Brexit simulation back in 2013

1. August 2013
A Wikistrat Crowdsourced Simulation

2. Simulation Background
Editor’s note: This report summarizes a 10-day crowd-sourced simulation in which over 80 analysts from around
the world collaboratively explored scenario pathways for Britain exiting the EU.
Compiled by Jeffrey Itell, Senior Analyst.
As continental Europe remains embroiled in the Euro-crisis, British doubts regarding its future in the European
Union have increased. Pressured by the rise of the United Kingdom Independence Party on the right as well
as Euro-skeptic members from his own ruling party, Prime Minister David Cameron has announced an “in-
out” referendum on the island nation’s EU membership after the 2015 election. By that time, he hopes to have
achieved ample treaty changes that will allow Britain to opt out of far-reaching European economic and fiscal
integration plans, thus convincing British voters that their future is still in the EU.
Cameron’s gamble might not pay off as other countries are tiring of British demands for special treatment.
Germany prefers to avoid a British exit as it could tilt the balance of power in Europe in favor of the Mediterranean
bloc, but is not prepared to concede much in the way of social, labor-market or banking regulation. The French
reject an “à la carte Europe” and might prefer a British exit for the same reasons the Germans fear it - more EU
power for France.
In May 2013, Wikistrat ran a ten-day crowd-sourced simulation, exploring possible scenarios for Britain’s exit
from the European Union, focusing on what could cause Britain to leave the European Union after the year
2015, when general elections are due, and how exiting would affect Britain’s standing in the world over the
subsequent decade.
In this simulation, Wikistrat analysts prepared 26 scenarios, in which they considered four issues: (1) the
driving factors that would cause the British public to vote favorably on a post-2015 referendum calling for EU
withdrawal and the British government to honor the results of the referendum; (2) Britain’s options for when
and how it would leave the EU; (3) the implications of a British withdrawal from the EU - how key member states
would react and how Britain’s withdrawal might change the EU institutionally; and (4) the economic and security
implications of withdrawal on Britain and how Britain would reinvent its role in the world.
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3. Overview of Master Narratives
The analysis provided in the 26 scenarios gives evidence to support four “Master Narratives,” (MN) built around
two questions:
1) First, to what extent does Britain exit because of actions taken by other EU members or because it wanted
to make its way in the world outside the EU framework?
2) Second, after withdrawing from the EU, to what extent does Britain form new alliances or become isolated?
The X-axis (question 1) represents the primary driving factor: to what extent did the British electorate and
government decide to leave the European Union because of internal factors (joining the EU never really made
sense) or because of external factors (such as European policies hostile to British interests that seemingly cost
more than the benefits of membership). The right side of the X-axis represents Britain’s strongest position,
exiting the EU for its own reasons, while the left side represents Britain leaving because of actions taken by the
EU.
The Y-axis (question 2) addresses the results of Britain’s decision to leave the European Union: to what extent
does freeing itself from EU rules enable it to find stronger economic and security relationships in the world, or
does cutting itself free lead to isolation and decline? A Britain that develops strong alliances will rise to the top
of the chart, while one with weak alliances will reside at the bottom.
These axes, master narratives and relationships are represented on the chart below.
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4. Supporting documentation not included in this report also analyzes the various ways Britain can choose to leave
the European Union and the effect that leaving will have on key member states and the EU as an institution.
The four master narratives chart four distinct futures for the United Kingdom if it withdraws from the European
Union. Departure could be bring the U.K. great rewards, but at great risk of isolation and irrelevance. The best
case scenario (Master Narrative 1) is when Britain affirmatively decides to leave the European Union of its own
accord to pursue tighter integration with American, Western and Asian alliances. Rather than being tied down
Lilliputian-style by EU entanglement, Britain reenergizes itself with new alliances in the dynamic markets of Asia.
The worst case scenario (Master Narrative 3) is when Britain has no alternative but to leave the European Union
because of incompatible policies, but then finds itself not only isolated with few strategic partners and little to
offer, but facing the economic and legal hostility of its former cohorts and neighboring countries.
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5. Master Narrative 1:
Back to the Future
Internal Reason/Strong Alliances
Never quite European, Britain decisively chooses to leave a failing
EU and form alliances with stronger, more dynamic societies.
