On the day on which UK’s Prime Minister David Cameron announced the decision regarding the referendum on the Brexit: an exit of Great Britain from the European Union, listing of the pound plummeted rapidly. Representatives of foreign companies began to compute the negative consequences of Brexit for the British economy. Shortly after that first opposing voice appeared from Borris Johnson – PM’s fellow member of Conservatives Party and London’s Mayor – who eagerly urged Britons to exit in order to take the fate of their country into their own hands.
An explosive mixture of arguments from supporters of “Leave” and “Remain” campaigns will run until 23rd of June 2016. To have clearer view let us examine some of the crucial issues on this debate about UK’s future.
Brexit: Let’s talk money
Economics and future prosperity of UK’s business lie at the heart of the vivid discussion on Brexit.
Eurosceptics claim that the withdrawal will reverse immigration, save billions of taxpayers’ money and free Britain from the economic burden of net payer position. Europhiles, on the other hand, reply that leaving EU will lead to a profound economic insecurity and cost UK’s economy thousands of job places.
Economic departments and think tanks aim to estimate the cost of both scenarios but it leaves us with nothing more than an educated guess. Supporters of the ‘Leave’ campaign claim that EU “prevents the UK from taking full advantage of a surging global economy [and] capitalising on its unrivalled influence throughout the rest of the world”. However, in order to really benefit from the withdrawal, some conditions would have to be fulfilled. First of all, UK would have to save all of the current net contributions to the EU which in 2015 amounted to £13bln. Second, the Britain would have to come up with new trading deals not only with the European countries but first of with China, India and United States which are no regulated through the EU market. Third, new immigration policy would have to be put in place and finally, EU regulations would have to scrap in order to free the SMEs market.
All of it connects with additional costs, at least for the first few years after exit. But as the saying goes one needs to put his money where his mouth is.
Pro-Europe think tanks such as Centre for European Reform (CER) claims that Brexit will force Britain to ‘find’ extra funds for regional development and agriculture which currently are subsidized by EU funds. Also curbing EU immigration might diminish inflow to the public finances as they are large net contributors to the Treasury as research has shown.
More balanced view has been offered by the Open Europe think tank which stating that the result of Brexit, if UK leaves, will depend strongly on the trade deals the UK will be able to negotiate after the referendum and if UK achieves liberal trade arrangements with the EU and the rest of the world, it could achieve 1.6% higher GDP in 2030 than predicted now.
Nevertheless, these are just attempts to predict unpredictable. While news coming in from large business are not promising. Already last month, one of the world’s largest banks JP Morgan, announced it has been looking for a place for its new headquarters on the continent. Deutsche Bank also plans to return to his homeland. Also, other big international and European companies thinking about shutting down their HQs in Britain and returning home, especially if the post-exit trade agreements won’t secure them, at least, similar position to the one they have currently. The situation may be especially dramatic for car industries and finance services.
What about Europe?
The withdrawal of the UK from the European Union is not decided yet. If however, the British decide to leave the EU, the EU will need to begin a long process of fundamental institutional reforms.
Of course, the decision in favor of leaving made on 23rd of June won’t automatically ‘push’ the UK out of European institutions neither it won’t immediately stop the European policy of London. On the contrary. For David Cameron, as well as for the other 27 Member States and representatives of EU institutions, the difficult process of preparing, negotiating and ratifying the treaty to withdraw Britain from the European Union will begin. The experience of the ratification of the Treaty establishing a Constitution for Europe in France and the Netherlands, or the Treaty of Lisbon, for example in Ireland, Germany or Poland, showed that the negotiations and the ratification of the document may take a long time and the legal effects of the treaty for all parties will be able to come to life only in 2020.
What do Britons think about Brexit?
In the discussion about the referendum on the future of the EU, one should not ignore the British point of view. British appreciates this commitment to their originality and independence not only in the EU structures. Driving on the left side of the road, pound, as well as the natural border between the mainland and the Islands, strengthen the sense of independence and originality.
On the other hand, the Brits are aware that Europe needs the United Kingdom, which is connected to the mainland not only by language or culture but mainly by its finances. Therefore, there is part of Britons that are convinced that leaving EU now will put them in a good position of negotiating new membership conditions, under which they would not have to obey EU’s regulations about immigration policy or the financing of social policy. That, however, might be only a wishful thinking. Additionally, the success of the British economy outside the structures of the internal market convince those who see it as an indication of an inefficient system of the single currency within Eurozone. However, there are comments raising concerns about the rules for access of British products to the European market. It is not only the question of the introduction of tariff measures in trade relations but above all, we are talking about the consequences of the outflow of immigrants from British manufacturers.
Also, one must consider the estimates, which indicate that the exit of the British Union would weaken Europe’s position in the global economy. According to the forecasts of the German Chamber of Commerce, the EU would lose 13 percent of its population and 17 percent of economic strength. Therefore, a decision which the English, Scots, Welsh and Northern Irish will take in June will influence only UK’s future but the future of all remaining 27 Member States. Let’s hope they will choose right.
Share with us your perspectives on the reasons why Britain should stay or exit the European Union!