This is because when interest rates are hiked up by the Central Banks, it leads to inflation and widespread recession in which there is a lack of money flow throughout the economy, leading to cash-strapped businesses that inevitably lead to businesses closing, bankruptcies and market failure.
Although a stock market crash and downturn in the market may be an unwelcome gift for the holidays, in the long term outlook, Mrs. May’s Deal could forever lead the UK to be chained to the EU in which they will have no part in policy making, which leads to a long-term problem for the UK. That is why in good conscience, some Members of Parliament have considered opting for the No Deal scenario and prepare for its immediate consequences rather than wait to delay the vote until January. It is likely that Mrs. May did not want to ruin Christmas for UK businesses and financial institutions who may have to pay greater taxes and tariffs if her deal is not passed, but the simple fact is that delaying the vote puts the UK in risk for economic instability if preparations are not made in advance before the Brexit deadline of March 2019. Mrs. May’s delay on voting for her Deal is one that is similar to a divorcing couple only staying together for the Holidays, until they decide to break up after the New Year.
The EU has already made contingency plans for financial firms in a No Deal scenario. As the financial capital of Europe, London currently has around £29 trillion (approximately $38 trillion) of derivatives contracts, including 90 percent of euro-denominated interest rate swaps are directly centered in London. The contingency plans would ensure that these contacts aren’t interrupted with legal uncertainty for at least 12 months to 24 months after Brexit. Therefore, it would be critical during this time that financial firms switch over to new contracts or at least be able to renew selling their services across to the EU, in a similar way when a company acquires another company, and the services and contracts from the old company are transferred to a new company to ensure a smooth transition.
The Bank of England has forecasted a No Deal exit as a “destruction of the British economy” and Bank of England Chairperson Mark Carney has also threatened to raise interest rates. It is also becoming increasingly clear that despite either a No Deal or Mrs. May’s Deal, The Bank of England will most likely raise interest rates anyway, leading to an economic recession in the UK, following the current pattern of the Federal Reserve in the United States.
In 2018 alone, the Federal Reserve has raised interest rates 4 times, the most recent a few days ago on December 19, which lead to a sell off in the US stock market in all of December, plunging into the beginning of a bear cycle. A similar succession of interest rate hikes by the Bank of England will also lead to recession in the UK economy after a decade of stable growth.
London has been the financial capital of Europe long before the UK was a member of the EU, and dates back to the 19th century and would most likely continue to be the financial capital of Europe until the end of the 21st century. In addition, much of the EU’s corporate and sovereign debt is serviced by London, and Europe’s governments and corporations will have to refinance their own debt at a much higher cost.
However, it is also possible that nearer to the end of the 21st century, Frankfurt could eclipse London as the new financial capital of Europe, however, not due to Brexit, but primarily due to events set since 1997 in which began the collusion occurring between banks in the LIBOR scandal that nearly brought down the entire global financial services industry in 2008. It was during Prime Minister Tony Blair’s reign in which he allowed the Bank of England to set its own interest rates, without oversight by Parliament and although that helped to boost the financial industries temporarily, it also set the stage for the LIBOR scandal that would soon ensue in the coming years and culminate in the financial crisis of 2008. If the UK is not able to make significant reforms in this area, it is inevitable that the changing of the guard would shift more towards Frankfurt as the new financial capital of Europe during the latter 21st century into the 22nd century as Germany’s strict economic management and structural reforms could lead the way after the current economic downturn, as it had done in the past in the 2008 financial crisis.
If London is to remain the financial capital of Europe into the 22nd century, the Bank of England must introduce interest rate cuts, regardless of the outcome of a No Deal Brexit deal in order to stimulate the British economy and Members of Parliament must immediately plan for a Financial Stabilisation Act and set aside billions, most likely around 20% of current GDP in order to create loan guarantees, recapitalisation funds for banks, tax reductions and loans for small to medium enterprises.
It appears that Prime Minister Theresa May probably wanted to delay the inevitable until after Christmas, trying to pretend that the feuding couple is not headed towards divorce, however action must be immediately taken to stabilise the British economy, and it could very well be that perhaps if a General Election is triggered in the New Year, that it might be that the best person to lead the UK from out of the oncoming recession might very well be the opposition leader, Jeremy Corbyn.
The End of the Automobile Age
Le Corbusier saw that the car would become King in the 20th century, and he designed cities built for car parks and freeways. After WWII, authorities utilised his ideas to cheaply deal with chronic housing shortages, hence the rise of concrete blocks and freeways began. However, now as that era is coming to a close, we are now confronted by pollution, an overproduction of cars and bumper to bumper traffic and gridlock in all the major cities as the world demands faster and more efficient transportation.