Unlike the countries of continental Europe, whose land borders
require cooperation or confrontation, Britain chose to join the
European Union out of self-interest, not necessity. Buffered
by the English Channel, Britain could at times throughout
history choose to distance itself from the day-to-day affairs of
continental Europe. Joining the European Union (and hedging
its bets by keeping the Pound Sterling) was a choice, not a
necessity. This master narrative suggests ways that Britain
could improve its lot by freeing itself of the EU yoke and
reinventing itself on the world stage by forming alliances with
stronger partners.
Britain could stage its EU exit off the back of a surging economy.
Although austerity measures make a double-dip recession possible, Britain’s currency flexibility provides policy
options that could lead to a British economic rebound while Europe continues to flounder. Even under a mild
recovery, Britain could tire of waiting for visionary leadership to emerge in Europe and, instead, chart a credible
set of independent policy options for a prosperous British future.
If its economy remains stagnant, Britain’s ruling class and public could still conclude that compared with
other opportunities, partnership with Europe through the EU mechanism provides insufficient opportunities
for economic growth and stability. Instead, Britain could jettison its relationship with a persistently confused
Europe for stronger economic ties in the world’s growth sectors in America, Asia and Latin America. Britain
could execute this strategic shift in a variety of ways, leveraging its core strengths: finance, defense ties to
America, English and its Commonwealth relationships.
For example, Britain could emulate Australia’s approach to economic engagement in that region by forging
closer bilateral ties with the United States, Canada and India to take advantage of growth opportunities in a
nimble fashion that would not be possible if it remained tied down by the bureaucracy in Brussels. Or, rather than
going alone, it could attempt to piggyback on the U.S. strategic pivot to East Asia, contributing militarily and
diplomatically to that effort and gaining economic advantage in return. In essence, Britain could hitch its destiny
to America, with which it has maintained a long-standing security alliance. London could also accomplish this
goal by joining NAFTA, thereby anchoring itself to the more economically liberal and fiscally sound English (and
Spanish)-speaking North Atlantic, and through America to fast-growing Asia and its four billion consumers,
many of whom are becoming part of the middle class.
If Britain wanted more independence from American policy, it could “rebrand” itself as one of the leaders of
the English-speaking world (in contrast with dealing with countries as a leading EU member). It could also use
these advantages to rekindle relationships with Commonwealth partners, former colonies and Middle Eastern
countries, with which it has historic ties.
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6. The U.K. could also exercise the option to turn its attention northward to realize the vast potential of oil and
gas reserves in the Arctic made accessible through climate change. The U.K. could maximize its position as
a Permanent Observer within the Arctic Council, offering itself as the principal financial hub of all resource-
endowed Arctic Council states and Arctic investors, showcasing its new-found freedom from EU regulations.
Furthermore, the melting polar ice caps provide the U.K. with an opportunity to become a principle transshipment
hub between Asia and continental Europe, strengthening ties with Asian Commonwealth members, supporting
the U.S. Asia Pivot and tying into a burgeoning Transatlantic Trade and Investment Partnership.
Regardless of which strategy it choses, leaving the EU would provide Britain unfettered access to Asian
markets, which would provide economic growth opportunities unimaginable in Europe. Nevertheless, the shift
in the Churchillian three spheres of U.K. foreign policy away from Europe towards the Commonwealth and
the Transatlantic relationship still requires an ongoing amicable relationship with continental Europe and its
enormous market, which accounts for most of Britain’s current trade. Therefore, following a British exit from the
EU, much of the U.K.’s diplomatic energy and effort would be spent ensuring that Britain still sees the value of
a close relationship with European member-states.
One option would involve joining and reinvigorating the European Free Trade Association (EFTA), which Britain
helped found in 1960. Joining EFTA would enhance Britain’s trade dynamics with the Commonwealth, strengthen
bilateral ties with America and maintain continued access to the European markets. Thus, an EU-exit for Britain
would not mean isolation in Europe, but an involvement in regional integration dynamics, which would both
appease Britain’s internal idiosyncrasies and European traders. While the U.K.’s shift from EU to EFTA status
would have both advantages and disadvantages, if executed gradually and with the cooperation of EU member
states, it would reflect Britain’s relationship with Europe better to the advantage of all parties.
