The Economic Absurdity of Brexit

by Charlie_East_West on May 12, 2016

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We are being bombarded by a rather misplaced and dispiriting EU referendum campaign that has become a David Cameron v Boris Johnson battle of old Etonian egos. Where is the real debate? Where is the substance? Voters have been left somewhat bewildered about how to vote.

For me it is a no brainer. I want Britain to remain in the EU – for some obvious economic reasons. Leaving the EU would be an economic absurdity.

Brexit supporters are conveniently forgetting some inconvenient truths:-

So much innovation and research funding is underpinned by EU grants. This is vital money and there is no talk about how we would replace it if we left the EU. This is particularly relevant to Cornwall – receiving over £1billion in EU funding for enterprise and tourism. Without EU funding the Eden Project probably would have remained a pipe dream without funding.

It is clear to me that those who want to leave have no economic vision or idea of what they want to leap into.

What about businesses who have specifically opened offices and employ people in EU countries, so currently benefit from the protection EU laws offer, especially in areas such as intellectual property and funding streams. How will they be protected if Britain leaves?

I sympathise with those who say Brussels is inefficient and bureaucratic. But it isn’t as simple as all of that. We have voted for the vast majority of rules in the EU. And outside the EU, we would be more vulnerable to the growing protectionism we see coming from the US and other places. It must be true that you are less important to the other side in terms of trade when you are relatively small.

In the near term, Brexit will mean the pound falling, and that will mean the value of sterling assets declining in some disorganised way. And because insurers are the biggest holders of sterling assets, that would be bad for UK financial based companies and, by extension, for the people they serve – their customers.

In the medium term, half of the value of UK banks and insurance companies business is on the continent, and anything that makes it more expensive or difficult to operate will be negative.

Britain experimented with a lower-valued sterling after the 2008/2009 financial crisis, when it went down by more than 25%. Yet the result was only higher inflation without a rise in exports.

The Leave campaign say we could get rid of unnecessary regulation if we leave, but most of the rules covering the financial services industry brought in over the past 10 years have come from the UK not the EU.

UK insurance companies have fought for years to create a level playing field with overseas competitors – many of them are the biggest insurers in Europe, such as Allianz in Germany – and if we were to experience different rule books, that would only make life more difficult, especially when trying to gain market share in Europe and even after Brexit the financial industry would need to comply with EU rules as they changed anyway.

Those who want Brexit believe all the burdens of bureaucracy will disappear. They are kidding themselves. Of course say, farmers don’t like the extra regulatory cost of things like fulfilment of health and safety regulations – it must be paid whether you are profitable or not – but it is necessary and is not going away. Much of it has been passed into Scottish or UK law – and it’s going to stay that way. And why wouldn’t it when the EU is by far the biggest market for our produce. The EU offers UK traders and exporters 500 million customers without prohibitive tariff agreements.

It has been estimated that UK trade with some countries in Europe could have increased by as much as 50% as a result of EU membership.

If we leave, there will be extra tariffs on foodstuffs. We would not have trade agreements with the EU countries and would need to get them fast. Would they be on the same terms?

Finally, The UK’s net contribution to the EU budget is around €7.3bn, or 0.4% of GDP. As a comparison that’s around a quarter of what the UK spends on the Department for Business, Innovation and Skills, and less than an eighth of the UK’s defence spend.

The £116 per person net contribution is less than that from Sweden, Denmark, Finland, Germany and the Netherlands.

And this is the critical figure:
The overall net benefit of EU membership to the UK is in the region of 4-5% of GDP or £62bn-£78bn a year – from inward investment, subsidies, grants and trade agreements.

These are just a few of the compelling economic reasons why Britain is stronger in the EU and that Brexit is an economic absurdity. Despite Brexit supporters providing arguments to the contrary, actual hard evidence should always play a hugely important role when making a decision on the EU Referendum.

{ 1 comment… read it below or add one }

Mike Killingworth May 13, 2016 at 4:12 pm

BREXIT isn’t about trade & other economic issues. It isn’t even about bureaucracy.

It’s about immigration and, to be frank, racism.

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