Brexit – Pros & Cons

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On June 23rd, the UK will vote for the Brexit, a historic question that’s been rumbling close to the surface of British politics for a generation.

Should the country remain within the European Union (EU), or leave the organisation and go alone.

How could it come to this?

The Conservative election victory last year activated a promise to hold an in or out referendum on Britain’s membership of the European Union.

David Cameron made the promise of an EU referendum at a time when he was under pressure from EU – sceptics backbenchers within his own party – and when the Tories appeared to be losing votes to the UK Independence Party (UKIP).

Most political commentators agree that, he wouldn’t have wanted a referendum, and that he is desperate to secure that Britain keeps their place in the EU.

This winter, he initiated a tour of the EU capitals because he would renegotiate Britain’s terms of membership, which concluded at a summit in February.

Presenting the result as a victory, he promised to campaign with his “heart and soul” to keep Britain within a reformed EU.

But several members of his own Cabinet are campaigning for a British exit or Brexit as it has been known.

So what are the advantages and disadvantages of being a part of EU? Would Britain be better off staying inside EU or going alone?

Pros and Cons of a Brexit

The greatest uncertainty associated with Britain leaving the EU is that no country has ever done it before. So no one can predict the exact effect of a Brexit. Nevertheless, many have tried.

So no one can predict the exact effect of a Brexit. Nevertheless, many have tried.

Fee for the membership of EU

If Britain leaves the EU that would result in an immediate cost saving, as the country would no longer contribute to the EU budget. Last year, Britain paid in £13bn, but it also received £4.5bn worth of spending, says

Last year, Britain paid in £13bn, but it also received £4.5bn worth of spending, says Full Fact.

So the UK’s net contribution was £8.5bn last year. That’s about 7 percentage of what the Government spends on the national health service (NHS) each year.

What’s harder to predict is whether the financial advantages of an EU membership, such as free trade and inward investment outweigh the upfront costs.

The trade agreement

brexit investments

The EU market is a market where no tariffs are imposed on imports and exports between the members of EU.

“More than 50% of our exports go to EU countries,” says Sky News, “and our membership allows us to have a say over how trading rules are drawn up.”

Britain also benefits from trade deals between EU and other world powers.

“The EU is currently negotiating with the US to create the world’s biggest free trade area,” says the BBC, “something that will be highly beneficial to British business.”

Britain risks losing some of the negotiating power if they leave EU but it would be possible for Britain to negotiate their own trade agreements and of course renegotiate with all the EU states.

UKIP leader Nigel Farage believes that Britain could follow the lead of Norway, which has access to the single market.

However they are not bound by EU laws in areas such as agriculture, justice and home affairs. But others argue that an “amicable divorce” would be mission impossible.

“If Britain were to join the Norwegian club,” says The Economist, “it would remain bound by virtually all EU regulations, including the working-time directive and almost everything dreamed up in Brussels in future.” It would no longer have any influence on what those regulations said.

It would no longer have any influence on what those regulations said.

Leading Brexit campaigner Boris Johnson has proposed the Canada style trade agreement.

“I think we can strike a deal as the Canadians have done based on trade and getting rid of tariffs and have a very, very bright future”, he said.

The idea was quickly dismissed by the PM, who said that it would result in “years of painful negotiations and a poorer deal than we have today”.

EU-sceptics argue that the big majority of small and medium-sized companies do not trade with the EU but they are still restricted by a huge regulatory burden imposed from abroad.

A study by the think-tank Open Europe, which wants to see the EU radically reformed, found that the worst-case “Brexit” scenario is that the UK economy loses 2.2% of its total GDP by 2030.

By comparison, the recession of 2008-09 knocked about 6 percentage off UK GDP.

However, it says that GDP could rise by 1.6 per cent if the UK was able to negotiate a free trade deal with Europe.

That means to maintain the current trade set-up and pursued “very ambitious deregulation”.

Whether other countries would offer such generous terms is one of the big unknowns of the debate.

Pro-Brexit campaigners argue that it would be in all the European countries to reestablish the free trade agreement.

The opponents suggest that the EU will want to make life harder for Britain to prevent other countries to do a break with EU.

For example, France has said that there will be “consequences” for Britain if they leave EU.

Investment

Inward investment is likely to slow in the run-up to the vote, because of the uncertainty of the outcome and its consequences: that’s what happened before the Scottish independence referendum in 2014.

In longer terms, there are two different predictions:

Pro-Europeans think the UK’s status as one of the world’s biggest financial centres will be diminished if it is no longer a gateway to the EU.

While Brexit campaigners suggest that, free from EU rules and regulations, Britain could reinvent itself as a Singapore style supercharged economy.

Fears that car-makers could scale back or even end their production in the UK. Vehicles could no longer be exported tax-free to Europe.

This was underlined by BMW’s decision to remind its UK employees at Rolls-Royce and Mini of the “significant benefit” EU membership confers.

