Senior reporter comment: After Brexit - FREE

Senior reporter comment: After Brexit - FREE

EU tear bigIt’s no exaggeration to say that in London on the morning of Friday June 24, there was an outbreak of grief, heartbreak and tears, following the news that Brexit had triumphed in the referendum and the UK was set to leave the European Union.

The 51.9% win for “Leave” has painfully divided UK, and there was a definite mood of shock in the London market as the result became known before breakfast time. The night before, at the Reactions’ 2016 London Market Awards, industry figures seemed on balance confident that “Remain” would win and that business as usual meant safety, protection and certainty.

The market itself was divided. Most “official positions” at a company level had been for “Remain”, perhaps most notably Inga Beale representing Lloyd’s.

The deeper picture was less clear. Several senior market figures outed themselves as “Brexiteers”, speaking as panellists at Reactions’ London Market Conference 2016. The event was held on the day of the vote. Studies in the run up to the vote had hinted at this. One study showed a majority of the market testifying a “loss of faith” in the EU, while another showed a rise in the number of brokers favouring Brexit.

While many in the re/insurance industry believe we have lost traditional market cycles for pricing, we have watched some in the City of London go through the traditional cycle of grief. London as a city had voted, by 60%, to stay. The capital is often accused of living in a bubble from the rest of the UK, and this occasion summed that up.

On Friday morning the first of the grief cycles kicked in. “We did what?!” seemed a common sentiment around London. On the London Underground and leaving Reactions HQ for lunch the upset was palpable. The mood seemed quite sombre; heads were lower than usual. What many had thought impossible had occurred: Londoners spoke even less on public transport.

Some post-awards hangovers summed up what many were feeling. Some Brexiteers even recanted in well-reported cases of “Bregret” once the result struck home. One such sufferer told The Independent newspaper: “We’ve left the EU, David Cameron’s resigned, we’re left with Boris, and Nigel has just basically given away that the NHS claim was a lie. I personally voted leave believing these lies, and I regret it more than anything, I feel genuinely robbed of my vote.”

Over that weekend, many were still in the denial stage. Stories were shared and theories were circulated that the Article 50 procedure to leave would not be triggered. David Cameron’s postponement of the decision when to trigger the Brexit process until his successor is in Downing Street, by October this year, added to the conspiracy theories.

A few weeks before the vote, Steve Hearn of Cooper Gay and Mike Holley of Equinox had confidently told Reactions that they thought “sense would prevail”, and the British public would vote to remain in the EU – seeing sense in free trade and the advantages of Europe’s internal market. There has since then been widespread anger that such measured arguments were side-lined by more populist calls against immigration.

Next came the bargaining stage. Millions signed petitions for a second referendum. Many in the market began not just to consider their own Brexit plans, but to turn to their lobbying bodies – such as the London Market Group, Lloyd’s, and the International Underwriting Association – to argue the case for continued market access and “passporting” rights in the negotiations to follow between London and Brussels.

The fourth stage of grief is guilt. Could the strong Remain camp in the London market – a valuable source of jobs and prosperity – have done more to convince the British public of their case? Some “Bremainers” wished they had spoken up more or shouted louder.

Depression is the next stage of grieving, borne out by the markets, as stock prices and currency values mirrored emotions. The pound dropped to an early low of £1.18 to the euro. Markets being prone to hysteria and overreactions, they may bounce back, but the wider economic costs of Brexit are still mere forecasts.

Acceptance is the final stage of grief. This has been somewhat stalled by a lack of planning among politicians in the Leave camp about what would happen next. While the London market has at least two years before the UK formally leaves, it must act sooner. Many London market firms were prepared and have already set Brexit planning into operation, to mitigate the effects where they can and position themselves for what the future may hold. The Boston Consulting Group – co-creator of the London Matters strategy – was among those urging clear and strategic thinking, with a focus on scenario planning for the future.

If the past tells us anything – British history and that of the London market – it is that resilience is a strength, while playing the hand that has been dealt. In this there are strong grounds for optimism: London retains strong cards to play against whatever threats and rivals; and it remains host to the most skilful concentration of re/insurance players on the planet.

Vicky Beckett - vbeckett@euromoneyplc.com

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