To Brexit or not to Brexit?
To Brexit or not to Brexit - this has been the question of the year for Britain and with the referendum taking place imminently, just two options remain: leave the EU or stay in. Why has this been such a difficult decision to decide upon?
The truth is that both choices bring substantial risks and uncertainty for the future. And although the choice is crucial for Britain itself, this decision has some impact on the international economic ties, as well as international business.
Interestingly, countries around the world respond in a different way, some see the opportunity in the UK leaving the EU, some fear a threat to their economy and some are not concerned at all.
In order to understand the view of each country and assess potential risk, let’s look at the main points of each campaign.
“Vote to Remain”
The vote to remain campaign is heavily supported by the government. The major belief of this campaign is that the EU is a vital source of Britain's economic stability and prosperity. One of the strongest arguments in support for these campaigners is that Britain has negotiated a special deal with the EU managing to combine the best of both worlds essentially. In accordance with this deal, the UK will get the following benefits:
- It does not have to join the euro, using its own currency instead.
- To keep their own border controls assisting to address the migration problem.
- Does not have to be part of further European political integration.
- There will be tough new restrictions on access to their welfare system for new EU migrants.
- There is an agreement in place committed to reducing EU red tape.
Supporters of this campaign state that "Britain is stronger, safer and better place in the reformed EU" as this allows access to a Single Market and over 50 trade deals with countries around the world including important countries such as the US and Japan.
EU membership, according to in campaigners, means opportunities for jobs and greater economic security for the UK. HM Treasury forecasts that leaving the EU could result in 500,000 jobs being lost; average real wages could be almost 3% lower and GDP effectually deteriorated by 3.6%. Leaving the Single Market will result in heavy economic disruption as 44% of the UK exports go to the EU.
Voting to leave the EU would create years of uncertainty and heavy economic disruption. The Government predicts that leaving can result in ten years or even more of instability.
The opposition, however, considers that all forecasts are not reliable and simply much exaggerated. Vote to leave campaigners often accuse official forecasts of being inaccurate referring to the history of wrong predictions of the past.
“Vote to Leave”
The vote to leave campaigners have chosen a slightly different strategy, more often referring to the facts of what would be gained if the UK decides to leave the EU. The major statement of Brexit supporters is "let's handle the migration situation and take control of the UK borders".
A quarter of a million EU migrants come to the UK and this puts a lot of pressure on public services like the NHS and schools, and as processes can't be controlled internally, the UK also can't stop convicted criminals arriving from the EU. The expectation of the new countries soon entering the EU are quite appealing suggesting that most nationals from new countries would overcrowd the UK:
- Albania (2.8 million).
- Macedonia (2.1 million).
- Montenegro (0.6 million).
- Serbia (7.2 million).
- Turkey (76.0 million).
Supporters of the Brexit provide a calculation of the cost that the UK is annually paying out to the EU: membership costs almost GBP20 billion a year, which equals to GBP350 million per week. Campaigners suggest that this should be used to cover real economic and domestic priorities in the UK.
The other argument by the Leave Campaigners is the law making process. The statement is that the UK "needs to be able to hold lawmakers accountable" and under current membership, more than half of the UK laws are made by unelected and unknown people in Brussels.
In contradiction to the “remain” supporters, “leave” voters suggest that only 5% of British business export to the EU but 100% suffer the burden of EU red tape. They also say that EU regulations are highly demanding to the domestic economy costing small business millions every week.
Reverting to the secured deal that the Government has negotiated, “leave” campaigners state that it's not legally binding and the European Court can rip up the agreement the day after the referendum as they have similarly done with Denmark more than 80 times. They also argue that no deal would save the UK GBP350 million per week that is being spent now and is only projected to be increased in the future.
Both arguments and statements are severely disputed and debates are taking place daily all over the UK.
It is interesting to analyse how the potential threat of the UK leaving the EU is being perceived by the outside world and what this can mean to international business.
It's worth taking into consideration the results of the Bellwhether report, issued by the Institute of Chartered Secretaries in the UK. This report is a survey of FTSE 350 boardrooms seeking to uncover the most significant problems and their views. One of the questions for the summer report 2016 was concerning BREXIT. Interestingly, the result of the survey has shown that bigger companies operating internationally seemed to care less about potential Brexit threat. Questions regarding the impact of EU membership on their business was answered by the majority (45% of respondents) as neither a positive nor a negative. Just over 37% regarded membership in the EU as positive and 10% of respondents simply didn't know. However at the same time economic improvement was not expected by the majority of companies for the year ahead, only 16% of respondents anticipate any improvement in economic conditions, which could be connected with the potential instability expected by the Brexit decision.
Most EU countries view potential decision of the UK leaving the EU as a real threat especially those which have some close ties to the UK. For example, Cyprus historically had this connection. A lot of British people visit Cyprus as tourists every year (50% of the whole tourism), quite a lot of British people decide to relocate to Cyprus investing in the property there. On the other hand, many Cypriots also visit the UK for higher education. Leaving could potential threaten this situation, causing disruption in the economy of Cyprus and uncertainty regarding the education prospects in the UK.
Other countries in the EU have their own concerns as well. But the biggest worry is the "beginning of the end". In case Britain, one of the strongest countries in the EU leave now, may this mean that other EU members may follow the lead?
There is no clear answer to the question at this point, only predictions. Some specialists predict no changes at all, while others believe in the very "apocalypse" of the EU. However, there are some specialists which assume that in case of the Brexit, the EU will simply reform and restructure, but no severe collapse would be caused.
Everyone may have their own opinion on this theoretical question nevertheless, what is clear now is that there are some problems within the EU that need to be addressed, such as the reduction of red tape and increasing transparency for lawmaking policies, to become more accountable. The initial purpose of the EU was to create the single market fit for the ease of trade, not the political arena facilitating bureaucracy.
However, courtiers outside the EU don’t seem to be caring so much about the outcome of the Referendum, and actually may see the Brexit as an opportunity for establishing better economic ties with the UK.
Whatever the outcome is today (on the 23rd of June 2016), the dispute and example of the UK has lifted some problems that need to be addressed including the immigration situation, law making policies and accountability concerns.
Written by: Dina Pasechnik.
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