

The point, though, is that if things go pear-shaped, it’s most likely not going to be a direct result of Brexit. Also, because the UK has lagged the rest of the world during this period (in terms of stockmarket valuation specifically), there’s probably good scope for the British market to play catch-up over the year ahead.

So in relative terms at least, the UK looks a decent bet this year. You’ll be able to find out more about the sorts of areas we find most promising – and how the twists and turns of negotiating might throw up both threats and opportunities – in current and upcoming issues of MoneyWeek magazine. If you’re not already a subscriber, get your first 12 issues for £12 here.

This article was first published in MoneyWeek magazine issue no 984 on 31 January 2020. To make sure you don't miss out in future, sign up to MoneyWeek here and get your first six issues free.

Despite the thumping majority delivered to Boris Johnson just a few weeks ago, he knows that he cannot afford to rest on his laurels. Within hours of his victory he was quick to thank those who “may only have lent us your vote”; where “your hand may have quivered over the ballot paper before you put your cross in the Conservative box”. He now has up to five years to convince these people to stick with him. How will he do it?

To start with, he must, as he promised, “Get Brexit Done”. The easy part will be achieved when the UK officially exits the European Union (EU) at 11pm on the day this magazine hits your doormat. But it won’t look like we have left, given that the implementation period preserves the status quo for the following 11 months. To convince voters that he has delivered, Johnson will need to show that the UK has taken back control of its borders, its money and its institutions of government. This will be tricky, to say the least. Not only because he now enters a complex negotiating period with the EU – whereby compromise will be part of the inevitable conclusion – but also because this next phase will be weighed down by tortuous details and legal jargon. If voters felt the Irish Backstop was complicated, let’s see how they feel about how rules of origin affect just-in-time supply management chains. Your eyes are no doubt glazing over even as you read that sentence.

This Brexit fatigue is exactly what the PM wants. He has reportedly forbidden ministers from using “the B-word” and won’t mind a jot if it moves from the front pages to the business pages of the newspapers. The less it’s spoken about, the more voters will move on. Instead, he will drive forward the narrative of an open Britain, moving onwards and upwards as it embraces new trade agreements and a fresh domestic economic strategy. The Budget will become the B-word that matters. On 11 March, Chancellor Sajid Javid will be able to deliver a radically new fiscal direction for the country. His predecessor Philip Hammond declared an end to the age of austerity; Javid can introduce a new era of infrastructure investment. Johnson loves a big project. With interest rates low and (some) fiscal headroom, he can build new bridges or train tracks. He can be bold. His budget will sail through, not only thanks to that huge majority, but also because it will still be Jeremy Corbyn at the opposite despatch box. Labour’s new leader won’t take over until April. There is no opposition to anything Johnson wants to do.

The tricky balancing act facing Johnson

Except, of course, when it comes to those pesky negotiations with the EU over our future relationship. Alignment to EU rules would be less economically disruptive in the short term; but without divergence, Johnson will struggle to make the key argument that the UK has indeed taken back control. Can he deliver enough of a fiscal boost to buffer the economy from a disruptive departure at the end of this year? Will the Bank of England play its part with monetary stimulus?

Even if he gets an economic boost, it must be one that helps those voters who lent him their votes. Those citizens, who are based in areas which have struggled in recent times, might not be too happy if, for example, a huge employer in the area decides to up sticks and quit the UK because it has diverged too far from EU rules. We might all glaze over at the mention of legal jargon – but nothing hits home like job losses.

The framing of the debate

And so the final part of Johnson’s political strategy falls to his right-hand man, arch-campaigner, Dominic Cummings. Economic pain can be taken if it’s in the pursuit of an ideological goal. Just look at people who voted for Scottish independence – their decision was motivated by their sense of identity, rather than by GDP statistics. Even if Johnson can’t keep the economy buoyant, he can still keep voters onside if they feel he’s acting as their champion.

Last year, we had “The People vs Parliament”. Johnson needs a new bogeyman for the next battle. Step forward the EU. If it can be shown that they are the aggressors, attempting to bully Britain into unacceptable compromises, then Johnson can once again stand up for the common man. If he can’t get economic growth, then he can use this outrage to once again power him to victory at the ballot box.

This is why the Withdrawal Agreement Bill contained a line to the effect that “no Minister of the Crown will accept an extension to the 31 December 2020 deadline for a free trade agreement”. Under the terms of the agreement, both the UK and EU must mutually consent to extend this deadline by 1 July 2020. But now, it’s written into UK law that the government can’t do that. If the EU seeks to change that, the headlines will shriek that “the EU are trying to tell us what to do even after we’ve left!” and so on. So the plan for Johnson is clear: Get Brexit Done, get growth, and if all else fails, get Britain angry. If he can achieve that, he will be back as prime minister in the next election.

For more from Helen, visit blondemoney.co.uk

This article was first published in MoneyWeek magazine issue no 984 on 31 January 2020. to make sure you don't miss out in future, sign up to MoneyWeek here and get your first six issues free.

So that’s it. It’s only taken one referendum, two general elections and three prime ministers to get here. But Britain is finally leaving the European Union (EU). What happens now? The immediate answer is: nothing. The “Withdrawal Agreement” comes into force, which effectively keeps everything as it is, but sets the stage for 11 months of talks to decide on a future deal governing trade and the wider UK-EU relationship by the end of the year. Elsewhere, Helen Thomas of Blonde Money looks at how those talks are likely to unfold. Here I want to look at the implications for investors.

What’s changed?

While it may look as though nothing has changed, there are in fact major differences between where we are now and the various “cliff edges” that we’ve been perched on over the past three-and-a-half years. For one, businesses now know for sure that “remain” is no longer an option. Even if the UK were to change its mind tomorrow, it would need to reapply to be a member. So even with months (perhaps years) of talks ahead of us, the end destination is far clearer than it was. That’s a big step forward for businesses. They may not yet know exactly what Brexit will look like, but they know for sure that they’d better prepare for it, and they also have an explicit deadline. It’s also a big step forward politically. For as long as the UK itself was divided as to the way forward, there was no reason for the EU to engage seriously with talks. Why bother, when the country might change its mind at any point? Now that Britain has left, it makes sense to hammer out a deal that works for both parties.

That’s not to say it will be easy. Debates over financial services and fisheries will probably hog the headlines during the first half of the year. And when you throw efforts to achieve a US trade deal into the mix – and how that might interact or conflict with any EU deal – it becomes even more complicated. Even if a deal is agreed by the end of the year, it’s likely to be a bare-bones effort that pushes more detailed negotiations further into the future.

In terms of what to look out for, Paul Dales of Capital Economics reckons that if both sides can agree on “what to talk about and in what order” by the start of March, “it would be a good sign”. If they can’t even manage that, “it would be an omen that the going is likely to be heavy for the rest of the time”. But however it pans out, the point is, it’s happening. So what are the implications for investors?

UK government bonds (gilts) are probably the least-affected British asset class. For now at least, yields on most developed-world government bonds follow the general direction of global interest rates and that’s likely to remain the case, even if the government does unveil a decent-sized spending package under Chancellor Sajid Javid at the budget in March.

Rather than via gilt markets, the way global investors have expressed their concerns about Brexit has been by selling off (or buying back into) sterling. That’s unlikely to change this year. The pound is off its post-Brexit lows, but as Jonas Goltermann of Capital Economics points out, 2020 promises to be a bumpy, headline-driven year, with sterling being particularly vulnerable to fears that the UK could end up with no explicit trade deal at all at the end of the year. So while we think it’s a good idea to increase your portfolio’s exposure to the UK (particularly if you are currently “underweight” relative to where you were before the Brexit vote), that doesn’t mean selling all of your overseas exposure and betting it all on Britain.

The most obvious bet on a Brexit bounce

The most obvious investment beneficiary of extra clarity on Brexit is the UK equity market. Despite its recent burst higher, Britain is still cheap relative both to its own historical valuations and to other global markets. As Karen Ward, chief market strategist for EMEA at JP Morgan Asset Management points out, “it is the attractive dividend yield offered by UK stocks that is likely to prove too tempting for international investors”, who are still hungry for yield against a backdrop of low interest rates. As a result, even in a year in which equities are unlikely to shine as brightly as they did in 2019, says Goltermann, “we think that a gradual unwinding of the ‘Brexit discount’ on UK equities means that they will fare better than most”. Indeed, “if the forward price-to-earnings ratio for UK equities returned to where it was in mid-2016, it would raise the level of the index by about 25%”.

So what should you invest in? We’ve suggested several UK-focused investment trusts in the past and the sector did very well last year. But with catch-up potential remaining, options include BlackRock Throgmorton (LSE: THRG), which trades on a small premium to net asset value (the value of the underlying portfolio), Schroder UK Mid Cap (LSE: SCP), on a discount of just under 10%, and Montanaro UK Smaller Companies (LSE: MTU) on a discount of 7%.

Each week, a professional investor tells us where he'd put his money. This week: Guy Anderson of the Mercantile Investment Trust highlights three British favourites.

Against the backdrop of heightened political risk in the UK and abroad, combined with a notable slowdown in global economic growth, seeing beyond the uncertainty can be challenging. However, because we focus on the attributes of individual businesses we can still unearth companies that are both fundamentally robust and have the potential to be long-term winners, even if the immediate geopolitical and economic climate is tough. We are always poised to take advantage of strategic opportunities as they arise, and the current market environment is generating opportunities to buy potential long-term winners at attractive prices.

The Mercantile Investment Trust invests in a diversified portfolio of UK companies outside the FTSE 100 index with significant scope for growth. The UK is home to both domestically-focused businesses as well as those that are more global in nature. Within the first category, valuations have been depressed ever since the June 2016 EU referendum result but we still believe there will be long-term winners once the Brexit fog lifts.

Grafton Group: beyond DIY

Grafton Group (LSE: GFTU), the builders' merchant, is a company that has been performing strongly despite the uncertainty unsettling its market. Weekend DIY is being replaced by "do it for me" and by focusing on this trend through Selco, its trade-only builders' warehouse format, Grafton has been able to outperform a competitive market. The company has ambitious growth plans while competitors are struggling with outdated IT systems and unwieldy real-estate footprints. Having reported admirable growth (earnings have risen by an annual 15% over the past three years) in a tough market, we expect the company to emerge in an even stronger position once once there is more clarity over Brexit.

Games Workshop: going global

While the past five years have proved to be very tough for high street retailers, an unlikely resurgence in table-top fantasy war games has been a boon for one of the key names in this sector, Games Workshop (LSE: GAW). The manufacturer and retailer of Warhammer 40k has seen remarkable growth since the appointment of a new chief executive in January 2015 with the shares returning more than 1,200%, making it the strongest performer in the FTSE 250 over that period. We still see further value as this exporter embarks on an international multi-channel expansion. With more than 40 years of experience, the company is rich with intellectual property and finding a growing number of avenues through which it can monetise this.