In addition, a British exit from the EU could precipitate an intense north-south debate fostered by the inability of
the northern nations (which no longer include the U.K.) to stem demands for support by southern nations. This
dynamic could create new opportunities for Britain if the northern countries - Germany and the Netherlands
- strengthen their relationships informally and institutionally to effectively deal with southern “beggar” states.
Under sufficient duress, Germany could lead an effort to partially disengage economically and financially from
the south, resulting in a two-speed EU. Such an arrangement would be more amenable to British interests, as
the U.K. could reorient its relationship with Europe by focusing primarily on strong northern block members.
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7. Pages
Internal Reason/Weak Alliances
Never quite European, Britain decisively chooses to leave a failing
In the previous master narrative, skill and a bit of luck lead to an
improved position for Britain. This master narrative illustrates
what occurs when Britain decides to engage the world alone,
but bad decisions and misfortune cause Britain to struggle in
finding its place in the world order, leaving it at odds with its
continental neighbors and unable to make new alliances.
Public opinion against EU membership is the common driving
force in the following pathways. Although the rationales for
leaving the European Union are plausible in these examples,
greater consideration could have been given to the downside
risks of exit.
A weak economy, unrelenting immigration, Islamic non-assimilation and unemployment, which take its toll
on the British psyche, could force an inward-looking U.K. to vote to exit from the EU. So could a populace
foreseeing the European Union becoming an increasingly federalized nation, which is not the deal Margaret
Thatcher signed up for. Although a more skeptical governing class would be more cautious about leaving the
EU, intense public sentiment and special interest lobbying could compel the governing class to honor public
sentiment.
Given a high level of public sentiment opposed to EU membership, even a misplayed hand could result in
Britain on the outside looking in. For example, leveraging the threat of the emerging U.K. Independence Party,
Prime Minister Cameron could seek treaty revisions and lower fiscal demands from the European Union ahead
of Britain’s EU withdrawal referendum. If Cameron overplays his hand and Germany and France miscalculate
the Eurosceptic sentiment in Britain, the U.K. could find itself “accidentally” on the outside, against every
European leader’s wishes.
Bankers, labor and the surging U.K. Independence Party could also force British politicians to lead the U.K.
to exit and isolation. Responsible for 40 percent of Europe’s financial services, London’s bankers, who have
never been happy with EU banking restrictions, could advocate a British exit in order to inoculate themselves
from increasingly stringent measures. Leveraging resentment against unrelenting Romanian and Bulgarian
immigration, Labor could also call Cameron’s bluff by affirming the government’s referendum to leave the EU.
A strong campaign by the U.K. Independence Party and lukewarm EU support from other parties could result
in a similar outcome.
Under each of these conditions, Britain could decide to leave the EU hastily in response to public opinion without
adequately considering the risks. If it cannot improve its ties with Asia, the Commonwealth countries, and Asia
- and as an independent country with an economy dwarfed by the EU, the U.K. would be disadvantaged in
negotiating new alliances - then Britain could find itself honing its trade relationship with Europe, but from the
outside, subject to all the rules but without a seat at the rule-making table. For example, Britain could negotiate
an exit in exchange for U.K. common market access, which would require adherence to EU trade rules. Or,
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Master Narrative 2:
Alone Again, Naturally

8. if Britain’s government was taken by surprise with the result of the referendum, it would likely scramble for
membership in the European Economic Area to provide it access to the European single market. Doing so
would subject the U.K. to all but the agricultural regulation it sought to escape, while losing its clout to affect
EU rule-making. Britain could also opt for the Norway model, but contributing to the EU’s budget on the heels
of withdrawal will be a tough sell among the British political class and electorate.
These three outcomes are prefaced on Britain skillfully defusing continental animosity to its withdrawal.
Retaliation by the EU and its member countries, though, is just as likely. Upon exiting the EU, Britain’s economy
would likely experience immediate shocks: companies relocate to the continent, foreign workers leave, British
workers return (without jobs) and Scotland leverages its desire to remain in the EU for a better deal with
England. Britain would do best to build stronger alliances with Commonwealth members to offset these losses,
but cutting ties with its closest trading partners would leave Britain disadvantaged for the foreseeable future.
