So, Cameron has his deal and the date has been set; on 23 June 2016 Britain will decide whether to remain in the EU, on the new terms negotiated over the weekend, or whether to call time on our 43 year relationship with our European partners.
But what would a ‘Brexit’ mean for the UK? What are the pros and cons of leaving (or staying)? The short answer is that no-one really knows since no country has actually left the EU before, though admittedly some have come close (Greece, we’re looking at you) and Greenland did leave the EU’s predecessor, the European Economic Community, in 1985.
So, to add to the speculation, here are our thoughts:
- Cost savings
Europe is a club and, like most clubs, membership has a fee attached. This includes not only direct costs, such as Britain’s contribution to the EU budget (estimated as a net contribution of £8.5 billion in 2015), but also indirect costs, such as those associated with implementing European laws and regulations. In March 2015, Open Europe estimated that the 100 most burdensome EU regulations cost the UK economy over £33 billion per year. Leaving the EU would mean an immediate saving in membership costs and an ability to reduce indirect costs through…
No more ‘Brussels red-tape’ is one of the key arguments put forward by Euro-sceptics who see the EU’s influence on UK legislation as excessive. They argue that Britain’s membership of the EU forces businesses which may not even trade with the EU to comply with an oppressive and costly regulatory regime. Sectors which are particularly affected include financial services, renewables and employment. Leaving the EU could pave the way for sweeping legislative reforms to unshackle UK businesses making them more competitive and potentially reducing prices for consumer goods.
- Border control
Immigration and border control is a highly emotive subject. Supporters of a Brexit argue that it is impossible to curb immigration whilst Britain remains part of the EU where the free movement of people is a founding principle. The UK has no control over immigration from other EU states and with income levels among eastern European countries (such as Poland, the Balkan states and the Baltic countries) at a fraction of those in the UK, it is hardly surprising that there has been net immigration into the UK from those countries. Arguably, this has led to suppressed wage growth and increased unemployment among the UK-born population in the less skilled sectors popular with migrants from those countries.
- No more benefit tourism
Two of the key reforms negotiated by David Cameron (the ’emergency brake’ on in-work benefits for EU migrants and linking child benefit payments to the cost of living in the child’s country of residence) are aimed at tackling ‘benefit tourism’ where EU migrants move to the UK to take advantage of welfare and health care benefits. Leaving the EU altogether would give Britain complete freedom to set its own criteria to qualify for benefits.
- Loss of trade
The EU is Britain’s biggest trading partner, accounting for 45% of exports and 53% of imports in 2014. There is much uncertainty as to what Britain’s position would be following a Brexit but at the least it is likely to be harder and more expensive for British businesses to trade with European member states. Membership of the EU also means Britain benefits from trading agreements negotiated between the EU and various non-EU countries. Whilst leaving the EU would mean losing the benefit of these arrangements it may also mean Britain could negotiate its own trading agreements, specific to its national needs.
- Loss of investment
The UK receives a significant amount of foreign direct investment (FDI) and, in 2014, almost half of this (£496 billion) came from EU countries. The UK benefitted from more FDI projects than any other EU country in 2014 – 887 projects, compared to 763 in Germany and 608 in France. Pro-Europeans argue that leaving the EU would make Britain a less attractive location for FDI with the loss of investors’ ability to access European markets via the UK leading to a direct reduction in FDI into the UK.
- Loss of jobs
According to the Treasury over 3 million UK jobs are linked to trade with other EU member states. Whilst not all of these will automatically be lost post-Brexit (as some trade would still continue with those countries) it seems likely that the loss of trade and investment highlighted above would inevitably lead to a loss of jobs.
- Loss of influence
The EU is a large market, accounting for around a quarter of world GDP. Being part of that group gives Britain a voice on the world stage and means we have a say in matters such as trading agreements with non-EU countries. Going it alone would result in a loss of influence in significant issues such as world trade, climate change and development projects where Britain could find it harder to ensure its own interests in such matters are taken into account.
And, either way, will we still be allowed to take part in the Eurovision Song Contest?! (This could be seen as a pro or a con…)
What’s the alternative?
Many proponents of a Brexit look to Norway as a model for the UK’s status outside the EU. Although it is not an EU member state, Norway benefits from being part of both the European Economic Area and the European Free Trade Association. Euro-sceptics argue that adopting a similar ‘Euro-lite’ status would allow the UK to retain significant trading advantages whilst ditching the less favourable aspects of EU membership.
But is such an amicable divorce a realistic prospect for Britain? If Britain was able to negotiate its exit on those terms wouldn’t other EU member states want to follow suit, potentially leading the EU to fall apart completely? It seems more likely that the EU would take a tough stance on any arrangements with a non-EU Britain in order to discourage others from attempting a similar approach in the future. And, amongst all the speculation, there is probably only one certainty; that having left, there would be no going back.
Get in touch
What are your thoughts? How might a Brexit affect your business? Get in touch and let us know!
This post was edited by Sophie Brookes. For more information, email email@example.com.
(Figures and statistics quoted in this article are taken from In-Brief: UK-EU Economic Relations, a House of Commons Briefing Paper prepared in January 2016)