SSP: captive consumers

Retail spending has also held up well within captive locations such as airports and railway stations. SSP (LSE: SSPG) is a best-in-class food and beverage concession operator at these travel hubs. The company has been able to display strong growth in sales, both from its existing store base and by expanding internationally, while margins have been improving following several years of effective cost-cutting. The share price has been weaker this year following the news that Kate Swann was to end her successful period as chief executive, but we feel these fears are overdone and she is leaving the company in a strong position for further growth.

What's ailing the UK property market?

House price growth across the country has slowed to just 0.7%, according to the most recent Nationwide release. That's a drop in real (after-inflation) terms.

Meanwhile, transaction levels have risen slightly in the last year 64,340 new mortgages were approved for house purchases in March, just 430 more than in the same month in 2018 but they remain decidedly sluggish.

What dread apparition has rattled Britain's favourite asset class? Could it be possible that you can go wrong with bricks'n'mortar?

"Brexit" is the go-to excuse for those in the property business, much as "unseasonal weather" is the go-to excuse for troubled fashion retailers.

But the reality is that the problems in the UK housing market are a lot bigger than mere Brexit...

The increasing weakness of the UK housing market

Earlier this year, London estate agent Foxtons issued yet another set of grim results. The group abolished its dividend as profits were wiped down from £6.5m in 2017 (which was itself half what it was in 2016) to a loss of over £17m in 2018. The big hit came from the what the chairman, Gary Watts, called the "prolonged downturn" in the London property sales market to "record lows" (although lettings business revenue rose by 1%).

London has certainly been the hardest hit part of the UK housing market. At the high end, discounts on asking prices are at their highest levels since the financial crisis, according to LonRes.

However, according to the most recent survey by the Royal Institution of Chartered Surveyors (Rics), activity is slowing across the country.

You can put it down to Brexit; you can put it down to political uncertainty. And both of those might be affecting the higher end of the market, in that the globally mobile super-rich are becoming less willing to buy luxury property in an era where populist governments might be tempted to tax non-portable assets.

But there's a much more specific reason for house prices to be struggling, and it's one that isn't going to change any time soon. It's the fact that one of the biggest and most powerful purchasing forces in the UK market of the past decade is being squeezed out of the market.

Between changes to buy-to-let taxation and higher levels of stamp duty, becoming a landlord is no longer seen as the sure route to riches it once was. And that is having a big effect on the UK property market.

Landlords are going to keep feeling the squeeze

The additional rate of stamp duty on those buying second homes is one factor putting off would-be landlords. But more important is that the ability for higher-rate taxpayers to offset their mortgage interest payments against their tax bills is being withdrawn in stages. The squeeze began in 2017, and it will be entirely withdrawn by April 2020.

The upshot is that it'll be far harder for landlords to make the sums add up. It's also become harder to secure a mortgage as a buy-to-let landlord, partly as a result of this and partly as a result of generally tighter mortgage lending rules. The figures make it clear that this is already having an effect.

In 2017, according to estate agency Countrywide, landlords bought 12.5% of homes sold in the UK a nine-year low compared to 14.7% in 2016, and 16.3% in 2015. The biggest drop was in London. Meanwhile, the proportion of landlords buying in cash has been rising sharply.

The abolition of tax relief isn't the only issue facing landlords. Buy-to-let mortgages are typically interest-only loans. That is great news when interest rates are this low your monthly payments amount to buttons because you aren't repaying any of the original capital.

However, it means you feel the pain of rising interest rates much more acutely than anyone with a repayment mortgage: because your entire payment is made up of interest, your bills will go up proportionately more when rates rise.

In short, if rates do rise even a little between now and 2020 (which seems very likely at the moment), then landlords are going to be squeezed even harder, between falling tax relief and rising rates.

While some landlords have already woken up to this, human nature means that many others will only realise just how much their property is costing them when they fill in their tax returns in years to come. For some, the resulting figures will come as a nasty shock. (The nice thing is that the government can expect a capital gains tax bonanza, according to accountancy group RSM, which may partly account for the current relative health of the public finances).

The only realistic conclusion is that we'll see a bigger exodus from the sector and more than likely, the end of the era of the "accidental-turned-permanent landlord". And the point is, this is not going to change any time soon. Soft Brexit, hard Brexit or no Brexit, this is a structural change.

A house-price crash seems unlikely but a boom seems even less likely

The good news is that this leaves the field open to potential owner-occupiers. The tricky bit is getting from where we are now to a point where those first-time buyers can actually afford to buy the property.

You see, landlords always had more buying power than first-time buyers. Not only were they generally already property owners and both older and more established, they also enjoyed big tax advantages.

With that gone, competition on the demand side of the property market has fallen. Meanwhile, on the supply side, at the margins, some landlords will be squeezed out of the market some may even be forced sellers.

What will happen to house prices? As long as interest rates stay relatively low (and they could go up a bit from here and probably still not do too much damage), then the idea of a huge house-price crash still seems unlikely.

But equally, there's little reason to expect prices to rise. Whichever government runs the country for the next ten years or so, it's clear that increasing housing supply is a major policy goal now. Interest rates can't get any lower, so it's hard to see how credit conditions can get any easier. And physical property is going to remain a tempting target for taxation.

In market terms, most of the risk is to the downside. And just to be clear, we'd heartily welcome lower house prices and a more sensible UK housing market. Let's just hope the adjustment happens gently enough for our financial system to cope.

This article was first published in March 2018 and has been updated to reflect the latest position in the housing market

Preparations have been made, the costs largely sunk already. Deal or no deal makes little difference.

Rolls-Royce is stockpiling parts for its factories. Premier Foods says it is spending £10m on contingency plans in case supplies of food start to run out. EasyJet has set up subsidiaries in continental Europe to make sure it is still allowed to fly its planes into Spain and Italy, and many of the City's banks and fund managers have quietly opened up branch offices in Paris and Frankfurt to keep within the European Union's single market. With a vote in parliament looming on our exit from the EU, and with the result completely unpredictable possibly up until the very last moment, companies are understandably readying themselves for the possibility we will crash out on 29 March next year with no deal agreed between the UK and its former partners.

In the run-up to the vote, we have already heard warnings about the cost to business and the economy of not taking the deal the prime minister has negotiated because the only other alternative is nothing at all and that would impose horrendous costs on the economy and business. But there is a point that is usually overlooked. In fact, businesses have already made plenty of preparations for "no deal". And, most importantly, those preparations are largely one-off costs. While leaving the EU will undoubtedly do some damage to the British economy, and cost some money, by now the hit has largely been taken. After Christmas it won't make much difference whether we leave with a deal or not.

What happens when parliament votes?

When parliament votes on Theresa May's Brexit deal on 11 December the outcome will be completely unpredictable. The deal might be voted through. It might take multiple votes stretching into the new year. It might be passed by a new prime minister. There might be a second referendum, or a general election, or we might carry on bickering until March and just leave with parliament still unable to reach a settled conclusion. Indeed, maybe everyone will just keel over from exhaustion, rewind a couple of years, and cancel the whole thing. Just about anything could happen.

Against that backdrop, and the massive uncertainty it creates, it is only sensible companies should start preparing for no deal. If they have suppliers in Europe as many do then they need to make sure goods will keep flowing into the shops and warehouses. If they have supply chains linked into Europe, they need to maintain them, and if they are exporters they have to check they can comply with whatever rules may be imposed once we are no longer inside the EU.

Of course, it is important not to exaggerate the impact. About 16% of the UK economy is accounted for by imports and exports, and about half that trade is with Europe. So roughly 8% of the economy will feel some impact, but the other 92% won't really notice any difference at all whatever happens over Brexit. Even so, tens of thousands of companies will be affected.

And yet, like any economic shock, the impact will also diminish over time. In fact, there are two types of cost to Brexit. There are the tariffs that might or might not be imposed on trade. And then there are the compliance costs involved in coming out of the single market and customs union. The tariffs might well be permanent, although we have no way of knowing at this stage. It would be very odd if the UK and EU couldn't at some stage negotiate a free-trade deal, given the closeness of the two territories. But who knows? Even so, tariffs will be fairly modest, because World Trade Organisation rules don't allow for huge ones, and will be largely compensated for by the exchange rate.

The money's already been spent

Then there are the compliance costs. Leaving without a deal certainly creates a lot of expense in new logistics systems, coping with paperwork, dealing with tariffs, creating satellite offices and so on. That is all going to involve time and money that might have been better spent elsewhere. But the important point is this: those are largely sunk costs. Take an asset manager that decides it has to set up a branch office in Frankfurt, for example. It will take a hit. But it only has to be done once. Or a manufacturer who has to put in some extra administrative systems to cope with the paperwork of bringing in parts from Germany, or who has to appoint a sales representative in France to stay within the single market. It all involves a certain amount of expense. But once you've spent the money preparing for no-deal you don't need to spend it again.

Much the same is true of lost investment. There will be some global firms that will decide to skip an investment in the UK because we are leaving the EU. But those decisions have already been taken, and that investment has already been lost. There won't be anyone in the world who gets up on1 April, even if it is April Fool's Day, and suddenly discovers that Britain is no longer in the EU. Damage will have been done, but it can't be undone now, whether we agree a deal with Brussels or not.

In truth, if we get into February with no deal in place, it won't make much difference to the economy whether we leave with one or not. Business will have made its preparations. There will be disruption and expense, but we will already have suffered that. Two years ago, the costs of no deal were huge. A lot had to be done to prepare for our exit, and the potential for damage was substantial. After Christmas, the costs will be fairly minimal and if parliament realises that, it makes leaving with no agreement a lot more likely.

So that's it. After more than two years of talks, Prime Minister Theresa May has finally agreed a draft withdrawal agreement with the European Union (EU). The UK is on its way out of the EU. Brexit is assured. Or is it? We look at concerns about the deal which stretches to 585 pages of impenetrable legalese in more detail in the box below, but in short, no-one is especially happy with it.

May herself looks set to remain in post. At the time of writing, it looks as if the prime minister will not face a vote of confidence, let alone lose it. Most Conservative MPs realise there is no obvious replacement certainly no-one who could unite the party and none of them wants to risk another early general election.

However, her chances of getting her withdrawal agreement through parliament in its present form appear non-existent she simply doesn't have the support (and that's assuming the EU even signs it off this Sunday, which is by no means assured, given that Spain wants more clarity on Gibraltar while several other countries want to discuss fishing rights). If the deal is knocked back when parliament votes on it in early December, there are basically four options left.

Deal, no deal, or yet more elections

Two of the options involve returning to the country for a second opinion. One is to hold another general election, the other is to hold a second referendum. Both are fraught with difficulty. They would take time to organise (not least agreeing the question for the referendum), and they would require the backing of MPs. The first point is probably surmountable. Under the terms of Article 50, the UK is set to leave the EU regardless of where negotiations are on 29 March next year. But while it would require the assent of all of the other 27 member states, the EU would probably agree to extend this deadline, as either a general election or a second referendum could result in Britain simply voting to "remain", which the EU would ultimately prefer.

