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By Tim Skeet

This week I found myself in the panelled grandeur of an annexe to the House of Parliament facing up to a former government minister and advocate of ‘Brexit’. By now most observers will realise that there is a real possibility that the UK will choose at the referendum on June 23^rd to invoke its right to exit the European Union with untold consequences both for the UK and the rest of Europe.

An old British adage dating back to well before the tunnel was dug states: ‘Fog in the channel, Continent isolated’. Many reading these words will be baffled by the attitude of a nation that appears to have done famously well with its opt-outs, back room deals and budget rebates. Indeed, Britain appears to even have managed to impose its language on the workings of the EU machinery, though in eloquence and resonance it was always in French’s shadow. The recent inaugural conference of the Single Resolution Board last week in Brussels was indeed entirely in British English, except for one passage delivered in American-English by the Chairman of the FDIC.

With the sun beating down uncharacteristically on Big Ben outside and not a trace of fog, John Redwood, former minister and Brexit exponent eloquently set out the case for leaving the EU. The arguments, now familiar to many living in Britain, are grouped around the themes of immigration, sovereignty, finance and organisation. The arguments go that Britain needs to control its borders, limit the arrival of so many Europeans, re-establish control over its laws and taxes usurped by the Brussels bureaucracy, reclaim the hefty sum of money paid into the profligate and wasteful EU budget and cut links with the doomed Euro. Ever closer union is labelled a political nonsense designed to undermine the nation state.

Armed with these stark points of view, Redwood and his supporters moved on to explain that the process of separation will be painless and effective. The EU needs Britain more than Britain needs the EU from a trade perspective and the rump EU will move quickly to make the separation painless. The ‘passporting’ of banks will continue under equivalence checks on the rules, and would be in the EU’s interests. Immigration would become controlled using a points system adopted elsewhere successfully by Australia, and the EU budget money would serve to re-balance the balance of payments, as well as fund hospitals in the UK. All this and more would be achieved while the UK reaches back out to its friends in the Commonwealth and US to rapidly conclude new and generous trade agreements.

Many of you will be choking on your croissants as you read these words, wondering which version of reality such views represent. My job at this event was to try to answer and counter these views of Britain’s future and bring the audience back to the more probable reality. Yet I note that these arguments are widely held by intelligent, experienced men and women in and out of the City and represent a large block of votes. Needless to say, Britain got to this point through a volatile mix of politics, populism and history. The advocates of Brexit bring passion to their words, fuelled by a long standing misunderstanding of what the EU is and does. Ultimately this is a debate where emotion and gut feel bang up against dry fact and cool heads.

The views of the IMF, OECD, the Bank of England, the UK Treasury and even President Obama seem to count for little in the minds of those keen to extract Britain from the EU. But reason and logic often fail to have much impact on emotion. What then are we to expect in June as the British populace, or at least those who could be bothered to vote, shuffle off to vote? Inevitably the result will be driven by the turnout. Polls indicate that most of those under the age of 35-40 will probably vote to stay in. Those over that age are likely to vote for the exit option. Sadly, the outcome will hinge on how actively the generations flock to the polling booths. The older folk, in this case sadly, are also more likely to actually vote. As there is no minimum acceptable level of turnout specified or acceptable level of majority, it is quite possible that a minority of the nation’s older people might well push the UK into a tough decision for which the younger citizens will undoubtedly have to pay.

While the stay-in sentiment prevailed in that panelled room by the Thames this week, the reality is that the people of Europe may yet have to figure out what it means for Britain to withdraw. Even if most may wonder quite why the British are so keen to leave, it is a fact that quite a lot of them do. I am certainly not one of them. There is a fog gathering in the channel, a fog around reality and a cloud over our futures.

Tim Skeet has worked for over three decades in the City, specialising in bank and mortgage financing. He is currently a Senior Advisor to ICMA and Chairman of the Investor Working Group on Bail-in.  His views are made in a personal capacity and do not necessarily reflect those of the ICMA.

Please note that any views or opinions expressed in this article are those of the author and not necessarily those of the EMF-ECBC. This article does not constitute investment advice.