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What would Brexit mean for the UK’s economic future?

By 12th October 2015 News No Comments

UKIP want a referendum this year but the conservatives are persistent they want to hold on until 2017. New steering groups have been set up to direct this movement with ‘in’ and ‘out’ groups vying for support. Open Europe have stated that if the UK leave the Eurozone there are 2 potential stances they can adopt, Protectionism or Liberalism, the result creating a fall in GDP of 2.2% or a rise in 1.6% respectively by 2030. Protectionism would mean the departure from free trade and would encourage the growth of domestic industries- potentially verging towards a more labour than tori approach, whereas the complete opposite is encouraged with liberalism. With the conservatives in office until 2020 and the EU referendum 2017 the initial response could see focus on new trade links and encouragement of continued high levels of FDI.

In

Much of the investment into the UK from the likes of China, the US and India has been in part explained to the fact that UK is a gateway into Europe and an exit would close this gateway, with the taxes and duties advantage no longer present. Uncertainty is something business’ do not look favorably at and in the lead up to the referendum decision, Investment may be postponed or diverted. In the longer term, UK MNC’s may move production elsewhere as the competitive advantage from free trade between countries would no longer exist. Moving from the UK into the Eurozone would allow for savings in financial accounting and compliance and when combined with lower operating costs and taxes could be enough to sway the MNC’s to vacate.

Out (Brexit)

brexit

 

On the other side of the table are those who believe that now is the correct time for Brexit to take place. Some believe that the fear of a substantial decrease in trade between the UK and Europe is hugely over exaggerated as the benefits to trade of being in the EU from a cost perspective, are miniscule (custom duty is 1.76%). Britain is strong enough to survive outside the EU and can easily follow in the footsteps of the likes of Norway and Switzerland who have successfully moved away from the Eurozone and continued to trade strongly with them and the rest of the world. Many fear that FDI will decrease but in a recent survey by Ernst and Young it was shown that the top 3 reasons for investing into the UK was UK culture and values, English language and telecommunications infrastructure, no mention of Eurozone membership. EU membership costs the UK billions of pounds in lost jobs as a consequence of excessive regulation, red tape and significant membership and aid contributions.

 

Conclusion: So What does Brexit mean for UK

The 2 steering groups are in the forefront of the press at the moment. Both have substantial business experience with their highly reputable members who will be doing all they can to sway the views of the British public when they come to vote in 2017. The fallout of Greece, should it occur, would be a big contributor should home citizens feel the effect, but for now it remains down to the steering groups and there success in campaigning.