However the second point is much tougher. For another general election to take place, two-thirds of MPs need to back it. That, as Samuel Tombs of Pantheon Economics notes, is a gamble that most Tory MPs will be unwilling to take, particularly as there's no obvious outcome in which they stand to gain anything. A second referendum might appeal if there is no sign of any sort of agreement in parliament, but it really would be a sign of weakness on the part of the government and of course, if the public voted anything other than "remain", then parliament would end up facing the same set of problems again.

So what does that leave? There are really only two options in the likely event of rejection. Either talks continue, or Britain leaves without agreeing a deal. Pantheon is optimistic on the first option, which amounts to a standard dollop of political face-saving EU fudge. "Ample time remains for the political balance to shift back in the prime minister's favour." So May is rejected, injecting a sense of artificial panic and urgency into the talks, helped perhaps by a panicky slide in sterling. In the end, perhaps after several Greek crisis-style "last-ditch" summits, she returns again from Brussels with "a superficially refreshed withdrawal agreement that enables some MPs to abandon their original opposition, or to switch to abstaining from the vote". As a result, "while the probability of a no-deal Brexit probably has risen it remains far from the most likely scenario". Vicky Redwood at Capital Economics, on the other hand, is less convinced, believing that "it is hard to see the EU giving further ground," particularly on the most contentious part of the deal, the "indefinite backstop" (see box on page 10).

Is an "orderly no-deal" Brexit on the cards?

So what happens if we can't agree, there's no extension to Article 50, and Britain leaves the EU with no deal on the table? There are a range of short-term scenarios, reckons Capital Economics (the long-term scenarios are almost impossible to calculate as they depend entirely on what direction future governments take upon leaving the EU). All would have some sort of "negative effect in the short term", but the scale depends on exactly how a "no deal" unfolds. At one end of the spectrum, you have an "orderly" Brexit in which relations between Britain and the EU "remain cordial" despite the lack of a formal trading agreement. As a result, you could have widespread co-operation on big administrative issues such as "aviation, custom checks and visas", with disruption kept to a minimum. In this case, "any short-term economic damage would be limited".

What if it's "disorderly"? This would probably result in "outright recession" and a hit to GDP of as much as 3%, reckons Capital Economics. The biggest hurdle in the short term is not so much trade tariffs, which average out at around 4%. The real issue is "non-tariff barriers including the administrative burden of customs controls". Even although only roughly 3% of non-EU trade is currently subject to documentary checks, and less than 1% to physical inspection, border checks would still take longer, which "could cause supply chains to collapse, production of some goods or services to be halted and confidence to plummet". Yet "any period of disruption would be short-lived". The weak pound would hit disposable incomes, but make British exports cheaper. Meanwhile, there would be official support the chancellor would increase public spending, and the Bank of England would likely cut interest rates (although don't expect it to admit that up front).

That said, "any rebound in economic growth would be more muted if the domestic political situation was still in turmoil, or if a Labour government had got in, introducing anti-business and tax-raising measures". If markets really believe that the UK is on the brink of a genuine crisis, then the obvious "tell" would be if sterling and gilts (UK government debt) both weaken at the same time. For now, the pound falls but gilt prices rise when a disorderly Brexit threatens, because gilts still benefit from the "flight to safety" drive. But if investors start to expect "a full-blown sterling crisis" that would force the Bank of England to raise interest rates, then "they would be as keen to ditch gilts as currency traders are to sell pounds". For now, "Britain's political crisis has yet to become a financial one". Could a Jeremy Corbyn government be the thing to tilt the balance? Possibly, but anything short of that seems to be within the market's capacity to cope with. One way or another, both Capital Economics and Pantheon reckon that "no deal" would send sterling down to somewhere between $1.12 and $1.20, although the question of how long it stays there would depend on how orderly or disorderly the deal was.

Whatever the outcome, Britain is cheap

If a deal is done, sterling will almost certainly rally, potentially quite vigorously. That would normally be bad news for UK stocks, but given that surveys suggest that fund managers are extremely "underweight" UK assets right now, they would probably return once the uncertainty has passed. Domestically-focused stocks would probably do particularly well, whereas dollar earners might struggle as the pound rallied. But even in the case of "no deal", the reality is that British stocks look cheap. As Jim Wood-Smith of Hawksmoor Investment Management points out, "UK assets (or shares) are already effectively on sale'. A small number of valuations are verging on the ludicrous 5% dividend yields are now commonplace, while there are several shares where we believe the dividend is safe and the yield is 7% or more."

That doesn't mean that stocks can't go lower from here it's certainly true that we may not have seen the point of maximum pessimism on UK stocks as yet, and you can argue that the current slide in US stocks bodes ill for global markets in general.

However, we really are at the point where you're being paid handsomely to wait. The FTSE All-Share, according to Bloomberg, is now trading on a dividend yield of around 4.4%, which is getting on for the highest it's been since the financial crisis. One investment trust worth looking at in this respect is the contrarian-minded Temple Bar Investment Trust (LSE: TMPL), with big holdings in the (still widely detested) UK banks, which trades on a discount of around 5%. On the smaller-cap side, one interesting option is Montanaro UK Smaller Companies investment trust (LSE: MTU) which trades on a discount of nearly 12% and currently yields 5.1% (paid out of capital). Top holdings include Entertainment One and Hilton Food.

Does May's deal deliver?

By far the most contentious aspect of the withdrawal agreement are the arrangements for deciding on a future relationship with the EU. This hinges around the border between Northern Ireland and Ireland. If Britain and the EU can't agree on a trade relationship within the "transition period" (likely by the end of 2022), the "backstop" kicks in. This prevents a "hard" customs border by aligning Northern Ireland with the EU single market, and keeping the rest of the UK within the customs union. What worries some is that this might end up being a permanent state of affairs, as both the EU and the UK have to agree on it ending, and the UK cannot unilaterally walk away.

MoneyWeek backed Brexit mainly to prevent further moves towards ever-closer union. We want to maintain our trade links with the EU (we like free trade) and have no major qualms about freedom of movement so we are far from "hard" Brexiteers. Yet the risk here seems to be that the UK could possibly be locked into a disadvantageous, ongoing Brexit process indefinitely. Hopefully, there will be more definitive clarity on this before the Commons vote but if it is indeed the case, it's clearly not an acceptable deal.

A no-deal Brexit could scupper payouts for retirees in Europe. Should you worry?

Ano-deal Brexit could result in tens of thousands of expat Britons being denied access to their pensions. This is the worrying warning from some in the financial services industry and in theory, it is certainly possible. However, it's worth being aware that, even in the worst-case scenario, there would be at least one way around the problem.

An alarming impasse

Huw Evans, director-general of the Association of British Insurers (ABI) trade body, has warned MPs that, without a Brexit deal, it would be illegal for many pension providers to pay pension benefits to policyholders living in other European Union (EU) countries. But despite the attention the claim has attracted recently, it's not new the ABI has been pointing this out since Brexit talks began.

The problem is that when the UK leaves the EU in March 2019, the "passporting" arrangements that currently enable UK-based financial services companies to operate in other EU countries will no longer apply. If the system is not replaced, these companies will have to stop all their EU operations including paying out benefits to pensionpolicyholders.

The impasse applies to most private-sector pension providers, from insurance companies to fund managers, as well as to the many occupational pension schemes that are now run by insurers. Employers should not be affected in the same way they should be able to go on paying occupational pension benefits if they run their own schemes, just as they'll be able to carry on paying staff living in different EU countries.

This is pretty alarming if you're living in the EU and receiving a private pension, or planning to move there in retirement. The exact number of people affected is difficult to quantify, but official figures show there are 247,000 British citizens aged 65 or over living in other EU nations.

But it's not all bad news. For a start, this is very much a worst-case scenario it's not too late for the UK and the EU to do a deal. Both sides appear to be moving towards an equivalence regime, which would offer many of the same rights as passporting. Also, many financial-services companies are already taking steps to protect themselves should the worst happen, most often by setting up subsidiaries inside the EU which would be able to trade. These businesses could be used to pay Britons' pensions where necessary.

In short, while Brexit could theoretically cut people off from their pensions, in practice there will be solutions for most.

A way around the worst-case scenario

As a last resort, Britons stuck in Europe with no access to their pensions could choose to open a UK bank account and have their benefits paid into that. They could then transfer the money into their bank account in their country of residence.

However, while this would solve one problem for expats, it would also bring new problems. Not least, many UK banks would be reluctant to open accounts on behalf of Britons who no longer have a clear connection with the UK such as owning a home here. In addition, bank-transfer charges and exchange-rate volatility could substantially reduce the value of your pension benefits.

Expats who do go down this road would be wise to shop around for the best deal on UK banking products.It's worth noting that new entrants to the market, including financial technology businesses that offer specialist money-transfer products (such as Revolut and TransferWise), may offer better value than conventional bank accounts.

No thaw for frozen state benefits

While the government continues to work to resolve the issue of how private pensions will be paid to expats in the EU after Brexit (see above), ministers insist that payments of state benefits will not be affected, whether there's a deal or not. However, the declining value of sterling has directed fresh attention towards the plight of another group of British pensioners whose state pensions are frozen in time.

Britain is one of only a handful of countries around the world that pays different levels of state pension to expats depending on where they live, even if they have made exactly the same tax and national-insurance contributions. Britons now living in a European Economic Area (EEA) country, or one with which the UK has a reciprocal social-security agreement, including the US, see their state pension go up each year by the same amount as pensioners still resident in the UK. But those who have retired to other countries, including Australia and Canada, get no increases at all; their state pension is paid permanently at the level due in the year in which they reached state pension age.

Lobby groups have been campaigning for reform for years, and calls for change have grown louder over the past two years as the value of the pound has fallen, further reducing the value of UK state pensions in many countries. So far, however, ministers have refused to change policy. In 2016, the government estimated that the cost of boosting payments to current levels ("uprating") would be more than £500m a year, with the cost of a partial uprating increasing pensions from now on put at around £37m.

It's just a year until we finally shrug off the Brussels shackles. Here are some last-minute preparations.

It is hard to know how the day itself will play out. Nigel Farage and Jacob Rees-Mogg will no doubt be letting off fireworks and organising victory parades. Nick Clegg and Tony Blair will be wearing black and organising a national day of mourning. But on 29 March 2019, one year away, we will finally have left the EU. So what should we be doing in the months that remain? Here are five ideas.

1. Brace for no deal

The hardliners in Brussels have retreated a little in the last couple of months. There is more room for compromise on both sides. Even so, we may still need to walk away. That means we have to have the infrastructure in place to cope. We will need customs officers, a plan for border controls, and regulatory agencies ready to go. It might just be a contingency. But that doesn't mean it shouldn't be in place.

2. Settle on a trade policy

Do we want to be an open economy, buying what we need from the rest of the world regardless of how willing they are to open their markets to us, or do we want to impose tariffs insofar as World Trade Organisation rules allow, as the US and EU do? The row over where our passports are printed suggests there is a lot of raw emotion behind protectionism. But that needs to be defeated if the UK is to prosper because free trade will make us richer.

