In 2016, whilst standing on the concourse of Victoria station just three days before the vote, a friend of mine close to the Remain camp called me. “I think we have lost it”. As someone who had worked and lived in London for three decades and who had recently decamped to Brighton, one of the rare Remain cities, I was shocked.
“Drive round Hampshire or Nottingham and Yorkshire and just look at the posters and the placards”, she said. David Cameron’s gamble to silence the anti-EU right was about to go radically wrong. As a European equity manager, the risks around an event such as this were so great meant I had little in the way of UK exposure anyway, and what little there was, was removed there and then.
The shockwave was immediate for the UK: the pound and the gilts market shuddered. Europe glitched. This was not supposed to happen. Merkel et al could not see this coming and thus had played hardball a few months earlier when Cameron had asked for concessions. How penny-wise and pound-foolish they now seemed.
This quickly hardened into a simple narrative, led by the French: let’s make this so unpleasant no one else will dare to do the same. They should not have worried, the Greeks had already made it clear five years earlier that leaving the euro was such a devastating blow to personal wealth that no electorate would ever consider it.
This ushered in the mess and muddle of the May years, during which she lost her majority, almost gave the keys to No 10 to the radical left, and resigned when she failed to pass almost anything through parliament, The factional fighting of the 2016-19 years may have critically undermined parliament as an institution.
The electorate then just wanted it done, and the landslide Johnson achieved was for just that. Lines that were red (no separate deal for Northern Ireland) evaporated and in early 2020, just before Covid, the UK floated off into the North Sea. Fishing rights were not much different, freedom of holidays (and work) was gone, a long tail of payments still existed, but the UK could set its own laws and do its own trade deals.
Then Covid struck.
Nothing happened. Not much could happen. Whatever momentum the UK could have gained, went. The US president changed, from sympathetic to hostile. Companies had to make it happen for themselves, coping with new regulations and losing margins more than markets. All the while, the actions of the PM and his ministers over Partygate so undermined his authority that Johnson was gone after just half his term in office.
Then it got worse, first under Truss and then under Sunak. Trust in politicians sank to new lows and I was at a UK conference in the Autumn 2022 when the CIO of a major UK insurance company declared that Brexit had made the UK uninvestable. She was not talking about the politics – no one would have forecast six prime ministers since the vote, with another on the way – she simply thought no one in the UK would make money if they invested in it having left the EU.
I was as shocked as I had been on Victoria station, because whilst there was all this political noise, companies had just got on with life. Earnings and EPS were ok. If I look at measures such as GDP growth both before and after Covid, they were pretty much in line with our European neighbours. There are plenty of erudite economic studies to show growth may have been worse than it would have been – hard to deny – but relative to our biggest trading partners across the channel, the UK did not materially under perform.
Covid and the invasion of Ukraine produced significant domestic volatility, much more in the UK than elsewhere when measured by inflation and growth, but the UK equity market, dominated by banks, pharmaceuticals, metals and miners, and oil stocks, performed well. Those international companies demonstrated their resilience. Even when you look at the mid-caps, the total return from across Europe between the UK, France and Germany, is in a narrow channel, whilst the UK may pay more in dividends.
It is in the bond markets where the radical changes have happened. The interest rate spread between 10-year UK gilts and German 10-year bunds, from the creation of the euro in 1999 to 2016, was mainly between zero and 80 bps. Post-2016, this began to rise; the old ceiling became a floor and this peaked at 2.24% just before last year’s Budget in October 2025.
This has become a major problem for the UK. The UK’s inflationary experience has been worse than that of Germany and, whilst German politics is in no great shape, its constitutional fiscal discipline has remained, maintaining credibility, whilst the UK embarked on its Covid and post-Covid fiscal spending spree which continues to this day. The competitiveness of the UK economy is being affected by much higher rates, and whilst savers may be happy, borrowers are not. These high rates of interest have led to huge savings surpluses being held in the banking system, in ISA or deposit accounts – but not invested. Good for bank profits, bad for housebuilders and innovators.
Wider measures are also interesting. Using metrics such as return on equity, return on assets, operating margin, net margin and return on invested capital, and looking at the UK equity market (MSCI UK) versus Germany, France, Italy, Spain and the eurozone: the UK market in 2016 ranked second, third, third, first and second. Today it ranks first, second, first, first and first. An all-round improvement.
What about AI, the new investment boom that has developed since Brexit? According to the Stanford AI Index, we can measure how private investment in AI in the UK fares compared with others. Over the 10 years to 2025, the UK saw more private investment in AI than Germany and France combined. The problem is that the UK’s credible $34bn is tiny compared to the $757bn the US has spent over the same period.
In those numbers lies the crux of the European problem, in or out of the EU, we have all missed the boat when it comes to AI. AI is a US invention, developed and rolled out in the US, which we will all need to subscribe to. There is no European Claude, or even Claudia. Future growth and employment rates will reflect this chasm between the two continents, with the risk that the best and brightest leave for the USA, as they did in the 19th century.
The outlook for relations between Europe and the UK has improved. Firstly, it helps that we all have a common problem in Russia and we are all part of NATO with a need to expand defence spending. There is a second common problem which is immigration and again some joint efforts are possible.
But this is piecemeal, a real rapprochement would need an explicit manifesto pledge, because the sovereignty argument remains the key one. In 2016 people voted against remote politicians running their lives badly. The politicians have become less remote, but their failures have come under intense scrutiny and disdain.
Following the 2024 vote for change the failure of the current administration to grow the economy, control immigration or get the NHS to function has left it friendless. This has driven the UK to undergo a political revolution, and we are watching the collapse of the old parties and rise of the new. This is the real impact of Brexit, and until that is settled, any question of returning to any cohabitation with Europe will be impossible.
After the Brexit vote, I thought that the precedent of the English Civil War would hold: the execution of the king in 1649 and the restoration of the monarchy in 1660. It would take a decade or so for the wounds to heal and the consideration of the benefits reversal. It turns out that things moved much faster in the 17th century than they do today.
Michael Browne is global investment strategist at the Franklin Templeton Institute. The views expressed above should not be taken as investment advice.