It seems that the debate over Brexit becomes less clear with every passing day that we get closer to the poll on 23 June. Are politicians just too emotionally involved to accurately communicate their visions and plans? Have the clash of egos and ambitions got in the way of constructive debate? Perhaps it’s just me but it feels as if neither side has presented a particularly compelling case.
In the first of a series of blog posts on Brexit, we’re looking to answer this question from both sides of the debate. How does the EU work and what does staying in or leaving mean for your business and personal finances? For this post we’re starting with the case against Brexit.
Read on for our summary of the 4 main arguments on why we should remain in the EU. Much of this is also covered in the second video which is an interview with Hugo Dixon, author of the "In/Out Question". Please note the below in no way reflects the position of Wellers as a firm or our staff. We have simply produced this to encourage thought and debate, so please do let us know your opinions in the comments section at the end.
The Council of the EU is made up of 28 members and the UK is the second largest along with France. The voting is based on population which means we get 12.6% of the votes. It is this point that makes those in favour of the EU describe the UK has having real influence.
Take one of our key sectors such as finance, in recent years the UK hasn’t actually been outvoted on anything in this area in the Council other than on banking bonuses. Being in a political union means we have a chance to ensure that EU legislation isn’t produced in a manner that is detrimental to our economy and key industries.
When it comes to financial regulation, much of what has come from the EU has been UK led. The result being that this particular EU policy has a clear British imprint which has been achieved by Britain having a significant role in Brussels and also via international standards committees.
Legislative harmonisation can be very beneficial to the UK. Why? It ensures no one member obtains an unfair competitive advantage. It creates a level playing field for all territories involved via a single set of regulations which the UK has a defined role in determining.
Being a member gives us a single passport to operate – companies can access EU markets by being regulated in the UK. To leave would prevent us potentially from being able to access and sell services in EU member states with the current favourable terms. Other than Norway, there aren’t any other countries that have the passport arrangement.
It's argued that the passport has led to a lot of investment in Britain because companies based here can then offer their services right across the EU due to the UK being an EU regulated member state.
How much we would lose if we ended this relationship is open to debate. It would depend on negotiations over the terms of any potential exit. If they fell apart completely then potentially British firms wouldn’t be able to provide their goods and services across the EU.
Potential taxes, in the form of tariffs (think customs duties), imposed as a result of leaving would be quite likely, this would then reduce companies profit margins. It’s the key argument for being better off staying in – we get a significant say and influence by negotiating over regulations and subsequent legislation.
The single market accounts for 49% of ou trade. If we vote to leave the EU then the likelihood is we won’t be able to access this market as favourably as we currently do. This would potentially hurt exports. For entrepreneurs that means you may struggle to sell to what may have been traditionally strong markets.
Voting to leave would activate Article 50 which means the UK would have a 2 year period to negotiate the exact terms of any exit. Voting to leave would also likely force foreign companies to put their investments on hold due to the doubts and questions over the future economic direction of Britain.
Foreign direct investment, which the UK has become so reliant upon for many years, may well look to re-locate. Such a move would be to either maintain (or establish) their access to EU markets. The reason being they’d be questioning what exactly the deal would be at the end of the two year period. This would create uncertainty, something both financial markets and businesses loathe.
There are of course models the UK could replicate. Norway for example is part of the European Economic Area (EEA). It pays for the same access as the UK but doesn’t get to sit in negotiations at the European Council or Council of Ministers.
If the UK pursued such a deal it would be potentially very significant for our agriculture and farmers. They would see taxes and duties imposed if we were to operate outside of the EU and Common Agricultural Policy (CAP). Furthermore if we left, we’d be unlikely to see the end of CAP style subsidies. The National Farmers' Union (NFU) would probably demand a replacement similar to CAP from the government.
There are just over 400 million people in the EU who can move freely between the states. The UK however, is largely insulated from the recent refugee crisis from Syria because we’re not part of the Schengen Area. Schengen is the area covered by 26 European countries where passport and border control don’t apply.
Schengen means these locations effectively function as a single country when it comes to visas and travel. There is however, a border between the UK and Schengen area which means when you come into the UK you have to pass through Border Control, presenting your passport, to get in.
It is argued that being in the EU, but not in the euro and not in Schengen ensures we have the best of both worlds. We’re not part of the banking Union so the Bank of England, not the European Central Bank, is in charge of our monetary policy. By the same token we’re not liable for a debt crisis style bailout of another EU country because we’re not part of the Eurozone.
It is these rules that ensure that if an asylum seeker lands in an EU member state then that country must process their application. Should they then move to the UK for example, we have the option to send them back to the first port of entry. This is known as the Dublin Regulation and it is reported that the UK has sent back 12,000 asylum seekers since 2003. Due to our location and the Channel, rarely are we the first port of entry, even if many asylum seekers want to come and live here.
Europhiles argue that to achieve more and grow, the UK may need to compromise on elements of sovereignty. To have a single market means the need for a single set of rules. Consequently no one member state can dictate, instead the EU system requires a lot of deal making and compromise. Once that process has run its course and legislation is drafted up, the question then becomes what do we get out of this?
Along a similar line of argument, we’re part of NATO and this also involves a loss of sovereignty because the principles upon which it operates means we operate in an alliance block. If one member is attacked, all other members agree to mutual defence in response to the external threat. This can dissipate a nation’s sovereignty as being a member may force them into action based on decisions not made at a national level. However, it’s also very beneficial defensively with any action based on strength in numbers.
The same argument applies to the EU. For example, harmonisation of regulations allows for greater trade under one set of standard rules. Otherwise your company would potentially be forced to navigate up to 28 or so different sets of regulations to ensure your product or service could be purchased in European territories.
The result of the EU referendum could pose significant questions to the Union. What would happen if Scotland voted to stay in the EU but England voted for Brexit?
Could Parliament really deny them another referendum given this fundamental point of difference? Should this scenario arise it provides the nationalists with another reason to promote a break up of the Union. That could provide some serious ammunition given that 45% of the Scottish population voted in favour of leaving the UK in the 2014 referendum.
Plenty of food for thought!
The content of this post is up to date and relevant as at 04/05/2016.
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