Ian McAbeer, Founding Partner, with Tushar Shah, Partner, Blackhaw Wealth Management - 6th August 2016

The vote for the U.K. to leave the EU was achieved by a very slim margin - 52% in favor of leaving and 48% in favor of staying, with a 72% turnout. One would not use words such as “mandate” or “landslide” to describe the outcome and we can be sure that the U.K. Parliament will take this into consideration. Quick math: 52% times 72% = 37%. Seriously, will the U.K. Parliament (which happens to favor remaining in the EU) simply pull out because of something that only 37% of its population voted for?

Speaking of Parliament, it turns out that the Brexit referendum is not even legally binding. This is a critical point that is worth repeating: the British Parliament is not legally required to do anything as a result of the Brexit referendum.

Demographically, Brexit succeeded due to the older Britons. Those over the age of 65 voted 60% in favor of Brexit. Voters under the age of 25 voted 75% to remain in the EU and those 25-50 years of age voted 56% to stay. The “future” of Britain, if you will, overwhelmingly wants to stay in the EU as most of the younger Brit’s self-identify as Europeans first, and Britons second.

The U.K. has the unilateral authority to invoke the often-cited Article 50 of the Lisbon Treaty, which would commence the two-year time table for Britain to leave. The pre-Brexit Prime Minister David Cameron, who has since stepped down, did not invoke Article 50, but has left this task up to his successor, Theresa May. Even many of those in the “leave” camp including Boris Johnson (former London mayor) have stated that they are in no hurry to commence exit negotiations. After all, a hard deadline leaves Britain in a weakened negotiating position. Having no deadline at all allows Britain to take as long as it wishes.

Both the U.K. and the EU benefit from free trade amongst member nations and both have a vested interest in preserving the existing trade and business policies. In other words, both sides have a true interest in allowing cooler heads to prevail during the exit negotiations.

The razor thin victory of the “leave” camp, coupled with the demographics of the voters and the non-binding nature of the referendum, seriously calls into question the notion that Brexit is a sure thing. In fact, there is the very distinct possibility that Britain won’t exit the EU at all. The results of the referendum were not strong enough and not broad-based enough to simply throw away decades of membership and the positive benefits of free trade and labor mobility without further consideration.

The U.K. may seek some sort of solution that allows it to remain in the EU, but may use the referendum as a point of leverage to extract concessions, such as permission to impose immigration restrictions and tighter controls over borders and waters. There is precedent for this arrangement with Norway, which is NOT a member of the EU, but is a party to the European Free Trade Association and, as such, benefits from trade without the need to accept unfettered labor mobility. Perhaps this will be the model for negotiations between Britain and the EU.