Mainly due to the auspices of former Prime Minister David Cameron, and his foresight, support and investment into the tech sectors, London has become the tech capital of Europe, and soon likely to eclipse Silicon Valley as the tech capital of the world. It is also highly likely that the UK will move from a primarily car manufacturing nation of the EU era, to a tech-focused nation in the new Brexit era.
It is also clear that as the new tech capital of the world, London will be a city that no longer depends on cars. Cities around the world are coming to the same conclusion: that they’d be better off with far fewer cars. In an era of the “new mobility”, the younger generation are no longer dependent on cars and they are less likely to have a driving license.
It’s a vision of cities in which residents no longer rely on their cars but on public transport, shared cars and bikes and, above all, on real-time data on their smartphones. He anticipates a revolution which will transform not just transport but the cities themselves. “The goal is to rebalance the public space and create a city for people,” he says. “There will be less pollution, less noise, less stress; it will be a more walkable city.”
- Gilles Vesco, Politician in Lyon responsible for sustainable transport in Lyon
Despite, electric cars being popular, such as Tesla, and interesting underground developments by Elon Musk's the Boring Company, car manufacturing inevitably creates pollution, and the automobile industry is the largest source of lead pollution in the world.
The Made in Britain luxury carmakers Bentley, Rolls-Royce, Aston Martin and McLaren will remain iconic brands, weather through Brexit, and continue to produce beautiful machines for the rest of the world. However, it is clear that the UK will no longer depend on cars as their largest exports to the EU, as many other car manufacturers, such as Jaguar Land Rover move their manufacturing bases elsewhere in Europe (such as Slovakia) to avoid additional tariffs. It seems futile then, that Mrs. May is attempting to appease automobile manufacturers in lieu of British sovereignty in order to pass her Deal. Instead, it might be more to her advantage in order to appeal to the tech sectors, and to continue to increase foreign investment in this sector.
It is also clear that the UK has embraced the end of the automobile age, and a more forward-thinking Prime Minister should begin to prepare the UK population for the immediate future, through retraining programmes, education and investment in social programmes instead of holding vainly onto the favour of corporations that are in denial of Brexit and the end of the automobile era.
Brexit has also become a boost for rail and train companies as the world demands the speed of maglev technology and more rapid and efficient transportation. Also, due to the weakening pound, the value of deals involving US companies buying UK businesses more than doubled to £79bn in 2017-18 from £36.8bn in the previous year.
In short, British tech companies have received more venture capital funding than France, Germany and Sweden combined in just 2018, and this is a trend that is not likely to stop after Brexit.
As Prime Minister, it may help Mrs. May to be more forward-thinking and to appeal to those sectors in which there will be tremendous growth, and not vainly hold onto the old ideals that the UK will remain an auto manufacturing centre as it had been during the last Industrial Era when it was part of the EU. Post-Brexit UK and London, as the new projected tech capital of the world, will need a Prime Minister to develop London into a modern car-free metropolis, with revolutionary transportation and continue to ensure foreign investment into Britain’s best technology companies. This means that the period of austerity will have to end, and the UK will have to begin to increase investment in its own educational institutions, social programmes and its people.
As leader of the Labour Party, Jeremy Corbyn has insisted that a vote on Mrs. May's Deal not be delayed and left to the last minute. If a General Election is called in the New Year, it could be that Jeremy Corbyn might become the next Prime Minister of the UK as the controversial politician has increasingly gained popularity in the public. Mr. Corbyn is known as a Democratic-Socialist who wants to increase investment and spending into social programmes and nationalise Britain's rail, mail and energy systems and spend at least £500 bln modernising Britain's infrastructure. He is a politician known for "anti-austerity" measures.
Although, most superpower governments have reverted to a 16th century mercantilism view of the economy, by defining wealth primarily as a money centric society and by advocating austerity, or lack of spending or investment in its social programmes, perhaps the time has come to pass that we should revisit the definition of “wealth” towards more of Adam Smith’s philosophy in which he defines “wealth” as a society that has a high quality of life, and access to resources and services, with a free flow of money, rather than the hoarding of money.
As HRH Prince Charles says in his book, Harmony: A New Way of Looking at the World: “There is a need to move towards the kind of economic thinking that promotes quality of life, rather than simply the quantity of consumption. GDP growth was an idea of its times, a mid-twentieth century concept that fitted with the circumstances of the era in which it was conceived, but now the challenges are different, and we need new economic tools to deal with them.”
By Sierra Choi