On the 23rd of June, British citizens were called to vote in a referendum. They had to decide whether to stay or leave the European Union. The result was “leave EU” and as soon as it was known, critics from around the world condemned this democratic decision and there were important repercussions in the financial, economic and political sectors. The sterling suffered a record one day plunge to a 31 year low; on Friday 24th the global stock market lost $2 trillion in value. The Britain’s Chancellor of the Exchequer, George Osborne, talked about the possibility to raise taxes as consequence of the Brexit result. After this extraordinary economic and political turmoil, a question came to my mind: “Is so bad and counter-productive leaving the EU, specifically for UK?”
From there, I started to investigate and analyze the findings.
- UK has never joined euro currency and this means that both people and companies will not face any specific or additional shock due to the going back to the previous currency.
- UK still remains geographically in Europe as banal as this can be.
- According to the “uktradeinfo” statistics (April 2016), UK economy is based on imports (http://bit.ly/1OVoCTJ). Indeed, on year to date, UK imported £75 bn from the EU and £72 bn from the extra-EU countries; whereas the exports were £45 bn from EU and £50 bn from Extra-EU and the trade balance is very under pressure today. From these data, emerge that is more likely that EU has convenience to keep UK in the union rather than let it go.
- The five major British trading partners are:
- Germany, whose British imports exceed exports of £ 2.5 bn.
- USA, this time exports exceeded imports of £ 1 b
- Nederland, the UK imports exceed export by £1.3 bn
- Switzerland, the UK imports exceed by £2.8 bn
- China, the UK imports exceed £1.7 bn
5. According to UK government official statistics (http://bit.ly/1Oe5r5e), in 2015, Britain’s net contribution to EU budget was £8.4 bn (the gross payment was £ 17.7 bn) and the nation provided the 12.5% of the total EU budget (third contributor after Germany and France). This means that UK payed £8.4 bn in excess of what is returned from the EU.
6. Stay out of the EU means to stay out also by the european regulations, it also means that the UK is free to manage the taxation for companies (in particular corporation tax). For example, UK could reduce taxes for the big corporations and attracting their business and creating more jobs.
7. The pressure on the pound, which is reducing the value compared to the main currencies, it also increases the interest in the products and services produced in UK, making them more convenient to buy. This increases the exports and rebalances the trade gap. Of course this is not good news for European neighbors who have a competitor in more for exports.
8. Immigration. In Europe we have cases of countries with open borders for Europeans although not part of the ‘European Union’, such as: Switzerland, Monaco, Norway, Iceland, Andorra, Liechtenstein etc. and, trust me, Europeans have not issues to visiting or working in those countries. The UK is one of the leading countries of the European Union, which attracts immigration and this happens for several reasons. The main ones are: the English language (for studying purpose or because the majority of immigrants already speak the language and this makes it easy to look for work); culture, living standards and the quality and quantity of jobs available. Being part of the EU also means not having full control of immigration, this means that even if the economy is not strong enough to meet the entire unemployed labor force, it can not intervene on the influx of migrant. This has several effects on the population by increasing social unrest. In fact, more unemployed means reduction of wages, lengthening of time to find work and, in case of severe unemployment, even emigration.
9. From the diplomatic point of view, we can agree that the UK is second to no one. In addition, the main partner for exports are the United States, with whom they have an established and special relationship. In addition, UK still retains an important international role. For example, the country is a permanent member in the UN Security Council; It has one of the best military defense forces of the world and an efficient counter-intelligence. British companies are strong and have operations around the world. The financial sector is one of the best in terms of services offered, management and security assets. UK has important treaties, agreements and alliances with former colonies. Furthermore, they still keep their international role. For example, they have their seat as permanent member in the United Nations Security Council; they have one of the best defence force in the world and an efficient counterintelligence. The British companies are strong and have business around the world. The financial sector is one the best in terms of services offered, asset management and security.
10. UK is a multicultural society and London is a very efficient capital.
In light of the above analysis, my initial question becomes: “What has to offer the European Union to the United Kingdom to make the country stay?”. Someone mentioned that, being part of the EU, countries benefit of commercial advantages and conclude valuable international business negotiations. This makes me smile, because I wonder how it is possible that EU knows what is best for a country more than the country itself.
Personally I like the idea of being part of a great community like the EU because this increases the personal skills and interact with people with different backgrounds (although sometimes there is a price to pay). By learning from other people’s experiences we can make the world a better place to live, but the outcome of the British referendum says that there are also problems and people are dissatisfied. Therefore, now it is the time for European institutions to reflect on this result and take action as soon as possible in order to meet the demands of European citizens.