Worse, the EU could retaliate by restricting British employment and trade opportunities on the continent,
further weakening Britain’s economy and exacerbating unemployment within immigrant groups, creating a non-
virtuous cycle of isolation, xenophobia and poor economic performance. Although exiting the EU might be
an advantageous and lucrative short-term move for London’s banking sector, lack of an external regulatory
constraint could drive business to better regulated, less risky banking sectors in the United States, Japan and
Germany.
A precipitous exit could also complicate Britain’s relationship with the Republic of Ireland, still an EU member,
putting the fragile peace in Northern Ireland at risk. Ireland and Britain need to resolve difficult customs, trade,
travel and (especially) immigration issues upon Britain’s exit. Britain’s commitment to the Northern Ireland peace
process would be questioned unless non-restrictive travel and trade agreements are negotiated. Relations with
Scotland would also be complicated, especially in light of Scotland’s pending independence referendum. (More
details below.)
Britain’s departure (along with its significant contribution to the EU’s overall budget) could also transform the
EU, turning it into a mere economic trade union. Ironically, Britain could then find itself increasingly dependent
on continental Europe for trade while carrying the burden (and punishment) for being the country that sank the
unified Europe experiment.
Having lost its say in the rules upon which it must abide and unable to compete with a unified Europe for
alliances elsewhere in the world, Britain could very well experience its swan song on the world stage.
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9. External Reason/Weak Alliances
Battered by incompatible EU policies, Britain is forced to leave
While the EU may be an imperfect union that takes actions that
exasperate the British public and business community, Britain
may learn that the world is more interested in dealing with an
U.K. inside the EU tent than outside it. In this master narrative,
the European Union adopts policies that are incompatible
with the U.K.’s national interests, accelerating British support
for an ill-advised EU exit. Rather than working within the EU
for improvements, Britain opts out precipitously, learning
afterwards that a bad situation can quickly become worse.
Three primary issues could force Britain to leave the EU:
centralization of power in Brussels that usurps too much U.K. sovereignty, the EU’s inability to resolve the fiscal
demands of the southern debtor nations and the failure of the EU to defend itself against encroachment by
foreign powers.
EU demands for deeper integration and concentration of decision-making in Brussels - an evolution that Germany
reluctantly accepts - could push Britain to follow Norway’s relationship with the EU through the European
Economic Area. Britain would secure economic privileges under the EEA and protect itself against regulations
that affect sovereignty rights, but at the cost of giving up direct political power in continental politics.
For similar reasons, Britain could opt for the Turkish model, in which Britain secretly negotiates an exchange
of EU membership for a customs union affiliation similar to Turkey’s. If successful, it is likely that other EU
member countries would negotiate their own deals with the EU, which could start a process of creating tiered
EU memberships.
Fiscal demands by debtor nations (Greece, Cyprus, Portugal and Spain), which are either unreasonable or
incapable of being paid, could also force the U.K. to withdraw from the EU. The specter of having to participate
in future bailouts could push Britain into “splendid” isolation. In one scenario, the underperformance of southern
nations shifts the loci of EU power from the north to the south (power shifts from debtors to creditors), creating
a Mediterranean Union rife with fiscal consolidation and large transfer payments.
In another variation of resolving the southern debt crisis, the EU would shuffle around revenues and expenses
to Britain’s detriment in order to cover its obligations to southern countries. The EU could raise revenue by
diminishing the EU-U.K. agriculture rebate to a level where the U.K. loses net income and has to finance less
efficient agriculture competitors in southern Europe. Today, 30 percent of U.K. farmers are kept afloat by EU
subsidies.
Europe’s failure to defend its security interests, especially in light of a successful Iranian nuclear weapon test,
could also force Britain’s hand, especially if such a test was followed by a tit-for-tat retaliation that hits Britain
the hardest, prompting it to align more closely with the United States at the expense of Europe.
