Should I Stay or Should I Go? - The Brexit Argument
There has been an increasing dissidence between whether or not the United Kingdom (UK) should remain or leave the European Union (EU). But why is the UK considering leaving the EU? Not long ago Prime Minister, David Cameron, had assured there would be a referendum in the Conservative Party manifesto for last May’s election. There is a referendum to be held today, which will determine if the Britain will remain or exit the EU, coining the term “Brexit” (which mirrors the term “Grexit” when Greece considered leaving the euro zone).
Creation of the EU came to fruition after the second World War. The purpose of this merging between the member countries, was to allay tension between the European nations. In other words, binding the nations so that they could never be as threatening to each other- whether it was physically, politically, or economically. According to BBC News, fostering economic cooperation has further cultivated a “single market,” which allows goods and people to navigate around as if the member nations were one country. The UK eventually became a member in 1973 and has reaped countless benefits.
Chief among these benefits is single market access. Firms in the UK have entry to the single market but it’s more than just a free-trade agreement. The EU has eradicated tariff impediments and customs procedures inside it’s borders. They have also taken actions regarding the removal of non-tariff-barriers by administering EU competition law and coordinating product regulations. According to the Confederation of British Industry’s (CBI), which speaks for 190,000 businesses, employing 7 million people, the net benefit of EU membership to the UK could be in the realm of 4-5% GDP with the economies of North East and Northern Ireland taken into account. The EU has also assisted in opening the global market to the UK. Additionally, being a member of the EU has increased foreign direct investment (FDI) into the UK. According to CBI, “the EU accounted for 47% of the UK’s stock of inward FDI at the end of 2011, with investments worth over $1.2 trillion.”
Potentially leaving the union could yield unintended consequences to the politics and economy of the UK. According to The Economist, Eurosceptics across the EU paint a story about liberation and history; abandoning “…the sclerotic, undemocratic EU.” The brexiteers hope to “set Britain free to reclaim its sovereign destiny as an outward-looking power.” They rally behind the ideal that free trade leads to prosperity, although, prosperity may not be the expected result. The National Institute for Social and Economic Research (NIESR), which is comprised of economic specialists, forecasts a 2.9% fall in GDP in the short run and has even worse implications in the long run. Lower trade and a decreasing rate of FDI are some of the factors that would contribute to this plummet. The effects on top of this would extend to productivity and wages; a further fall in sterling which would push up the prices. Therefore, stronger regulation on migration could make things worse.
Advocates for a brexit are headstrong about the idea that trading with the rest of the world would be made easier. Europe has several trade pacts that would need to be altered if the UK were to leave the union, which would reduce the nation’s viability as a negotiating partner. Also, with new trade pacts being broached, the timetable would be ambiguous. Something that both sides of the quarrel can come to agreement on is that the short-term effect of Brexit will likely be negative. The potential of new trade arrangements has led to decreased confidence in the sterling, which could result in deterring investments. The Bank of England claims Brexit is a huge risk to domestic financial stability.
With the polls soon coming to a close, the result could go either way. Sources from leading outlets, including The Economist, The BBC, and The Telegraph, suggest that both sides are nearly even. Around 46.5 million people are entitled to take part in this referendum which is the third nationwide referendum in UK history. Older voters are more likely to back Brexit, with the younger voters most likely to support remain. Regardless of the outcome there will be serious implications throughout all of Europe in the coming weeks.