The UK goes to the polls tomorrow to decide the nation’s EU membership, yet confusion still reigns over what the result may be. The last referendum in Britain promised similar wafer-thin margins, but ultimately it was a comfortable win for Scotland to remain part of the United Kingdom.
Consensus seems to suggest this vote will be much closer, with a variety of polls claiming both Leave and Remain hold the lead. Megan Greene is chief economist with Manulife Asset Management and is in London this week on business. Normally based in Boston, Mass, the timing of her visit means she has been able to gauge opinion on the ground first hand.
“Nobody knows what exactly to trust,” she says. “The polls have been fantastically flawed over the past couple of years. Then you have the bookies who had a pretty good performance in the Scottish referendum, but have had a bad long-term forecasting record in the UK. So everyone is a bit blind going into this; the only thing that’s clear is it will be very close.”
Monday’s rally of sterling and the FTSE 100 implied the investment community believe a Remain vote is the likely result tomorrow. As Greene points out, however, the markets are far from infallible.
“The markets don’t get everything right either, as we saw during the crisis,” she says. “There have been a few more positive polls for Remain this week, which is partly off the back of the Jo Cox murder, so investors have assumed that more people will come to the Remain side.”
It has been surprising to some the level of acrimony and vitriol the campaign has dredged up, reaching a nadir last week with the killing of Labour MP Jo Cox. According to Greene, the divisions in Britain this referendum has highlighted won’t disappear on Thursday, regardless of the vote. “I have been here for a few days and it’s been really surprising to hear people say ‘I want my country back,’ ” she says. “That’s across the spectrum. The Leave people are saying that because they want controlled borders for example. The Remain people are saying it because they feel like their country is unrecognisable, particularly in the wake of the Jo Cox murder.”
It’s a sentiment she as an American can easily identify with. “In the US a lot of us are saying the same thing, wondering just how Donald Trump is so successful,” she says. “I think it’s much more likely Hillary will win, but it’s no longer impossible that Trump will win, and that is scary enough.”
As for the possibility of Brexit, ultimately she sees the electorate deciding to stay with what it knows best, albeit under some duress.
“Ultimately when push comes to shove, there is a stickiness with the status-quo, so I think it will be a Remain vote,” she says. “But we should ask just how we even got here? Brexit is just one example of a much greater phenomenon. We have been in prolonged economic doldrums and that is fertile breeding ground for populism. The Leave campaign has mobilized that, and that’s why they have done so well.”
It’s true that the financial health of many Western nations is far from robust. As chief economist with Manulife, Greene not surprisingly has strong views about the link between the current political turmoil and what she believes is an economic system gone awry.
“Basically I think we have an oversupply of both debt and labour,” she says. “We have an oversupply of liquidity and capital too. In normal business cycles central banks allow inputs like labour and capital to resize at a lower value when there has been overproduction. But that would be so incredible painful for debt-laden households now, so central banks step in and stop that resizing from happening.”
She adds: “The normal business cycle has been broken, so I think we will have this economic stagnation for much longer this time round. It’s a Western world problem, you are seeing it in almost every European country and in the US and Canada as well.”
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