Likewise, Business for New Europe says tax revenues would drop if companies that do large amounts of business with Europe. Particularly banks moved their headquarters back into the EU.

Barclays, however, has put forward a worst-case scenario that might benefit the Outers.

It says the departure of one of the EU’s most powerful economies would hit its finances and boost populist anti-EU movements in other countries.

This would open a “Pandora’s box”, says the Daily Telegraph, which could lead to the “collapse of the European project”.

The UK would then be seen as a safe haven from those risks, attracting investors, boosting the pound and reducing the risk that Scotland would “leave the relative safety of the UK for an increasingly uncertain EU”.

Immigration

brexit investment

Under EU law, Britain cannot prevent anyone from another member state coming to live in the country.

While Britons benefit from an equivalent right to live and work anywhere else in the EU.

The result has been a huge increase in immigration into Britain, particularly from eastern and southern Europe.

According to the Office for National Statistics, there are almost 1 million eastern Europeans, Romanians and Bulgarians working in the UK, along with almost 800,000 western Europeans.

And 2.93 million workers from outside the EU. China and India are the biggest sources of foreign workers in the UK.

Inners say that, while the recent pace of immigration has led to some difficulties with housing and service provision, the net effect has been overwhelmingly positive.

By contrast, Farage says immigration should be cut dramatically, and the leaving the EU is the only way to “regain control of our borders”.

Other pro-Brexit campaigners would not necessarily reduce immigration, but say that it should be up to the British Government to set the rules.

David Cameron says that concessions he won during the renegotiation of Britain’s EU membership will reduce immigration as new arrivals will receive a lower rate of child benefit.

Jobs

The effect of leaving the European Union on British jobs depends on a complex interplay of the following factors: trade, investment and immigration.

Pro-EU campaigners have suggested that three million jobs could be lost if Britain leave the European Union.

However, while “figures from the early 2000s suggest around three million jobs are linked to trade with the European Union,” says Full Fact, “they don’t say they are dependent on the UK being an EU member.”

If trade and investment fell post-Brexit, then some of these jobs would be lost – but if they rise, then new jobs would be created.

A drop in immigration would, all else being equal, mean more jobs for the people who remained.

But labour shortages could also hold back the economy, reducing its potential for growth.

Stuart Rose, former Marks & Spencer chief executive and a prominent pro-EU campaigner, conceded recently that wages may rise if Britain leaves – which would be good for workers, but less so for their employers.

Writing for the London School of Economics, Professor Adrian Favell says limiting freedom of movement would deter the “brightest and the best” of the continent from coming to Britain and reduce the pool of candidates employers can choose from.

Free movement of people across the EU also opens up job opportunities for British workers seeking to work elsewhere in Europe.

Britain’s place in the world

For Outers, leaving the European Union will allow Britain to re-establish itself as a truly independent nation with connections to the rest of the world.

To Inners, Brexit would result in the country giving up its influence in Europe, turning back the clock and retreating from the global power networks of the 21st century.

Brexit would bring some clear-cut advantages, says The Economist.

…Keep reading!

The UK “would regain control over fishing rights around its coast”, for example.

But it concludes that the most likely outcome is that Britain would find itself “a scratchy outsider with somewhat limited access to the single market, almost no influence and few friends”.

Britain would remain a member of Nato and the UN, but it may be regarded as a less useful partner by its key ally, the US.

The American government fears that the “EU referendum is a dangerous gamble that could unravel with disastrous consequences for the entire continent”, says The Guardian.

Security

Work and Pensions Secretary Iain Duncan Smith, who has come out in favour of Brexit, says we are leaving the “door open” to terrorist attacks by remaining in the EU.

“This open border does not allow us to check and control people,” he says.

However, a dozen senior military figures, including former chiefs of defence staff Lord Bramall and Jock Stirrup, say the opposite.

In a letter released by No 10, they argue that the EU is an “increasingly important pillar of our security”.

Especially at a time of instability in the Middle East and in the face of “resurgent Russian nationalism and aggression”.

Defence Secretary Michael Fallon has also said the UK benefits from being part Europe, as well as Nato and the United Nations.

“It is through the EU that you exchange criminal records and passenger records and work together on counter-terrorism,” he said. “We need the collective weight of the EU when you are dealing with Russian aggression or terrorism.”

In contrast, Colonel Richard Kemp, writing in The Times, says these “critical bilateral relationships” would persist regardless of membership.

And that it is “absurd” to suggest that the EU would put its own citizens, or the UK’s, at greater risk by reducing cooperation in the event of Brexit.

“By leaving, we will again be able to determine who does and does not enter the UK,” says Kemp, a former head of the international terrorism team at the Cabinet Office. “Failure to do so significantly increases the terrorist threat here, endangers our people and is a betrayal of this country.”

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