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EU Referendum: An Unbiased Look at the Impact on the Economy

April 2016

To stay in the EU, or leave? This is the debate that has been raging across Britain for decades. On 23 June 2016, it will all come to a head as the people of Britain finally settle the long-running question.

The ultimate decision will affect all aspects of society: economy, security, jobs immigration etc. This blog item will only focus on economic matters. The purpose of this article is to present the pros and cons of leaving/remaining in the EU in terms of the economy and British businesses.

No country has ever left the EU, so there is a great deal of uncertainty about exactly what will happen if Britain is to leave. Many have made predictions, but this is ultimately just speculation – no one can know for sure what the outcome will be.

Perhaps the biggest ‘sub-argument’ of this whole debate is this: ‘Is the EU membership worth paying?’

Last year, Britain paid in £13bn, so leaving the EU would immediately result in a substantial saving. However, Full Fact has claimed Britain also received £4.5bn in spending. This means the UK’s net contribution was £8.5bn, this is 7% of what the government spends on the NHS each year. The question is, do the benefits of EU membership (free trade, inward investment etc.) outweigh the upfront cost?

Being a member of the EU allows us to have a say in how trading rules are drawn up. If we were to exit the EU, all trade arrangements would be wholly our own, but likely be subject to tariffs. The EU is a single market in which no tariffs on imports/exports between member states are imposed. According to Sky News, over 50% of our exports go to EU countries. Many Eurosceptics cite Norway as an example of a country that trades with the EU without being in it. While Norway is considered a rich country by most standards, they also have no input in trade rulings.

As you can see, it is difficult to ascertain which option is best for us an importer/exporter. There is scope for the UK to negotiate a free-trade deal that will allow us to maintain the current set-up. However, there is a distinct possibility that the EU will not be so generous and will make trading with EU countries difficult for us, in order to discourage other countries from breaking away in the future.

The overall effect of a UK exit on businesses will most likely vary greatly depending on the nature of the business. For some, it may be positive, for others negative. A quick Google search on the subject will reveal a number of articles about CEO’s of large companies coming out in both support of leaving the EU, and in support for staying. Opinion really is split, amongst business leaders and the general public alike. The option that is better for the British economy is ultimately the option that is better for businesses, however there will of course be exceptions.

The effect on jobs is extremely complex, and depends on the intricate interplay of many factors – trade, investment, immigration etc. Pro-EU campaigners have estimated that 3 million jobs (jobs linked to EU trade) could be lost if Britain decides to go it alone. It is important to note that these figures were obtained during the early 2000s, and while there may be three million jobs linked to EU trade, it doesn’t necessarily mean they are dependent on EU membership.

This article will offer no concluding opinion as to which option is best for the British economy; it only offers just some of the things to consider before casting your vote on 23 June 2016.

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