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Master Narrative 3:
Abandoned and Alone; No Easy Road

10. Britain would likely leave the European Union under any of these scenarios. Although Britain would regain some
measure of its sovereignty and perhaps fend off claims on its national treasure, it would likely struggle to find its
place in a world comprised of major alliances. As a single country struggling to renegotiate relationships with its
border lands of Ireland and Scotland, Britain would likely be unable to compete effectively on the world stage
with a unified, if diminished EU. Why strike a deal with Britain at the expense of dealing with the much larger
and lucrative EU?
Adopting the Norway model would relieve Britain of some burdens and free its internal markets. However, the
move would also leave Britain flailing for allies without the strength that Norway possesses - low population and
high energy production. Adopting the Turkish model could have similar results. However, Turkey does not have
to rely on the EU for trade within its geographic region. It is able to trade with many of its neighbors aside from
the EU while the U.K. is geographically bound by the EU to its east and the Atlantic Ocean to its west. There is
no guarantee that Britain would be able to negotiate favorable trade rights with the EU. France and Germany,
feeling betrayed, might punish the U.K. by isolating it economically and politically, demanding onerous trade
concessions from Britain as an early withdrawal penalty.
Britain would also likely lose its edge in competitive industries. Should EU agriculture subsidy policies change,
Britain would also have no choice but to liberalize its agricultural markets along an Australian/New Zealand
model. While this strategy may ultimately strengthen British agriculture, the short-term effects would wreak
havoc on farming, banking and other integrated economic sectors.
An EU exit could also trigger a cascading set of effects that marginalizes the English-speaking leader of the EU.
Enrollment in the U.K.’s world-class, English-language higher education institutions could drop precipitously
as EU students seek English language instruction elsewhere. Enrollment drops would drive up the cost of
tuition, putting the cost of higher education out of reach for more U.K. residents, resulting in an increasingly
uncompetitive workforce. Maritime companies would also move back to continental Europe, trashing another of
Britain’s economic comparative advantages. London’s premier financial sector would suffer on both accounts.
If forced out for national security reasons, Britain would become even more beholden to the U.S., losing flexibility
with respect to U.S. military and economic policy. In all likelihood, a compliant Britain would even be forced to
rely on the United States to rebuild its economic ties with continental Europe.
The downstream effects of a precipitous British exit from the EU could also hurt Britain closer to home, in
Ireland (as discussed above) and in Scotland. For example, if Scottish voters passed a referendum that ended
the 300 year-old union with England in 2014, this would remove four million Scottish voters from Britain’s EU
referendum, leaving Britain on the outside and Scotland still on the inside. Scotland’s separation would cost
the U.K. 80 percent of its gas and oil production and large financial institutions such as the RBS, grievously
weakening Britain. Alternatively, Scotland, taking advantage of Britain’s weakness, could instead push for more
autonomy and negotiate a more favorable arrangement for staying in the U.K. Taking note of Britain’s weakness
and isolation, Argentinian irredentists could move again on the Falkland Islands, requiring a weakened Britain
to beg the United States for assistance, which it might not be willing to provide.
Britain would have to console itself by becoming the fulcrum for EU dissenters continent-wide. The U.K. and
Russia, as the two big EU outsiders, would strengthen their relationship, while Britain pursues an economy-first
foreign policy to mitigate the severe loss of EU trading partners.
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11. External Reason/Strong Alliances
Battered by incompatible EU policies, Britain is forced to leave the
EU and forms strong alliances with more responsible partners.
While British public opinion is decidedly anti-EU, Britain’s
politicians, keen on staying within the Union, deftly assuage
that anger through EU concessions and other means to keep
the U.K. in the EU. Despite these efforts, events play out so
badly in the European Union that virulent anti-EU public opinion
arises in a manner that the British elite cannot contain. This
master narrative explores the pathways and consequences of
a reluctant Britain forced to leave the EU but ultimately finding
out that life is better on the outside looking in.
The European Union’s persistent sovereign debt crises and
underdeveloped security posture are the two issues that
could force a British exit. For example, a second wave of the
European sovereign debt crisis could lead to an economic and political breakdown in the EU’s southern periphery,
resulting in Greek hardliners repudiating its debts and exiting the EU in orderly fashion. If the contagion spreads
throughout the south, Britain could wash its hands of German/French mismanagement by orchestrating its own
exit on favorable terms.
