To Brexit or not to Brexit

The vote for or against Brexit (Britain leaving the European Union) will take place in three weeks. The fractious debate and close polling means it’s uncertain whether Britain will leave or stay in the European Club. Read on to discover what the main arguments are in the debate.
What is changing?

Costs

  • The estimated costs of Brexit do not take into account the fact that remaining in the EU could lead to additional GDP growth as further development of the Single Marketboosts trade and foreign direct investment.
  • Britain will save some of the money that it sends currently to the EU, but in order to access the ‘Single Market‘ it will still have to pay in favor of the ‘weaker’ European countries.
  • Most studies of the impact on Britain’s economy of a decision to quit the EU show the uncertainty will hit growth in the short term and the loss of access to the EU’s single market will damage growth for decades to come.
  • In the case of Brexit, the Treasury, LSE, OECD and National Institute predict short-term income losses of about 3.6%, 2.6%, 3.3% and 2.3%.
  • Economists for Brexit predict that the main economic consequence of Brexit is that UK incomes in 2030 will be about 4% higher.
  • Financial markets have priced in ‘Brexit’ risk mainly through a weaker exchange rate.
  • The additional cost of Brexit to already bloated UK regulatory change budgets will be £17 billion through 2026.
  • The UK economy’s future outside the EU will be successful.’
  • Brexit will reduce unnecessary regulatory burdens and cost on business.
  • Brexit will see talent flow out of Britain.

Energy

  • A Brexit scenario is expected to leave the UK with little influence over EU energy regulation but still largely regulated by it.
  • A Brexit is likely to put the UK’s 2020 and 2030 renewables targets under threat.

Negotiations

  • Britain would be locked in talks with the EU for two years after a Brexit, while “competitors, including EU competitors, forge ahead”.
  • Some will vote for Brexit who want the UK to remain in the EU but on better terms.
  • Being outside the EU will have disadvantages, but will also make many things easier, breaking from the shackles imposed by a community of nations with little or no financial sectors to speak of.
  • A trade deal between Britain and the United States could take five to 10 years to negotiate if Britain votes to leave.

Investment

  • A Brexit could be costly for the UK. Export losses of up to 30 billion pounds and almost 200 billion in investments are at stake. In Europe, Ireland will be the country most impacted.
  • Brexit will discourage foreign investors who use the UK as a manufacturing base for the rest of Europe.
  • A significant amount of financial business will head for the exits if Britons vote to leave the EU.
Implications

Economy

  • Leaving the EU could cause lower growth and unemployment to rise in the UK.
  • vote to leave the EU could: Push the pound lower, “perhaps sharply”.
  • vote to leave the EU could have material economic effects that could affect the appropriate setting of UK monetary policy.
  • Could lose at least 2pp of GDP growth in the first year if no Free Trade Agreement is signed between the EU and the United Kingdom post exit in 2019.
  • The UK Government could re-invest an amount equivalent to current EU funds for science into the national science budget.
  • Leaving the EU could reduce foreign direct investment in the UK by 22% and real income by 3.4%.
  • The UK could create a “brighter economic future for itself” outside the EU.
  • A vote to leave the EU could have material economic effects that could affect the appropriate setting of UK monetary policy.
  • A post-Brexit Britain could leave workers and struggling firms with less protections.
  • The UK could grow as the EU declines.

Trade

  • trade deal between Britain and the United States could take five to 10 years to negotiate if Britain votes to leave the European Union at a June 23 referendum.
  • Leaving the EU could spark “trade retaliation” against the U.K.
  • In the case of the UK leaving the EUbilateral trade flows with Ireland could reduce by as much as 20%.
  • Talks could drag on for many years because there would be no “goodwill” from member states to help the UK get a deal after a Brexit
  • Investment banks could lose access to the single European market.
  • The United States could affirm that it would include an independent Britain in any future Transatlantic Trade and Investment Partnership agreement with Europe.
  • Brexit could present an opportunity to deepen the U.S.-U.K. alliance and would likely boost the troubled European project in the process.
  • There is an argument that the UK could reap the rewards of EU membership in the event of Brexit by gaining Associated Country status.
  • The total export loss in the case of a Free Trade Agreement (FTA) with the EU could be around GBP9bn and nearer to GBP30bn if no FTA is signed.
  • Leaving the EU could spark “trade retaliation” against the U.K.
  • Sectors such as materials, healthcare and energy should be relatively well insulated from risks to the UK economy should a Brexit scenario materialise.

Migration

  • Thousands of Calais refugees will be allowed to cross Channel if UK votes for Brexit.
  • Brexit will reduce but cannot prevent further large-scale migrations to the UK.

Global impacts

  • 27pc of global funds now think Brexit is the biggest ‘tail-risk’ for the global economy.
  • Brexit could inflict severe damage on the European Union.
  • Brexit puts peace in Europe at risk.
  • Brexit could destroy the UK itself, leading quite possibly to Scottish secession, alongside the risks also of unsettling the peaceful status quo of Northern Ireland in relation to the Republic.
  • A Brexit could see global businesses locating in emerging digital hubs in Berlin, Paris and Stockholm rather than London.
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