3. Shut that door or don't

We need to decide what to do about immigration. We won't have to keep the doors open any more. But that doesn't mean we should shut them, even if many Leave supporters think it does. The UK can carry on with high levels of immigration and, given how much our economy depends on it, probably should. But we need to make up our minds one way or another. Many businesses, especially in struggling areas such as retailing and restaurants, now rely on a plentiful supply of cheap workers. We should let them know whether that is going to continue.

4. Plan for transition

For all the scare stories, it doesn't make much difference to most of the economy whether we are in the EU or not. Exports only make up 13% of the economy, and less than half of that total is sold into Europe. A few sectors will be affected, however. The car industry could take a big hit if there are tariffs imposed between the EU and Britain. So could aerospace and pharmaceuticals. They are all important to the British economy. Money and help should be made available.

5. Hug a farmer

For all the flags and grand talk, the EU is in many ways still just a farm-subsidy board. The Common Agriculture Policy still consumes 40% of its budget, and dominates its tariffs and trade agreements. Once we are out, we will have control over our own agriculture for the first time in a generation. But what do we want? We should use the money available to protect the environment, prioritising areas of natural beauty. At the same time, we should import the cheapest food we can from anywhere in the world that wants to sell it to us. If our farmers can't compete, by all means pay them to protect the land. But there is no point in paying them to produce food that isn't economic.

Who's getting what

Northamptonshire county council, which declared itself bankrupt last month, paid acting chief executive Damon Lawrenson more than £1,000 a day. It also forked out nearly £1m over five years to DDL Consultancy, owned by Lawrenson. He has now left "by mutual consent".

The Ultimate Fighting Championship (UFC), a mixed martial arts tournament, is making a bid for a promotional multi-fight deal with boxer Anthony Joshua (pictured), which could earn the Londoner $500m and make him the richest British boxer of all time, says The Daily Telegraph.

Mark Wilson, boss of insurance giant Aviva, raked in £4.3m in pay in 2017 after enjoying a 2.5% salary hike and picking up nearly £3m in bonuses and shares. Wilson landed a total of £4.5m in 2016. The pay details come just a week after Aviva's climbdown over its proposal to cancel £450m of preference shares (see page 16).

The former boss of Micro Focus, Chris Hsu, pocketed £8.4m just months before he was forced to resign last week. Hsu became CEO of the firm last September when it paid US technology firm Hewlett Packard Enterprise (HPE) £6.8bn for the software division he had been running.

Nice work if you can get it

PricewaterhouseCoopers (PwC) one of the "Big Four" accountancy firms has been accused by the work and pensions committee of MPs of "milking the Carillion cow dry" after making £500,000 a day from its work on the liquidation of the construction group. In the first eight weeks of the liquidation, PwC charged £20.4m. The company's fees have since come down to a weekly bill of £1.4m as the number of staff working on the liquidation has fallen. A calculation shows that PwC is now charging out its time at £12,500 per person per week, an estimate not denied by the firm, reports The Times. The company will receive the money in priority to other creditors, who are thought unlikely to recover more than a token sum from the collapsed group. PwC had previously received £21m from advising the company, the pension fund and the government before the collapse.

Speaking to individual business leaders and entrepreneurs can be extremely useful when looking at how Brexit is affecting the private sector. However, trade associations can provide a broader overview of what's going on, and the biggest concerns, simply because they interact with so many different companies.

The biggest British trade association is the Confederation of British Industry (CBI). Its 1,500 direct members include most large companies, and another 188,500 firms are covered through associations that are affiliated to the CBI. Together these firms employ seven million people roughly a third of the entire private sector.

Alpesh Paleja is the CBI's principal economist. As part of his job, Paleja pays close attention to trends in business confidence and investment. Immediately after the EU referendum there was a plunge in business confidence. The good news is that the CBI's surveys suggest that "confidence has partially recovered over the past year". However, Paleja warns that this recovery is far from complete, and is extremely fragile. While "small projects are now back on the table" and "those agreed before the vote are still going ahead", "uncertainty around Brexit "is definitely hitting big longer term decisions". A recent CBI survey said that 40% of firms say Brexit has affected their business decisions, virtually all negatively.

Similarly, Paleja has mixed views about what the future has in store for the UK economy. On the one hand, he is relatively positive about Britain's growth prospects in the next few months, with strong evidence of "near term strength". However, he also thinks that in the longer term, uncertainty will lead to a softening of growth. He also thinks that it is "difficult to say at this stage" whether the rest of Europe will use Brexit as an opportunity to try to persuade firms to relocate from the UK, though relations with counterparts in the EU-27 remain "quite constructive" at present.

These mixed views are reflected in the CBI's official growth forecast, published last month. It predicted overall growth of 1.6% for this year, falling to 1.4% in 2018. This is an upward revision to the projections of 1.3% and 1.1% that were made earlier this year, but the expected quarterly growth rate of 0.3% for the foreseeable future is half the level of the rate of expansion between 2013 and 2016. Low wage growth and higher inflation will also hit many households.

According to Paleja, both the CBI and the business leaders that he has talked to want the government to focus on keeping close economic relations with the EU. In practical terms this means that they "want Britain to remain in the single market and customs union over the transition period", even if such a transition period takes longer than expected. Any permanent trade deal should also focus on "retaining barrier-free trade" as much as possible, letting firms take part in EU funded project, and immigration policy that "is as close to the status quo as possible".

Immigration is shaping up to be a major issue for British business freedom of movement allows them "ready access to a supply of skilled and unskilled labour", especially in the context of the wider UK skills gap. Conversations with individual CEOs and managing directors have also revealed that the uncertainty is causing many EU migrants to return home, leading to a "brain drain". Paleja emphasises that concern about changes to immigration policies is "broad based" while manufacturing and agriculture stand to be "badly hit", "even professional and financial services firms are worried about the implications of future restrictions".

"The position of EU nationals in the UK needs to be properly clarified", he says. At the end of last month, the prime minister announced measures designed to protect their rights, including the idea that EU citizens who have lived in the UK for the past five years could get settled status, entitling them to permanent healthcare and employments rights. However, while this is "a step in the right direction", Paleja warns that "a great degree of uncertainty still remains" and that these commitments will "need to be translated into detailed proposals, followed by action" because "the clock is ticking".

A few weeks ago we covered the legal nuances of alternative arrangements to financial passporting. This week we talk to another legal expert about the wider picture. Thom Brooks is professor oflaw and government at Durham University, and head of Durham Law School. He advised the Labour Party at the last election, and played a key in persuading the Electoral Commission to adopt the "Remain" / "Leave" wording on the EU Referendum (instead of the "Yes" / "No" originally proposed). His particular specialism is on immigration law, clearly a hot topic, both during the campaign and now.

Shortly after the referendum Professor Brooks made headlines when he declared that "Brexit will never happen". Of course, he emphasises that he didn't mean this literally Britain will still give up its membership. However, he notes that many of the promises that the Leave campaign made (such as the £350m a week for the NHS) won't be fulfilled. He also notes that even the Conservatives want to preserve some of the institutional arrangements we currently benefit from.

The most obvious of these are those governing counter-terrorism and security. At the moment EU membership allows us to receive preferential access to intelligence, including material that even the United States is not allowed to see. Another agreement that the UK would want to see preserved is the Dublin agreement on asylum and immigration. This means that refugees have to claim asylum in the first safe country they arrive in, rather than being able to wait until they reach the UK.

He also thinks that, "there is definitely going to be a transitional period". He notes that even hard-Brexiteers, such as Iain Duncan-Smith and David Davis, have accepted that it will take years for a final trade deal to be hashed out. While Theresa May still insists that things can be done within the two years allowed by Article 50, Brooks says "the Canada deal took a lot of time to agree", so both sides could be in for a long wait. Indeed, he thinks that even agreeing the general principles will take a year, with the "nuts and bolts" of any deal taking much longer.

One big theme that we've detected from business leaders, including those who supported Brexit or think that it could benefit them, is that they are worried about the status of their EU national staff. Brooks agrees that this is a "massive issue". In theory, the rest of the EU is happy to agree a deal where both sides guarantee the status of each other's nationals. However, while "the government has the power to end the ambiguity right now" Theresa May is currently stalling, so the issue lingers on unnecessarily, in his view.

Another issue is the issue of the Common Travel Area the right of Irish citizens to move freely between the UK and Ireland without having to pass through border controls. Sadly, Brooks thinks that "there will have to be changes" to how such arrangements work. The problem is May's insistence on leaving the customs union, which puts a "severe strain" on the arrangement. (This is because if there aren't any border checks, the Irish border could easily become a route for smuggled goods from non-EU countries that Britain has a trade deal with).

Brooks also notes that the EU knows how important the CTA is to the UK and could use it as a bargaining chip, if it was so minded. After all, Brooks points out that "they can justifiably say that the whole problem has been created by Britain's voluntary decision to leave the single market and the customs union". It goes without saying that a hard border between the two countries "would certainly not be beneficial for either the UK or Ireland".

So what model does Brooks support? Give the Conservatives' stated objectives he would suggest that they try for a Swiss style agreement, which is slightly removed from the single market, but preserves many of its benefits. Such a model is suited to the increasing amount of regional and local devolution. Labour's manifesto implies that they would be more open to a Norwegian style agreement, which gives almost complete access to the single market (though even Norway chooses to be outside the customs union).

Brooks emphasises that even under the current arrangements it is possible to restrict freedom of movement to a certain degree. For instance it is possible for Britain to deport those who have been unemployed for greater than a set period of time and are not self-supporting. However, if the government really wanted to crack down on people who were abusing the system, it would have to either bring in ID cards or get GPs and landlords to function as part of the immigration system.

In terms of whether the "divorce bill" that the EU is demanding from Britain is serious or just a bluff, Brooks thinks that it "is a bit of both". However, he is clear that EU membership is not like being a member of a video club or Netflix, "where you can just turn in your card and walk away". Instead, a better analogy would be partnership in a firm. In return for "a seat on the board" the UK "accepted the principle of collective liability", and so will have to pay something. However, the exact amount will eventually end up being negotiated down.

It isn't often that I agree with George Soros, but on the EU I mostly do. We both think it is dysfunctional; that it is facing an existential crisis of which Brexit is a symptom rather than a cause; and that there are two possible outcomes from here either it will collapse or it will "transform itself into an organisation that other countries like Britain will want to join".

To do the latter (which would be great!) it needs to abandon the idea of ever closer union and move to a loose system of union with lots of different membership models. It needs to remember, as Soros told the Brussels Economic Forum this week, that "the European Union was meant to be a voluntary association of like-minded states that were willing to surrender part of their sovereignty for the common good".

However, after the financial crisis the EU became something else: "a creditor/debtor relationship where the debtor countries couldn't meet their obligations and the creditor countries dictated the terms that the debtors had to meet." The net result was "neither voluntary nor equal."

This has to be addressed, as do the various problems of free movement, democratic distance and country-inappropriate regulation across the EU. We need, says Soros, not ever closer union or even a multi-speed EU (which suggests anyway that the final destination is ever closer union) but a multi-track Europe one that gives its members genuine choices and allows them to retain genuine sovereignty.

