Comment: Stay in or out? The British dilemma
Monday 20 June 2016
With the EU Referendum fast approaching, Professor George Saridakis examines the economic arguments being made by each side.
During the past few years, the European project has become increasingly brittle and questionable. Public trust in the European institutional framework has decreased and Euroscepticism has spread across Europe.
Unfavourable and unpopular policy mechanisms and responses to recent financial and economic challenges, emerging struggles to co-ordinate migration streams and the weakening role of elected national governments in decision-making call in to question the role, efficacy, legitimacy and democratic credentials of the institution as a whole.
World attention is now on Thursday 23 June, a historic date in which Britain decides whether or not to follow a separate path from its fellow European members. Surely, there are flaws in the way EU functions that should be rectified, and there are some apparent benefits from leaving the EU (e.g. using the EU membership cost to fund other national activities and regain national sovereignty).
Are there, however, convincing arguments and evidence that the benefits of withdrawing from EU outweigh the costs? No matter how we stand on this referendum, it is hard to quantify the impact and provide an accurate answer to the above question. For example:
- It is likely that a Brexit will generate economic and policy uncertainty damaging the confidence of consumers, companies and investors and affecting their decisions – ultimately pushing the economy in to a recession causing job losses and insecurity.
- Foreign Direct Investment will probably drop and it will become harder to keep and attract corporate headquarters in Britain.
- Brexit will affect the financial sector's stability (e.g. the loss of the passport facility) and potential access to bank finance. This will be a constraint on many small and medium-sized enterprises (SMEs).
- Support and resources for SMEs from the EU will also disappear (e.g. EU funding through Horizon 2020 and the late payment directive).
- Other sectors, such as agriculture, automotive, education, energy, telecoms, real estate and retail will also face significant challenges from a EU departure.
- Trade with the EU will reduce if a divorce occurs and it is uncertain if better – and more attractive – trade deals can be agreed with non-EU members.
- Sterling is likely to depreciate resulting in high inflation, reduced purchasing power for UK residents and deterioration in general living standards.
What about immigration? Rising immigration deserves policy attention given the enlargement of EU but this is not to suggest that immigration has caused job losses and downward pressure on wages for British people. In contrast, the available evidence tends to suggest that immigrants have contributed to the British economy, to job creation and to entrepreneurial aspiration and activity.
Overall, the arguments for Brexit have failed to provide convincing grounds to imagine a better Britain outside the EU and have rather served to reinforce the important role Britain plays within the EU. Instead, the debate should act as a catalyst for reforming the EU so that it better serves its member countries and citizens and fulfils the main purpose it was founded for – ‘a peaceful, united and prosperous Europe’.