To Be In Or Not To Be In: That Is The EU Question

One of the big arguments in this year’s election is the role of the EU within the UK and the need for a referendum on the UK’s part within the EU. UKIP built its profile and agenda on a divorce from the EU, and the Tories have seen a portion of its right flank either defect to UKIP or echo its thoughts on Brussels. Cameron and Farage both propose a referendum on the EU for 2017 at the latest, although Nigel Farage’s party remains the only one that is specifically campaigning on leaving the Union. The rest of the political parties are happy to remain as part of the EU.

Hope vs Fear

The argument to leave is a compelling one. While the side arguing for the status quo talks of nothing but economic demise, those looking for change are talking of a thriving economy. Free from the shackles of Brussels and over-extensive regulation, the UK’s financial and manufacturing sectors can excel. Or can they?

We don’t know what sort of relationship the UK would have with the EU following a British exit – or Brexit, as it has come to be known – but let’s take a look at the economic issues that would likely pervade the UK economy in the aftermath.

Immigration

Membership of the EU allows people free passage, and the ability to live and work within any of the 27 nations. While the UK receives more immigrants than it sees leave for other economies, it’s possible that any decision to limit the ability of EU member state citizens to come and work here could result in a similar tit-for-tat legislation on Brits looking to work in Europe. As we outlined in our look at immigration earlier in the series, we believe that immigration is a net positive for the UK economy. A report by the Chartered Institute of Personnel and Development last year told us that organisations that employ EU migrant workers are more likely to report that their business has been growing over the last two years (51 per cent) than organisations that don’t employ migrant workers (39 per cent). Put that down as a win for the status quo.

Investment

This really is a difficult thing to quantify. The prevailing economic argument is that inward investment into the UK would fall if we left the EU. That may be true, although we would argue that after an initial dip in investment from the EU, more may come from China, the US or Japan. The UK has benefited from not being part of the Eurozone in terms of investment, as investors have seen the UK – and particularly London – as a safe haven. While this may increase in the short term, we must remember that leaving the EU does not affect the UK for another decade; it is for keeps, and therefore its relevance as a short-term haven from Eurozone issues is rather beside the point. A scoreless draw for both teams there.

Imports and exports

The UK is the eighth largest trading nation in the world, with total trade in 2013 equalling nearly $1.1trillion worth of goods and services. Of the top ten export partners of the UK, seven are in the European Union (the top two are Germany and the Netherlands). Norway, Iceland and Switzerland are not members of the EU but maintain a free-trade agreement with it so why can’t the UK?

All in all, how well the UK would do outside of the wider EU boils down to how well the negotiations go between the parties in the months and years after a vote. While the public may want the vote, can they trust the people negotiating on the behalf not to mess it up? This may be another opportunity for Brits to disappoint in Europe.