Future Generator: The media continues to be frosty towards Brexit
The ‘Future Generator’ is a highly unique and cutting-edge approach to forecasting ‘media sentiment’, developed by a partnership between Global Risk Insights (GRI) and Ethnographic Edge (EE). The aim of the forecast is to determine how media sentiment towards a country’s political environment might develop in the future. Considering the impact of media sentiment on trading and investments, our forecasts will give readers more time and context to maximize on market opportunities.
The following is a Future Generator assessment of the United Kingdom.
The EE signal suggests negative media sentiment towards the UK’s political climate
EE’s data analytics platform projects that media sentiment towards the UK will remain negative until early next week. Considering the strong correlation between media sentiment and political events, EE concludes that post-Brexit political unrest in the UK will produce continuously negative media sentiment until at least November 7.
GRI assessment of the EE signal
GRI’s team of directors and our UK expert have assessed the signal provided by EE. Based on local expertise and political risk training, we agree with the data analytics produced that the UK will see its latest negative media coverage continue. This is likely to be accurate for the following reasons:
1. The UK is moving towards a “hard Brexit”
On June 23, the UK voted by a small majority to leave the European Union. As a result, the UK is facing one of the world’s most politically risky, uncertain futures. Media sentiment this month has been consistently negative following Prime Minister Theresa May’s announcement that she plans to trigger Article 50 – the formal process that the UK must follow to leave the European Union – no later than March 2017.
This announcement confirmed fears that her cabinet plans to pursue a “hard Brexit.” This political choice prioritizes immigration control over economic benefits from free trade. These benefits are owed to Britain’s current membership in the EU single market. In exchange, the UK abides by free movement of people across all 28 EU member countries.
If May fails to accept free movement of people in the future, there is significant risk that the UK will lose its membership in the EU single market. Her choice could also forfeit the UK’s potential inclusion in the European Economic Area. If this occurs, a wave of tariffs and non-tariff barriers could ensue when Britain tries to export its future goods and services.
It is true that the UK’s GDP growth surpassed expectations when it grew 0.5 percent in Q3 2016. However, this news was reported alongside predictions that UK banks will likely lose passporting privileges that they earn by virtue of their EU membership. If the UK ceases its single market membership, it risks disrupting its finance sector which contributes 12 percent of the UK’s economic output. This is one of many economic risks that a hard Brexit would bring.
2. Scotland will not get preferential treatment during Brexit negotiations
May previously said that she would not trigger Article 50 until “we have a UK approach and objectives.” These comments were made following a meeting with Scottish First Minister Nicola Sturgeon, who has been a vocal critic of Brexit since more than three in five Scots voted to remain in the EU.
Last month, Sturgeon declared that a second referendum for Scottish independence from the UK by 2020 is “highly likely, given the situation we’re in.” She also reiterated that she wants to explore ways to keep Scotland in the single market even if the rest of the UK leaves.
Those dreams were dashed last week when Scottish Secretary of State David Mundell told Holyrood’s Europe committee that it was “absolutely wrong” to suggest that certain areas could see special deals when the UK leaves the EU. Committee Convener Joan McAlpine responded by saying that his comments raise “a number of questions” about Scotland’s role in Brexit negotiations and membership in the EU single market.
These uncertainties regarding Scotland’s future in a post-EU Britain will cause media sentiment to worsen over the next week.
3. Northern Ireland’s High Court dismissed legal attempts to block Brexit
Like Scotland, Northern Ireland voted to remain in the EU. Last month, a group of cross-party Northern Irish politicians legally challenged Britain’s plans to leave the EU without a vote in parliament. Last Friday, Northern Ireland’s High Court declared that its government and laws could not override the British government’s decisions.
This case was being closely watched for its status as the first legal ruling on Brexit in Britain. Supporters were optimistic that it could uphold the votes of its citizens to remain in the EU. Instead, Northern Ireland continues to face collective and unique risks.
Limitations on free movement of goods and people could impact the 16 percent of exports that go to Belfast or the UK. But Northern Ireland must also manage potential damage to its 1998 Good Friday Agreement, which sought to end conflict between Catholics and Protestants.
May has said that preserving peace in Northern Ireland is “one of the priorities of her government.” But if Britain fails to accept free movement of people, then the open border between Northern Ireland and the Republic of Ireland – an EU member country – is in jeopardy. It remains unclear whether a hard border between the two countries would return and, if so, how it would be enacted. That uncertainty has caused an influx of Northern Irish citizens to apply for Irish passports and for media sentiment to turn sour, as well.
What it means
The preceding three developments coincided with EE’s signal late last week that media sentiment will continue to be negative towards the UK. This points towards continuous unrest in the UK’s post-Brexit political climate. May’s first speech addressing Brexit at October’s Conservative Party Conference raised more questions rather than providing answers. It also implied that she is pandering to the far right of her political party rather than listening to what her citizens want.
As we previously noted, the majority of UK citizens favor strong EU relations post-Brexit, regardless of whether they voted to leave. May has made it clear that she plans to take negotiations in the opposite direction. Therefore, we expect the UK’s economic outlook and political climate to trend downwards towards slower growth and decreased stability. That will be reflected in media sentiment towards the country.
The United Kingdom expertise in this report was provided by Lauren Maffeo.
Lauren Maffeo has reported on and worked within the global tech sector. In 2012, Lauren earned commission from the government of Taiwan to report on the island’s media market. Lauren earned her MSc from The London School of Economics and her BA from The Catholic University of America, where she was a CUA Oxford Honors Scholar at St. Catherine’s College, Oxford.