Depending on how the sovereign debt crises play out, Germany could jump first, leaving the single currency
union to avoid mounting financial demands from the south. Germany’s exit would shatter Britain’s confidence
in the EU, prompting its own exit ahead of EU disintegration.
The ineffective control of borders by EU nations could also precipitate a British exit. The countries that are
struggling most with government debt and poor economies (Spain, Italy and Greece) are also the frontline states
policing the EU’s borders. Should these countries increasingly fail to live up to this responsibility, widespread
illegal immigration (much of which directly funnels to the U.K.) could force Britain to effectively seals its borders
with a continental Europe suffering under the influx of indigent migrants.
Vulnerabilities caused by inadequate EU defense policies could also precipitate an unexpected and unwanted
exit. France and Germany have long sought to create an EU military integration plan to co-exist or replace the
current role of the Atlantic alliance through NATO. However, chronic underfunding of the defense initiative and
the financial demands of southern nations could doom the EU defense initiative, leaving Europe inadequately
defended. In such a case, Britain (with much urging from Washington) would likely cast its lot with the United
States-led NATO, rather than the underfunded French/German defense initiative.
Under these circumstances, an exit from the EU would strengthen Britain’s position only to the extent that it
would have been in far worse shape had it remained. For example, the short-term consequences would be
harmful should Germany leave the EU first. Over time, however, the U.K. and Germany could reorganize their
economic relationships in Europe in a manner that would leave both better off than would have been possible
in an unstable and unsustainable currency union.
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Master Narrative 4:
Virtue Out of Necessity

12. Although it would take years for Britain to recoup its European trade losses (which would have occurred regardless
with a disintegrating and dysfunctional EU), it could recover by increasing its ties with the Anglosphere and
Commonwealth countries and by reasserting itself as the financial leader of countries nonaligned to regional
trading blocs.
Exiting would also provide Britain with the flexibility to address its security needs. Britain would immediately
retain its ability to “punch above its weight” in world affairs, bilaterally and through NATO, by helping the U.S.
and its allies maintain global world order while an ineffective Europe dithers. In particular, Britain could help fill
the security gap created by U.S. disengagement in the Near East and strengthen its special relationship with
the United States by supporting its pivot to Asia.
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13. 1212
Prime Minister Cameron’s accession to a referendum on exiting the European Union could turn out to be a
dangerous gambit. As these master narratives indicate, although there are several pathways for strengthening
its global position should it leave the EU, most of the risk is on the downside. The U.K. could easily find itself
poorer, isolated and irrelevant should it decide to leave the EU. Exiting would also present new difficulties with
Ireland and Scotland. Although some of these issues could be resolved satisfactorily over time, it is inconceivable
that the U.K. could deal adequately with all of these issues simultaneously as a result of a precipitous British
exit from the EU.
Holding the referendum itself presents dangers. While Britain’s leaders may secretly intend to not honor a
vote in favor of exit, a second round of sovereign debt crises, tit-for-tat attacks over Iran’s nuclear issues or
breakdowns on Europe’s southern border controls leading to an influx of refugees and migrants could force
Cameron’s hand to leave the EU. Even a misplayed hand in conjunction with external shocks within continental
Europe could result in an undesired exit.
While Master Narrative One illustrates ways in which Britain could improve its world position by exiting the
EU, it also indicates that the U.K. could likewise improve its position by working from the inside to improve the
EU. Even in a ‘flat’ world, the U.K. still does the majority of its trade with its nearest neighbors. Getting that
relationship correct is job number one. Only if the European Union falters so badly or disintegrates would it
make sense for Britain to leave the EU. However, in that case, its first efforts would have to be in renegotiating
its relationships with Germany and France as well as whatever entity the EU transitions into being. The U.K.
is too small to act alone on the world stage; its economy is inextricably tied to continental Europe, and its
best way to gain access to markets in the Americas and Asia is through a European confederation. Britain’s
efforts should be directed at making the EU a more perfect union rather than gambling that it can successfully
freelance its way to success.
Strategic Takeaways

14. August 2013
Britain Exits the
European Union
Written by: Jeffrey Itell
Edited by: Caitlin Barthold
This report was based on the
collaborative efforts of more than
80 analysts
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