Brexit: is ‘immigrant’ capital next?

There is a paradox at the heart of the Brexit vote that might end up having toxic long-term consequences for the foreign ownership of infrastructure assets. And it's this: while protectionism runs through many Leave voters' decision to quit the EU, the current crop of Leave leaders, about to comprise the UK's new government, are enthusiastic free-marketers. This is a dangerous mismatch.

Brexit is widely seen as a howl of anger from large swaths of the dispossessed and the so-called losers of globalisation across England and Wales. The main reason why Remain's economic arguments fell on deaf ears, many now argue, is because, outside of London, voters didn't have that much to lose anyway. Seen through this prism, Leave voters' anti-immigration sentiment is less xenophobia and more a seeking of economic reparation. Rightly or wrongly, immigrants are seen as benefiting from an economic model that does not favour a big part of the country's population.

Now that Leave voters have emerged victorious, it is entirely natural for many of them to expect the UK's economic model to be changed to suit their needs. Unfortunately for them, that is unlikely to happen.

Leave campaign figurehead Boris Johnson, in his 'pro-cake pro-eating it' opening salvo to the forthcoming Brexit negotiations, has set the tone: Brexit is not about retrenchment; it's not even about immigration anymore; it's about opening the UK to the world, unshackled from the EU's cumbersome rules and regulations. In short, Brexit is about more free trade and globalisation, not less.

Now that Johnson has announced he will not run for Prime Minister, it is uncertain whether other Leave campaigners will follow his lead. But a business as usual scenario, if it materialises, will probably come as a rude awakening to a few million voters.

As the UK's looming economic crisis takes hold and people find themselves poorer, they are likely to be angry that nothing has really changed and will look for a political force that redresses that – a protectionist government, in essence. If that occurs, then it's not hard to see how foreign ownership of domestic infrastructure assets might be endangered.

The UK has long been Europe's number one investment destination, thanks to stable regulation, a reliable legal system and ready availability of good assets. Not surprisingly, large swaths of the country's energy sector, utilities and transportation assets, like airports, are owned and run by foreign investors from Asia, Canada, the US, Australia and other parts of the globe.

But how safe will these assets be if a protectionist government – backed by popular opinion – comes to power? What happens when energy imports, made more expensive by a weaker pound, start driving up bills? And what happens if the utilities increasing those bills are owned by foreign private capital?

We've just seen a significant part of the electorate successfully whipped into a populist fury over EU immigration, even though it's widely acknowledged that EU immigrants are net contributors to the UK economy; try espousing on the virtues of your capex programme and private efficiencies in the face of that. If Brexit does turn out to be the first serious warning shot against globalisation, then infrastructure investors, usually in it for the long term, might be in for a bumpy ride.

This is an admittedly apocalyptic scenario – and one, as you will have noticed, with a lot of 'ifs'. But then again, for many people, Brexit has just made the unthinkable happen, whereas for 17 million voters, Brexit is a watershed moment in British democracy, a triumph against the status quo and considerable odds. Whichever side of the fence you fall on, the people have spoken and their will must be respected.

It is now incumbent on those who did not think Brexit could happen, though, to start thinking through other unthinkables. History shows, again and again, how quickly things can change. European integration is not a historical inevitability, nor is globalisation, and neither is the idea that nations championing globalisation today will always champion it.

Welcome to the new world.