And as Soros notes, the UK is an exceptionally well functioning parliamentary democracy. If the EU fully reforms (not likely but possible!) there is no reason why we shouldn't vote to join the new version at some point in the future using (hopefully) one of many membership models.

An awful lot of the people who voted Brexit (me included) would like to be in some sort of union with the EU just not the one currently on offer.

How much do we have to pay to get out of the EU unscathed? The answer will depend on Theresa May's (possibly dodgy) negotiation skills, but I think we can all assume that there will be a financial price for keeping cheap access to the single market without accepting all the strictures that usually go with it.

My guess is that the sum will be smaller than most think: any institution faced with losing 14% of its budget to someone who has said they are happy to walk is surely willing to play nice.

But whatever we have to pay, how do we pay?

A neat answer comes in a letter to the Financial Times today. How about we create and hand over a "hypothecated long term (50 years) or perpetual sovereign bond?" suggests Oxford University's Dr Peter Johnson.

The bond would be guaranteed by the UK government but held by the ECB and its interest rate (payable to the ECB) would be equal to the real rate of growth of UK GNP.

That would work for everyone: it would spread the debt over a long time, while allowing the EU to get some cash on an annual basis.

But crucially it would also give the EU reason to want the UK to do well: they would not want our GNP to decline, or worse, go negative (hence requiring interest repayments). Win win?

Should UK regions be able to offer region-specific work permits if free movement from the EU goes after Brexit?

This is a really interesting question particularly for areas in the UK where the population is ageing faster than elsewhere (Scotland for example) or for those that just think they need a constant supply of cheap labour to keep the show on the road (London, where EU nationals make up 25% of the workforce, for example).

"Yes" is also a perfectly good answer. In the Times today, Mark Littlewood of the Ibnsitute of Economic Affairs suggests that "devolved authorities should be able to issue their own work permits." Get one for London and it would come with an L on it. Get one for Scotland and it would come with an S on it. You'd then be entitled to live and work in those regions regardless of your nationality.

There's precedent for this in Australia and in Quebec, as Michael Glackin points out in the Scottish Sunday Times, and the Centre for Economics and Business Research points out in a new report.

In Australia, regional governments can directly recruit workers on a points system and in Quebec there is a devolved policy that allows the region to recruit skilled migrants in any sector. There is more on this here.

Overall it seems like a perfectly reasonable way of dealing with a lot of the things Scotland and London are worried about around Brexit. It also works in the generally successful economies of Canada and Australia. So it is well worth Theresa May thinking about properly.

I went on Channel 4 News last night to talk about the future of tech companies in a post-Brexit Britain. The premise of the piece was that Brexit was bad for our tech companies and that as a result they were all more than likely to up sticks and move to Berlin leaving what is now London's Silicon Roundabout to return to being the Old Street wasteland it was when MoneyWeek's cheap offices were located there a decade ago.

My job on the news was to have a go at explaining why this might not happen. But the question should, of course have been the other way around. Not why on earth would it not happen, but why on earth would it happen?

Let's think about why tech firms came to the UK in the first place. Most will tell you that it is about language (if you have lots of different nationalities working for you, you need a common language that works for the most possible people); the services infrastructure (legal and financial); the clustering effect (its great to be with other businesses similar to yours this is a legacy of UK success); the light touch regulation (the UK has been very supportive of fintech, for example, and the SEIS and tax credits for R&D schemes are popular); the ease of hiring and firing; the friendly tax environment; and of course the access to high-quality international employees.

Brexit doesn't change any of these things. The only one that it could change is the last (access to a wide range of quality employees). But even the most intense of immigration control advocates never mentioned barring high quality employees from entering the UK and of course there is already a system in place for hiring foreign workers via the Tech City Initiative.

That's not quite the same as fully free movement of labour. But we can put in place faster, better, wider systems that allow tech workers to come from the EU and the rest of the world if it turns out that free movement within the EU goes with Brexit.

Finally, it is worth noting that the UK's tech firms won't be leaving a single market in the same way as, say, our car manufacturers. While there are hopes that there will one day be a coherent digital single market in the EU, there isn't one yet (there are 28 separate ones with 28 separate sets of contract law).

Some companies will start up in Berlin or Copenhagen rather than in the UK as those cities double their efforts to attract them, and some will be tempted to deal with any uncertainty they feel by moving (though as all small company owners will know, moving is an uncertain business in itself).

But given why most came in the first place, it is hard (once you have removed the emotional response to Brexit) to see why they would leave now.

PS If anything is goingto destroy London's tech industry it is much more likely to be house prices than Brexit. Take out international migrants, and 66,000 people in their 30s left London in 2015. "We are seeing a major migration of London's housing wealth" says Lucian Cook of Savills.

I saw this sign on a visit to Culross on Sunday (if you are ever in Fife, do visit it's lovely). It irritated me, so I photographed it and posted it on Twitter with the comment "Dodgy Brexit maths".

The pushback was pretty quick. But the interesting bit was the part of the sign everyone took as being the point. I was subjected to endless comments from followers explaining to me that 33.3% would indeed represent 50% of 66.6%. But the bit that bothered me wasn't that (I'm OK with maths), it was the idea that your "usable salaries are being cut by more than 33.3%" as a result of Brexit.

So keen are a large group of my Twitter followers to think that Brexit has made them poorer that they don't appear to consider this to be dodgy maths, but it looks that way to me.

We can only assume that it somehow refers to the pound and to the inflation we can expect as a result of its fall against most currencies since 23 June. But how this year's weakness in sterling is translated into a 33.3% fall in usable salaries is anyone's guess (I suppose I should have stopped in to ask, but it was a Sunday and my kids aren't much interested in Brexit).

A not quite 20% fall in the trade-weighted value of the pound does not translate into an equal and opposite percentage rise in prices (not every single input of every single product in the UK is produced abroad). At the same time, there has so far been no discernable effect on GDP (rising at an annual rate of 2.3% in the third quarter) or employment (the Nissan plant in Sunderland is good to go) as a result of the UK's intention to leave the EU. Nor has there been one on house prices except for in prime central London (although of course if house prices were to fall, that would surely represent a rise in some people's "usable income").

There has, as the evidence-orientated man at the Office for National Statistics says, so far been "little evidence of a pronounced effect in the immediate aftermath of the vote". All the things predicted by "Project Fear" may yet happen in the UK (early days, etc) but right now I am less bothered by that possibility than by the fact that an awful lot of people seem to be convinced they already have.

Earlier today I retweeted something a table called "finance capitals of the world in numbers" without looking at it properly. I wish I had I wouldn't have given it the time if I had noticed what nonsense it was.

The thing was based on Deutsche Bank research and designed presumably to show how fragile London's position at the top of the global money tree really is. But look at the numbers in it and it makes no sense at all. It tells us for example that there are 2.2 million employees working in financial services in Frankfurt and a whopping six million in New York.

But the total population of Frankfurt is only 800,000. And the total population of New York is only 8.5 million (1.6 million in Manhattan). I'm prepared to assume that both cities get a lot of commuters in to work in financial services, but still the numbers are pushing it. The total population of New York State is 19.75 million. Do we really believe that going on 30% of them make their way to Manhattan every day to push money back and forth? And are we to believe that every man woman and child in Frankfurt has two jobs in the financial sector? Really not.

The truth is that there isn't a city in Europe's time zone that has the financial services critical mass that London has. When I chaired a panel at the Sibos conference in Geneva a few weeks ago I asked my panel (and audience) all senior finance people which European city would take over from London in the next few decades. They all said there is no such city.

Other cities might take bits and bobs of London's business and that may affect the number of new jobs that come to London over the next decade or so. But it works for big firms to concentrate their staff in one location and there is nowhere else that can offer the full infrastructure (from education to services) that a global financial centre requires.

My panel were all worried about Brexit (big time). But it wasn't London that they saw as being the place that would take the hit.

One of the oddest things said to me in the post Brexit meltdown of the Remainers was that everything was Facebook's fault. Who could have known, asked my friend (on Facebook) that so many people were planning on voting leave when none of his Facebook friends were, and when the news fed to him by Facebook algorithims suggested that everyone with any sense was planning to vote Remain. This bemused me. Didn't he read a newspaper? Listen to the Today programme? Watch the news of an evening? Apparently not.

Instead, all his information came one way or another from social media. And that turned out to be a problem. It isn't one that has just been identified. Back in 2011, Eli Pariser, co-founder of Upworthy, described my friend's situation as being in a "filter bubble".

Algorithms such as Facebook are designed to give us more of what it thinks we want such that, as Katherine Viner, editor of The Guardian puts it, "the version of the world we encounter every day in our own personal stream has been invisibly curated to reinforce our pre-existing beliefs." That means that those who rely on it "are less likely to be exposed to information that challenges us or our world view and less likely to encounter facts that disprove false information that others have shared".

You might ask (as John Stepek does) if this really marks much of a difference from the past: after all, people have always liked to live in their own filter bubbles (reading the Telegraph or the Guardian but not both, and spending the majority of their time with people who agree with them already). I think it probably does. Facebook has 1.6 billion users a large number of whom really do seem to get all their information from it. With Google, it really does dominate the online world.

Before social media, people might have read just one paper (or perhaps none) but at least most papers, while biased in one direction or another, do host a range of voices and bits and bobs of information that you wouldn't come across (or be asked to interpret) otherwise.

There wasn't one that only ran Remain articles or only ran Leave articles (even the FT gave me the space to explain why I planned to vote Leave). The same goes for the radio and TV news.

The good news is that it is very easy for most people to move out of their filter bubble and perhaps our referendum might encourage some to do it. Sarah Sands wrote in the Evening Standard yesterday that she had recently met a young artist who "had fearfully altered his social media profile to engage with those outside London, particularly Brexiters". I reckon he would do just as well to read a newspaper. Or two.

We've been talking about how much we disapprove of EC president Jean-Claude Juncker in the MoneyWeek office for a while now. For us, he pretty much sums up everything we see as wrong with the EU (and not all of us voted leave by the way).

Sometimes he is too flexible: refusing to enforce austerity rules in Spain and Portugal in defiance of the Growth and Stability Pact and cosying up to Russia when the EU is supposed to be imposing sanctions on it, for example.

Sometimes he is oddly inflexible: refusing to discuss any possible changes to EU policy that might have kept the UK in the EU and demanding that we invoke article 50 immediately, despite the fact that we have no legal obligation to do so.

He has also proved utterly hopeless at either dealing with any of the crises (in Greece, on the borders, in the UK) that have hit the EU in the last decade or creating any unity of purpose in his attempts to deal with them.

We are pleased, then, to see that one of the side effects of Brexit is a growing agreement on this. The Times ran an editorial today headed "Juncker must go" in which the paper pointed out that his "election" was not endorsed by UK politicians and that he as "shown himself unfit to hold the job or even provide coherent solutions to the continent's gathering problems." He has no mandate to behave like an executive president "but he behaves like one", in the full knowledge that it is all but impossible to force him out of office.

People still ask me endlessly if I am sorry that I voted to leave the EU on 23 June. I'm not. And the more I look atJuncker's behaviour and at how the structure of the EU allows it,the less sorry I am.

