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On the 8th July 2016, VCL published its monthly note. This included the publication of VCL's CEO, Martin Wood's monthly comment, as well as this month's five resource stocks of interest, which can be seen on the Short Note page, plus a topical cartoon.

"So the UK is leaving the EU - or the UN as Fox News reported!!

As a precedent for leaving the EU we will be inclined to cut a hard deal to deter others eyeing the door.

This could be a dangerous route. The other Eurosceptic parties will pounce on any EU weakness in negotiations to strengthen their own hand, but also - any overly harsh deals - that damage the EU too, will also be used to show the desperation of the union to deter others from leaving!! 

Now the EU continues to grow in terms of member states - but more importantly, it is not growing as an economic unit. So can it only keep members by effectively making itself a prison? Surely this is the wrong signal. To survive and thrive the EU needs to be a club people want to join and stay in long term, a place of economic salvation with business friendly policies that help growth. If it only keeps members for fear of economic retribution it is no more than a prison, and as the UK has shown, sometimes prisoners arrange jailbreaks.

The irony is that the remain camp, quite rightly, argued that Britain should stay in the EU to help fix it, but the victory of the Leavers might actually be the kick in the arse the EU needs to reform itself.

Can the EU look in on itself and fix the ongoing discrepancy in standards of living (German GDP from 2006 to 2016 up 11%, in same period France flat, Spain down 8% and Italy down 11%), the creeping politicization of a once purely economic community (remember the EEC?). The squid like rules that while they aim to theoretically help trade actually drown small and medium sized businesses in red tape (The EU has been in long term decline compared to Asia and North America where regulation is lighter).

Or will Britain loose its nerve and not leave - removing the EU need to reform and declawing one of the most vociferous voices for reform to boot. Will the EU apply more of the wrong medicine and push for even greater centralization? - This would merely have the effect of encouraging the other 'out' leaving states to start digging their own Tom, Dick and Harry escape tunnels and hasten the demise of a basically good idea which has just lost its way.

The main issue for most leavers I think was not immigration - The UK may end up with more or fewer immigrants in the future, this is just a function of economics - a healthy economy sucks in workers, a flagging economy loses them, that is simple. But in future immigration to the UK may be biased to the economic needs of the UK, not the countries sending the workers, i.e. come for a job, don't just come.

The main issue is really the ‘democratic deficit’ inherent in the EU - this is what evokes most passion in the UK - the feeling of anger at being slowly subsumed by a non-elected bureaucracy (whether that is true or not is up for debate, but that is how it feels, and feelings matter in voting.) The UK is not alone in this feeling. 85% of Swedes and 73% of Dutch don't want any further political integration in the EU. Sweden and Holland are NOT famous for being illiberal, uneducated racists!

So a new relationship will develop between the EU and the UK - both parties need it. But perhaps if the deal has always been to make breakfast, Britain would prefer in future to be the chicken giving the eggs, not the pig providing the bacon.”