With recent opinion polls predicting a 50/50 split between remaining in the European Union and leaving, the so-called Brexit is now a real possibility. As both campaigns start to gain traction, the coming 18 month will see claim met with counterclaim as both side try to dominate the agenda and ultimately emerge victorious. At the centre of this debate will be whether or not Britain’s exit from the EU is likely to have positive or negative economic consequences.
The implications of a potential Brexit from the European Union are hugely significant. Britain’s exit from the world’s largest trading bloc would scarcely be without impact. We would lose restriction-free access to 500 million potential customers. Britain exported approximately £147 billion worth of goods and services to EU countries in 2014, making the EU the UK’s largest export market.
Those against exit argue that Britain would be foolish to leave the EU just when its collective bargaining power is securing a highly advantageous trade agreement with the US and Canada (the Transatlantic Trade and Investment Partnership). It is asserted that many British businesses would be at a disadvantage if the UK left the European Union, with trade barriers increasing costs and eating into market share.
Furthermore, contrary to popular belief, British businesses would still be required to follow the regulations set by the European Union without having any input in the formulation of business and trade regulations. This would leave Britain in a similar situation to Norway, outside the EU but subject to a large amount of business regulation if it wants to trade. This would ultimately increase costs for British businesses. Indeed, several large business such as HSBC and Nissan have said that if the UK were to leave the European Union, they would relocate their operations, resulting in unemployment for a large number of staff. One study by Open Europe, who want to see a reformed EU, have estimated that by 2030 Britain could lose up to 2.2% of its total GDP by leaving the European Union meaning that the economic benefit is still significant.
However, some would argue that the UK might benefit enormously from leaving the European Union. Although the EU is currently our largest trade partner, eurosceptics are correct that Britain is inhibited from trading fully with the rest of the world. Indeed, the UK is not able to conduct any meaningful unilateral trade negotiations meaning our trade with China and India is relatively weak compared with other nations.In addition, many small businesses in the UK complain about the excessive regulation coming from Brussels, which is often wasting manpower and eating into profits. A study conducted by Business for Britain, a eurosceptic think-tank found that on average UK businesses waste 28 hours a week complying with various EU directives. Eurosceptic groups argue that the Brexit would solve this problem, as regulation would be decided in the UK and not Brussels.
Furthermore, the UK has to make large contributions to the European Union’s budget. For the current EU budget, which operates on a 7 year cycle, the UK contributed €17bn behind Germany, France, and Italy. However as a net proportion of the EU budget Britain is the second highest contributor. Many Eurosceptics argue that this money could be used to promote infrastructure or housing development. However, the UK rebate system does mean that the UK does receive a refund on its contributions meaning the net cost of EU membership is not as high as Eurosceptic groups claim.
The possibility of a Brexit from the EU would have damaging consequences for the UK economy, with the negatives massively outweighing the positives. Although the cost of remaining in the EU is high, the benefits to trade and the massive advantage of being in the world’s largest trading bloc negates many of the issues Eurosceptics discuss. This correspondent’s view is that a reformed EU, with Britain inside is much more attractive proposition the colossal gamble proposed by Eurosceptics.