There is much talk in Scotland about how the SNP administration will deal with the result of the EU referendum Nicola Sturgeon is hinting heavily at trying to get Westminster to agree to a second independence referendum.

Sources all around are hinting heavily that she's saying that to keep things calm, but won't actually be going through with it. Most oddly of all, she has been suggesting that Scotland might have a go at somehow having the best of everything (or the worst of everything depends how you look at it) by staying both in the EU and the UK.

That's a tempting proposition for the Scots after all, it is what most say they voted for in the last independence referendum (although, given that the EU referendum was already on the table, they would have known there was a risk they wouldn't get it). Unfortunately it just isn't possible.

The European Commission has made it very clear that the "part of the member state would not itself be a sovereign state", and that it "would never have been a formal member of the EU as a sovereign state, so it could be argued that it cannot therefore remain' in the EU if the member state itself withdraws".

So there you have it. Scotland can't be part of both unions if the UK is out of the EU. And it can't vote for independence before the UK leaves the EU and get itself in that way. The only way into the EU before Brexit, then, would be to have a referendum, find a way to fudge all the hard questions on currency (the pound is definitely not an option now) and borders, and then manage to complete both the separation deal with the UK and the accession deal with the EU during the time in which the EU is negotiating the UK exit under Article 50.

All possible, of course, but I suspect even Nicola Sturgeon might find it all a bit rushed. To say nothing of a bit risky.

I wrote a few weeks before the referendum that voting for Brexit was not a sure fire way to get Brexit.

No one took that particularly seriously. And even after the vote, when I said the same thing on a BBC radio programme, the other panellists (all politicians) shook their heads sadly and the audience tittered at my stupidity. Today, however, finding a way to make sure that Brexit means anything but Brexit is all the rage.

There are hopes that Nicola Sturgeon will somehow veto the whole thing. She can't EU membership is a not devolved issue but that's unlikely to be enough to stop her saying she can and having a go.

There is the idea that if the current UK Parliament delays invoking Article 50 long enough it will never have to do it at all. Parliament could, for example, pass a motion calling on the prime minister not to invoke Article 50; that would certainly delay matters. And, of course, the shape of any withdrawal deal, as Peter Warburton of Economic Perspectives points out, has to be approved by Parliament (it would be a treaty) and they can therefore reject anything that doesn't have the kind of integration in it that they want. That wouldn't be popular with an electorate under the impression the referendum was somehow binding on parliament (it isn't) but it's perfectly possible.

There is talk of a second referendum to take into account the fact that buyer's remorse is being reported among Leave voters. The fact that this doesn't actually exist is seen as by the by (see this ComRes poll for the Sunday Mirror which makes it clear that a net 92% of Leave voters are happy with the result and a mere 1% say they are "fairly unhappy ").

And finally there is the FT's idea that we have another general election; that one party stands on a "think again" platform; or better still that a "new centrist pro European party" is created to shake things up. That could either allow the new parliament to just ignore the referendum altogether or to use the excuse for another referendum on the matter. It is far from fanciful, says the FT "to imagine that the next two years or so will see the complete recasting of the nation's politics."

So there you have it. Brexit? The country might have voted for it, but actually getting the government (we do still have one by the way) to deliver it will be a much bigger challenge all round.

This isn't by the way all bad the vote was very close and the very substantial minority has to be taken into account, too. So a compromise deal (rather than a new referendum or a drive to ignore the result) might well be the best way out.

This piece by Dan Hannan on aiming for a new "associate status" within the EU might work, as would a bumped up membership of EFTA as discussed before (and again in the magazine subscribers will get this week). Note that the top concern of those who voted Leave was not immigration but sovereignty and democracy.

There have been so many strange arguments rolling around this referendum that is has been hard to keep up. But the one that I have found the weirdest of all is that it is perfectly reasonable to vote remain purely on the basis that you don't much like Nigel Farage, Michael Gove and Boris Johnson.

Take this from Ben Chu (who I usually think is great) in The Independentyesterday. A vote to remain he says is "a ballot against Gove and Johnson's repulsive politics". This seems to me to me a total waste of a vote.

The question isn't do you like the politicians who are promoting leave or remain best. Neither is it do you prefer the political stance of those who are promoting leave or remain best. The question is do you think that over the long term the UK is better off in or out of the EU?

It's a long-term question not a short-term question, so who is promoting which side should make no difference to an intelligent person capable of using the internet to look up facts. We have no idea who will be the next PM. You can vote out in the perfectly reasonable expectation that the post Brexit PM will be an MP who was voted in.

Cameron may not resign he says he won't. And even if he does, why would you think that Boris would end up the next PM? The choosing of a party leader from inside the Conservative party isn't done on the basis of who might or might not have supported which side in a non-binding advisory referendum.

It is done by securing nominations from sitting MPs (the majority of whom are remainers). If there are more than two nominations, Tory MPs (majority remainers just to remind you) have a ballot on them. The top two then go to the wider party to be voted on. There is no obvious reason for either of those to be Gove or Johnson.

Johnson would be a lousy PM (there is general agreement among remainers and leavers on this one), Gove doesn't seem much into the idea, and anyway one assumes that the party will want to attempt to heal the rifts of the last few months with a middle-way leader one who has been quieter than expected during the referendum campaigns, perhaps (Theresa May being the obvious one here).

It's also worth noting that it is pretty easy to get rid of an unpopular PM in our incredibly durable democracy: a mere 15% of Conservative MPs would be needed to write a letter of no confidence, and that would be that.

Finally, it is worth noting that the next General Election isn't that far away (it is on 7 May 2020). So it isn't long before we all get a chance to vote on a new government anyway. If Boris is PM (can't see it myself but who knows) and it isn't going well, he won't be PM any more on 8 May 2020.

There are lots of excellent reasons to vote remain (I can't think of them right now but I know other people can) and lots of excellent reasons to vote leave. None of them have anything to do with which middle-aged male MP you think you think like most or you think has been the most horrid over the last six months. Because whoever he is, he won't be around for much longer. Really.

Chu responded to me telling him this on Twitter by saying that Leave's "appalling behaviour" has been "very relevant" in his decision about how to vote. I think he's massively missing the point.

What would the global effect of Brexit be? Entirely uninteresting it seems. In her column in the Washington Post yesterday, Catherine Rampell asked Moody's Analytics to model the result on the US economy for her. As youcan see from the resulting chart below, nothing much happens in the US.

The lines for GDP with and without it separate slightly in the near term but move comfortably back together by 2020. No suggestion of much in the way of upheaval there (despite the fact that the headline refers to Brexit as a "terrible economic shock").

Things might be worse for countries inside the EU, however. Look at the papers earlier in the week and it looks like the worst affected could be Germany. We are Germany's third largest export partner with sales to the UK from Germany accounting for around 3% of the country's GDP. If there isn't a quick and generous trade deal that, say the Munich based Ifo Institute for Economic Research, could cut German long-term economic growth by 3%.

The IMF is on the same page: it predicts terrible things for the UK on Brexit but also reckons that any countries with close trade and finance links with the UK would be hit. To that list they add Ireland, Malta, Cyprus, Luxembourg, the Netherlands and Belgium. #

Breakingviews.com also notes that Brexit might end up being a pain for Spain: some of its biggest companies have made big bets in the UK (think Santander, Iberdrola and Ferrovial). "It is unlikely that any EU economies would gain from the UK's exit."

Standard & Poor's agrees. It will, it says, be worst for Ireland which is the most susceptible "to any trade and migratory aftershocks" from a decision from the UK to leave. It's worth thinking about why Brexit makes no odds to the US we haven't a trade deal with them anyway so what difference? Then it's worth thinking about why it matters to likes of Germany because we do have a trade deal with them already.

This is simple stuff making a simple point: the single market matters to the rest of the EU just as much as it does to the UK (arguably rather more). So a post Brexit deal will, I think be fast and pretty straightforward. It isn't in anyone's interests for it not to be.

That might not be something that the scaremongers on all this can bring themselves to grasp (they want it to be way more complicated) but it is something that S&P point out in its report on the matter: Brexit misery for Ireland they say, only happens "in the unlikely event that an excited UK would not reach new terms on trade access to the EU after its departure."

Assuming everyone behaves sensibly we'll be in EFTA before we know it, and financially at least Brexit will turn out to be a total non-event.

What's the right model for a post Brexit UK to follow? If we do vote out this will be discussed for several years to come. But the good news is that there are several perfectly good paths for us to follow.

There's full Brexit which would leave us with full control over everything from agriculture to justice and immigration, but dependent on international rules to trade. This, contrary to popular belief, is a perfectly good option for the UK. Plenty of countries outside the single market trade very successfully inside it and there is no reason we shouldn't either.

Norman Lamont looks at this in the Daily Telegraph. One of his key and points is this: the cash we pay into the EU every year comes to the equivalent of about 7% of the value of our exports to the EU. We are effectively paying a 7% tariff to avoid what would otherwise be a 3% tariff at the moment. Which seems a bit silly. Not being in the single market at all really wouldn't be all bad.

Next up, however, there is the obvious and less tricky option of being inside the European EA and the European Free Trade Area (EFTA). Norway, Iceland, Switzerland and Liechtenstein are members (Switzerland is the only one which is in EFTA but not the EEA, but it has a bilateral agreement with the EU which gives a similar result). Iceland's banking crisis aside, all are pretty successful economies.

There's a good explanation of why it could work for us from Phil Hendren writing on medium.com.

It's a simple argument. Being in it would mean that we followed all the rules of the single market as they are now in order to have access to it, and that we make choices about all new laws if we want access to that bit of the market we implement them. If we don't, we don't.

However, we also "regain or cement control" over policy areas such as crime and punishment, foreign policy, defence, international development, agriculture, fisheries, justice, areas of social policy unrelated to the single market. Crucially, we could also regain the ability, as Norway does, to make our own trade deals outside of the EU (the EU is really lousy at making trade deals).

Below is a simple chart from Roland Smith (@WhiteWednesday) on Twitter which runs through the differences between being in the EU and the EEA, which to my mind at least makes it look reasonably attractive. The objections are the usual ones.

First, we would have no say in the rule making. But we have no say in the rule making anywhere else we trade anyway "for example when the EU trades into the USA it follows American rules which it had no say in" and of course we don't get that much of a say at the moment anyway.

And second that we would still have to pay to be in. We would. But as Hendren points out, it's a different kind of paying: not a full contribution to the EU budget but a fee for access to the single market. Think of it like a golf club: when you pay green fees "you never hear anyone say you're contributing to the budget of the Golf course with no say over how they spend it!' yet that is what an EFTA relationship is really. Instead of paying tariffs on everything we export into the market, we pay a flat fee per year and play as much golf as we like." There is also a contribution to reduce "social and economic disparities in Europe" under the EEA, but nonetheless, the final cost should be much lower than EU membership.

There is, of course, also the matter of the free movement of people: EFTA/EEA membership would mean the four freedoms remain. This might be a deal breaker for some. But given the upsides we aren't sure it should be and there is always the chance that the UK could strike a new/different EEA style deal anyway.

Finally, it is worth pointing out that this could be a remarkably easy transition. In order to join EFTA you have to follow all the rules of the single market. We already do that. So in terms of trading there would be no real change at all in the short term. No economic Armageddon, just a big step back from most of the bits of the EU we aren't mad for.

I've written before about how voting for Brexit won't get you Brexit. It might however get you EFTA/EEA membership and that might be no bad thing. There's a reason why less than 20% of Norwegians say they would like to join the EU.

I wrote here a few weeks ago that a vote for Brexit was highly unlikely to lead to an actual Brexit in the sense of a full separation from Europe. Expect instead, I said, a full on renegotiation with the EU, or, failing that, a full on fudge.

Turn to the front page of today's Times and you will see that our great leaders aren't even waiting for the referendum to pass before making it clear that whatever the result, out doesn't actually mean out.

Only 200 MPs support the Brexit campaign (publicly) and "senior Tories", says the paper, are planning to "fight a rearguard action to stop Britain leaving the single market even after a Brexit vote." That would mean the UK having to stick to most EU regulations and to the principle of free movement within the EU despite voting not to have to.

It isn't just the Tories breaking cover on this one, either. Labour MP Stephen Kinnock (whoclearly has a long-standing family interest in Europe) is also talking of the possibility of a Parliamentary vote to limit Brexit if Vote Leave wins. We might vote to leave the EU, he says, but if that means the "devastation" of the exporting sector* it won't give MPs a mandate to actually leave the EU.

So forcing the electorate to stay in the single market even if they vote to leave is, he told the BBC, "not fantasy" but a "huge probability". How about that?

Our MPs agreed to give us a referendum but it seems a good many of them don't think they need be bound by the result. And they wonder why we don't trust them.

*Subscribers please look to the editor's letter in this week's magazine, in which I will explain why Brexit will not "devastate" our exports.

This is hard for me. Deep breath. Here we go. I think it is likely to be a one off, but I agree with the SNP's Nicola Sturgeon.

When it comes to the EU referendum, the Treasury, she says, is beginning to cross into "almost insulting people's intelligence". I'm not the only one here. Steve Hilton is with her too. The government, he says, is "frankly treating people like simpletons" with its almost comically "outlandish claims of dire outcomes".

The worst of these so far come of course in the Treasury's latest report on how Brexit can't fail to mean what George Osborne is calling our first ever "DIY recession", a phrase designed to suggest that neither government policy nor lousy voter choices have ever caused a recession before.

According to the Treasury, a vote for Brexit means a shock or a severe shock (there are no other options it seems it is impossible that things might be just fine). That means the economy being either 3.6% smaller or 6% smaller over two years. It means house prices being at worst 18% lower (that makes them 8% lower in absolute terms as they are expected to rise 10% if Remain win). It's also all nonsense.

As the Times points out, "no other credible forecaster" (to the extent that there are any at this point) is predicting a recession as their central case after Brexit. The UK might be heading for one at the moment but that's more about the economic cycle than about Brexit.

The report also assumes no government measures to soften any blows in fact it assumes no real policy changes at all, something that shows a remarkable lack of confidence in whatever government we might have after Brexit and for that matter in its own ability to advise the government.

It suggests that the consequences of a Brexit win are "immediate" when there are at least two years before there will be any change. It ignores the easiest and most likely post Brexit deal (remaining in the EEA). It presents forecasts as clear facts (when they just aren't). It uses Armageddon headlines to hide non scary results (the fine print tells us that in the "shock" case the economy would just contract by 0.1% a quarter for a year) Finally, it comes to its relative doomsday scenario by inventing a bizarrely optimistic outlook for the economy if we stay in the EU. It is, in summary, just a bit silly.

Everyone keeps asking for a "vision". Why can't the Out camp (or for that matter the In camp) give us a clear vision of what the UK might look like post Brexit? How can they vote if they can't know what they are voting for?

This sounds like a perfectly good question, but it isn't. This isn't like a general election. In those you have parties who (in theory at least) agree on what kind of future they want and who can therefore offer a vision of how their policies will lead to that future.

In a referendum such as this one and the Scottish referendum you aren't being offered a choice of parties (and hence a vision), you are being offered a process. What the UK actually looks like post Brexit depends on how that process is used on the government in power after Brexit (who presumably will offer a vision).

However there is, I think, at least one answer for what the UK looks like after a win for Brexit and it is this: remarkably similar to what it looks like right now. Voting to stay in the EU is not to vote for the status quo. There is no status quo in the EU: it is constantly changing moving towards full economic union, political union and, of course, federalism. It's heading for an EU army, tax harmonisation and full control over foreign affairs.

Vote to stay in and you don't get what you have now: you get more Europe and we know what the EU wants that to mean. Imagine, says Dan Hannan in his book Why Vote Leave?, that you are on a bus, a bus whose destination, a United States of Europe, is very clearly marked on the front. The driver keeps calling out the stops ahead: common European taxation, a unified welfare system, an EU army.

Now here is the question: if you want to remain where you are, what do you do? Should you literally remain motionless sitting rigid in your seat as the bus purrs along its route, or should you politely disembark and wave it on its way? So the first thing that happens on leaving is not that there is change but that there is a general agreement in the UK that the change should end. And then things will happen very slowly indeed.

To leave, the UK government must invoke Article 50 of the Lisbon Treaty, after which the EU's rules apply to the UK for another two years. The referendum doesn't mean the UK has to do this immediately (this is for Parliament to figure out). It could do a great deal of negotiation pre Article 50 and then bring it in when things are mostly sorted (which really won't be that hard for all the posturing, no one wants a trade war) to avoid any time constraints (you only get two years to make a deal post Article 50 beyond that, EU law stops applying automatically).

Around then, one Act of Parliament would also make all EU law UK law and we would work from there (presumably keeping most regulations and so giving retainers the status quo they say they want).

But here's something else to think about: a referendum doesn't actually mean our government has to invoke Article 50 at all. My guess as to what will actually happen if Vote Leave win is that everything will be handed over to the civil servants (to allow out politicians the time to indulge in full scale internal bickering about whose fault it all is); there will be an awful lot of pre Article 50 negotiation; a joyous announcement that the EU has finally seriously reformed; and another referendum in two-three years. Vote out to stay in perhaps?

In today's FT Janan Ganesh writes about the politicians and City men who are pro Brexit.

Their "insouciance" is, he says, "the privilege of the rich". Politicians are immune from recession; their money keeps coming in anyway. "An MP, peer, adviser or think tanker has job security and, if it fails, an escape hatch to the public relations sector." In Westminster, the crash didn't happen and nor will the much forecast nightmare of the post-Brexit recession.

This lot, says Ganesh, can look out at the front line and not worry too much about 3.6% off GDP here or 18% off house prices there. They can afford their principles. Same goes for the City fat cats. It's a "picture of decadence" and Ganesh doesn't like it; not one bit.

I recognise this argument. I used it a lot in the Scottish independence debate. The difference is that then it was a good argument.

Scotland and the UK have a monetary union and a fiscal union. At the time of the vote, fiscal transfers were flowing from the rest of the UK to Scotland. It was possible to quantify the exact fiscal loss to Scotland on independence from those transfers. It was also possible to work out the costs of setting up new parallel institutions and it was obvious that "sterlingisation" (or a new currency) would come with clear costs. So we were working with facts: facts that showed us that the poor really would suffer on independence. That might have been the case for only ten years, but it would definitely have been the case.

Given that, the rich who planned to vote for independence and presumably decamp to London when things got hairy were indeed displaying "the privilege of the rich".

This referendum just isn't the same. There is no monetary union. There are no set up costs to leaving (so far we have been allowed to keep all our institutions). And of course to the extent that there are fiscal transfers, they go the other way. The only fact here is that the UK will send £19.6bn gross or £11.1bn net to the EU. That's real money. The rest is guesswork.

So the answer to Ganesh on this one is to say that if you can accuse the Brexiters of "privilege of the rich" when it comes to their political ideas, you must also look to the incentives of Remainers. After all, while Greek GDP has fallen some 25% since the crash, there has most certainly been no recession either in Brussels or in the pay packets of the top executives of our multinationals.

How likely is a vote for Brexit? Ask pretty much anyone on either side (bar an official Vote Leave rep) and they will tell you that, however much they'd like it to, it won't happen.

The bookies (who are almost always right on this stuff) tell us that there is a 70% plus chance of us staying in the EU (IG Index puts it at 73% today).

At the same time the telephone polls are telling us that Remain will win with no particular bother. The all-guns-blazing approach of the government's Project Fear campaign makes it hard to see how anyone who doesn't understand how pointless economic forecasts are can vote "out".

It's also easy to dismiss the many online polls which show Leave and Remain campaigns running pretty much neck and neck, given that they hardly showed much in the way of accuracy in the run up to the Scottish referendum.

Finally, it is worth remembering, as Jonathan Allum points out in his newsletter The Blah, that in referendums far more than in general elections people tend to cleave to the status quo when they get a pencil and a ballot paper in their hands and that the polls tend to understate that effect as they clearly did in Quebec and in Scotland. But I still wonder.

I suspect the status quo effect won't be as high in this one as it was in Scotland, for example. The union between Scotland the rest of the UK is 300 years old and involves a complete monetary union alongside a complete fiscal union as well as a mishmash of family connections that makes most people neither completely Scottish, English or Welsh.

The union between the EU and the UK is completely different. We still have all our own institutions after 30 odd years of a sort-of union there are few fiscal and no monetary ties to break.

People also increasingly understand, I think, that there is no status quo here. The EU won't stay as it is it will either collapse under the weight of its cruel monetary union or it will carry on to the final destination outlined in its original design (full federalisation). When they vote there will be no box for "let's just leave things as they are". That isn't part of any deal.

And the polls pose an interesting puzzle too: telephone polls aren't as useful as they used to be (no one picks the landline up any more) and online polls were criticised after the Scottish referendum as being too biased to the opinions of the young. Yet the young are supposed to be more pro EU than the old, so it doesn't make sense surely for online polls to overstate the Leave vote (all comments from polling experts welcome on this one).

Also of interest is that international investors have Brexit very firmly on their worry list: the latest Global Fund Manager Survey from Bank of America Merril Lynch tells us that 27% of managers are feeling a little stressed about it (China's coming debt disaster is next on the list at 21%). As a result, they've got their lowest weighting to UK stocks since 2008. Sterling, says Allum, has its second most undervalued rating in the survey's history.

Perhaps this time the result really is, just as the polls suggest, too close to call.Obviously, I will be voting to leave, and I think you should too. To find out why, take a look at our latest report here.

Look through the short-term economic turmoil and get inspired by along-term vision for Britain, says John Stepek.

23 June. That's the date that Britain will go to the polls to decide whether we should stay in the European Union or not. Prime Minister David Cameron came back from Europe last week with a deal that was more about tinkering around the edges than a radical redefinition of our relationship with Europe (see below) and which in many key areas still needs to gain the approval of the wider EU.

So it is highly unlikely to win over those already convinced of the need for "Brexit". Meanwhile, Boris Johnson Cameron's arch-rival has joined the Brexit camp, widely seen as a coup for the "leave" camp by fans of the London mayor.

Yet those planning to vote to stay in the EU still hold sway. The gap is narrowing, but most recently a ComRes poll for the Daily Mail had "stay" on 51% versus 39% for "go" (although online polls, rather than telephone polls, apparently are much closer). If you look at the bookies who tend to get these things right more often than the pollsters then the smart money is very definitely betting on "stay". We think that's a shame.

Our view is that Britain needs to redefine its relationship with Europe, and that given Cameron's failure to do so (unsurprising, as he has no desire to leave), we should be looking to get out.

Looking at the long term

Let's be clear this isn't about the short-term economics, and nor should it be. We're currently looking in depth at the economic implications for Britain in our series of investment briefings. And at this stage, of course, depending on which assumptions you make ie, how you want to spin the figures you can make the numbers look as gloomy or as glorious as you like. But one high-profile report, commissioned from Capital Economics by UK star fund managerNeil Woodford, gives a decent overview.

There are some savings to be made from leaving (our net £9bn-odd contribution to the EU), and on trade, even in the worst-case scenario, potential trade tariffs of around 4% fall "well within the normal range of exchange-rate movements" (ie, exporters should be flexible enough to deal with extra costs on that scale). Financial services exports would be likely to take a hit, as would commercial property prices in the City of London, if fewer firms "see Britain as a gateway to Europe". But offsetting that, Britain would be freer to seek to do business elsewhere. "Non-EU countries may find negotiating with Britain easier and quicker than dealing with the EU's bureaucratic machine, as Switzerlandhas shown."

Indeed, John Kay in the Financial Times argues that trade in services Britain's forte (we're the biggest services exporter in the world, relative to GDP) has not benefited as significantly from EU membership as trade in goods ("for most services the single market remains an aspiration rather than reality"). Overall, as Woodford puts it: "I think it's really hard to see any significant credibility in an argument to stay or leave that's constructed around economics. I think it's a nil-sum game, frankly If we stay or leave the fundamentals of the economy will be relatively unmoved."

The recent slide in the pound has rattled many investors, of course my colleague Charlie Morris of the Fleet Street Letter looks in more detail at sterling's travails below but amid the panic it's worth remembering a few things. There are lots of good reasons for the pound to be falling, and not all of them are about Brexit. A few months ago, everyone expected UK interest rates to rise before too long.

Now they don't think they'll rise for at least a couple of years, particularly given Bank of England Governor Mark Carney's recent comments. Sterling is also a "risk-on" currency it strengthens when markets go up, and it weakens when they fall. 2016 has seen the worst start to a year for equities in a very long time, so we shouldn't be surprised that the pound has found the going tough too.

Why leave?

So, you might say, if the decision to stay or to leave makes little difference either way (or is even detrimental) to the economics in the short term, what's the point of taking the risk of upsetting the apple cart? Because ultimately this is about a long-term vision for Britain. We can choose to stay within the EU as it is now. On that point, it's telling that even with Britain acting from a position of relative strength, Cameron's deal which even in the most sympathetic viewing is hardly a dramatic improvement in terms is the best we can get.

Arguably, that's nothing to do with Cameron's negotiating skills, or even with intransigence on the part of the EU. It's simply what happens when you have to get 28 countries to agree on every significant change. That's why I think it makes sense to take the opportunity to regain our independence from the EU and forge our own path. Cameron suggests that this is a leap in the dark but remaining in a relationship that is so difficult to change hardly offers any certainty either.

Some people try to make the argument that the referendum is almost a moot point there won't be any EU left to worry about, given the current upheaval. That's possible. Indeed, MoneyWeek contributor Alexander Rankine outlined a road map of how Brexit could trigger the collapse of the EU itself. Yet what if the opposite happens? What if the EU bounces back stronger than ever before?

Plenty of people expected Greece to leave, spelling the beginning of the end for the euro, yet Greece is still part of the eurozone. It has proved a surprisingly durable construct so far, which is a testament to the political will behind it. That should be a warning to us non-euro members. As Andrew Lilico puts it in The Daily Telegraph, if the eurozone is to continue to work, then "the economic logic... demands that there will have to be a political union among the eurozone members".

Closer union on the part of those members by necessity will push the non-euro users like Britain to the fringe. "Within a decade, [the EU] could have morphed into a gigantic eurozone political union made up of perhaps 25 countries and four much smaller non-euro members. The eurozone political union will set the rules, and the rest of us will have to agree."

If this is the case, it means that "the UK's opportunity to shape Europe's economic policy is reaching the end of the road". Lilico argues that "the good news is that economic opportunity, both in terms of trade and influence, abounds on the outside". But if that's to be the case, then we need to make a start now.

The spectre of a happy Putin

Others argue that we shouldn't leave the EU in its hour of need. "Think of how happy it would make Putin" goes one common refrain. The trouble with this argument is that quite apart from the fact that Nato will remain intact, regardless of what happens to the EU it's important to remember that this is very likely to be a one-time only chance. It's not as though we're going to get another opportunity at a more convenient time for all involved in the future.

This referendum has come about due to a unique set of circumstances that may not be repeated for a very long time. Given the history of the Conservative party, no Tory prime minister in their right mind would have allowed this to happen unless they absolutely had to and that's precisely what happened. Cameron offered this deal in a desperate attempt to avoid mass defections to UKIP, ahead of an election he never expected to win.

And there's no reason to expect Labour to offer a referendum, even assuming it can win the 2020 election. Unlike Scotland's independence referendum, this really is likely to be a once-in-a-generation opportunity.

And regardless of the deal struck by Cameron, a vote to remain will be seen not as a vote for the status quo, but as a stamp of approval on the EU's mission. Like it or not, that logically assumes further integration. There's a whole group of people in Brussels and elsewhere in the EU whose well-paid careers and generous pensions depend directly on keeping the EU integration show on the road and giving it ever more tasks to get involved in.

Even if the EU is not directly responsible for 15%-50% of laws that end up on our statute books (that's a House of Commons estimate, demonstrating just how malleable almost every EU-related statistic is), and even if the rules that emanate from the EU are not quite as whacky as myths about cabbage regulations and exaggerations about overly bendy bananas make out, Europe gives our own bureaucrat class a very handy excuse to hide behind. The EU at the very least is an "enabler" of our own civil servants' penchant for "gold-plating" the rules. Leaving the EU would strip away that particular excuse.

Which brings us back to the core reason to vote Brexit. Ultimately, the EU is an undemocratic organisation. It epitomises "big government" aloof from and barely accountable to the population it serves. You only have to look at what happened to Greece, and past reactions to unfavourable referendum results (the response is to repeat the vote until the "right" answer comes up), for it to be clear that the people are largely viewed as a nuisance to be bulldozed aside, as and when they get in the way of the grand project. I have a problem with that, and in the end, that's why I'm voting Brexit. And I think you should too.

Dave's Big Deal: what will change?

Last week, David Cameron concluded negotiations that culminated in concessions on three major issues: immigration and benefits, relations with the eurozone, and European integration in general, writes Matthew Partridge. On immigration and benefits, the UK government will be able to apply an "emergency brake" allowing it to prevent migrants from receiving full in-work benefits until they have been in the UK for four years. This will last for seven years.

Child benefit for the non-resident children of migrants living in the UK will be adjusted in line with the cost of living in their country of residence (although this does mean that in a few circumstances child benefit sent abroad will actually rise in value). The UK will also be given extra powers to deal with sham marriages involving non-UK spouses of EU citizens.

While eastern European countries (whose citizens will bear the brunt of tighter regulations on this front) reluctantly agreed to this measure, it still has to be ratified by the EU parliament. With many MEPs still opposed to the changes, there is a chance that it will be at least partially amended. In theory the European Court of Justice could still strike down the deal as discriminatory, although it will be under intense political pressure to uphold it.

It's also worth nothing that the restrictions are tapered, not removed altogether, so those migrants who have been in the UK for more than a year will still get some benefits, gradually increasing over the four-year period.

Another area where Cameron won concessions was in tackling the fear that countries within the eurozone will either gang up to propose regulations that put the City of London at a disadvantage, or even force the UK to join the euro.

The new deal explicitly promises that Britain can keep the pound without fear that it (or other non-eurozone countries) will suffer discrimination in favour of eurozone nations, and also that it will be reimbursed for any contribution made toward eurozone bailouts. It will be able to demand that any deal between eurozone countries is reviewed to ensure it isn't discriminatory. These changes will be written into treaties (though this has still to happen, of course), making them permanent.

Finally, there are several measures that Cameron hopes will serve as a brake on further integration. The most prominent of these is agreement that the EU will explicitly exempt the UK from "ever-closer union", the term in the Treaty of Rome, which has been used by the European Commission to justify ever-further integration. Cameron is also trumpeting the ability of national parliaments collectively to agree a "red card" that would force the Commission to revise legislation to deal with their objections.

However, this concession over "ever-closer union" is mostly symbolic and will have little practical impact. While the "red card" plan is theoretically powerful, it will require support from the parliaments of nations accounting for 55% of votes. Such support will be very hard to organise within the 12-week deadline written into the red card (which also means that parliaments won't be able to challenge past legislation).

And even then it is far from an absolute veto the EU Council can press on regardless, as long as it addresses the concerns raised, notes FullFact.org.

A sterling crisis?

Last August, a surprise devaluation for the Chinese yuan triggered a market panic, and remains in part responsible for the turmoil that we've seen since,writes Charlie Morris, investment director of the Fleet Street Letter.

So it may surprise you to hear that sterling has fallen by twice as much as the yuan since then. Indeed, in terms of performance, the pound has come 70th out of 78 currencies since that time, only being pipped by the commodity-dependent Russian ruble,South African rand and Latin American currencies. Boris Johnson can take some credit for the sharp fall in sterling on Monday, as he added his political weight to the Brexit campaign.

But Johnson and, indeed, Brexit, can't take all of the credit. Much of sterling's broader weakness can be attributed to our wide current-account deficit,which has been largely caused by the faltering European economy. Weak sterling can also be attributed to the fall in markets more generally. Britain is a financial centre and sterling's health is closely linked to their success the pound tends to be a "risk-on"currency and the recent market environment has been anything but that.

On the upside, the FTSE has risen as the pound has fallen unsurprising as many FTSE 100 companies' profits come from abroad. What's notable is that gilts haven't sold off, which means the markets aren't doubting Britain's creditworthiness at least not for the time being.

When it comes to valuing the pound,purchasing power parity data from the OECD think tank puts "fair value"at around $1.42, so perhaps it is now close to its lows (speculators are certainly heavily "short" betting on further falls which is often a sign of a trend nearing exhaustion).

At current levels, it's in territory rarely seen since the Plaza Accord days of the mid-1980s. But on this front, the real question isn't so much about the pound but the dollar. And as the only major country where you can still get much of a return on your capital,the dollar bull market could well have further to go. Only the yen has managed a decent rise (10%) against the dollar since last August, followed by the Icelandic krona.