On 23rd June 2016, Britain will vote on whether to leave the European Union. Debate abounds as to the advantages of staying in the EU or choosing to ‘Brexit’, with many focusing on the financial advantages/disadvantages of either option. Having weighed up the options here is our view of things.
The death to the City?
To turn a phrase – news of the death of London has been greatly exaggerated. Whatever the decision come June it is clear that there will be both winners and losers, and the City of London, at least in the short-term, is likely to suffer if a split from Europe is decided. The City of London can be perhaps be considered the financial center of the EU and a Brexit is sure to weaken its domination to some extent but it is such a strong financial centre that is it would soon bounce back. And unlike other areas of the UK economy, such as manufacturing, the City is strong enough to take the pain. Ultimately, London does too much business with Asia, the Americas, the Middle East, and the world in general, to lose out entirely to Paris or Frankfurt.
The truth is that effects of the anticipated, if modest, contraction of the City would still have a knock-on effect on the rest of the UK economy in the short-term but would likely offer opportunities to other areas of the UK.
London property bubble to burst
If you own property in London, where house prices are vastly exaggerated over the rest of the country, you might expect to see a decline on your investment. Some analysts predict that your your city apartment might hemorrhage as much three quarters of it’s current value as the foreign investors move out. Bad news for us some in the short-term but in an economy of wildly inflated, and frankly unsustainable, property prices it could offer a real lifeline for the younger generation. Sure the cash-cow property has been over the last 20 years would be put out for slaughter but it would enable Millennials working in London to buy houses at more reasonable prices and could make it a much more attractive commercial centre in the longer-term.
Pound Plunge
The pound has fallen by 17% against the dollar over the past two years and would likely decline further if Britain were to leave the EU. The net result would likely mean a fall to around 1-to-1 against the U.S. dollar.
However, Britain runs a perpetual balance of payments deficit, so a lower pound would stimulate the British export industries. This is fantastic news for British manufacturing making us far more competitive than we have been in over 30 years.
Now being free to negotiate our own trade deals to the rest of the world we would certainly see a dramatic rise in production outside of financial services.
Scotland
The Scottish independence referendum in 2014 was a vote in favour of staying in Britain, but only just. It is likely that, following a Brexit from Europe, there would be renewed insistence from Scotland to a further referendum to leave Britain with a view to them cementing alternative relations in Europe.
While this issue prompts further debate on the likelihood and effects of a split between Britain and Scotland, it does serve to complicate the current debate at hand.
Bye Bye Brussels Bureaucracy
Being in Europe costs us a around £55 million each and every day and this figure does not include huge amount in regulatory costs.
With those costs gone, taxes reduced, real estate costs slashed, and the exchange rate more competitive, Britain would be well-placed to compete with the Americas, the Far East, Middle East, and Africa – most of which are growing much faster than the EU.
Summary
Following Brexit there would obviously be short-term pain for all but if you take a longer-term view our future outside of the EU seems a lot brighter than in. In the long-term wealth would be spread more equally across all regions of the UK, rather than concentrated on Londoners and the very rich.
As we have said before, it is unlikely that big business would leave the UK in any meaningful way (despite what the papers currently say) and indeed, leaving the EU, might make us a better investment opportunity for other markets, like the USA.
In short, if you want to protect your short-term investment then staying in Europe seems like the option for you. If, however, you are prepared to take a longer-term, more altruistic view, then the 23rd June might be your opportunity to ‘get out of dodge’.
Whatever option you choose it is clear that it is a decision not to be taken lightly. As a nation we will never get this opportunity to shape the face of this country to such an extent again, so our advice is to go to the polls with a clear idea of what you are signing up for.
Thank you for your well thought out and balanced view of the situation. Keep waving the Union flag. Short term pain for life long gain.
And not a mention of the loss of workers protections, environmental protections… these would surely be swept away by our current government as an inconvenience.
I Japan where they massively liberalised their labour market and removed most safeguards to try and stimulate the economy they ended up with a new word: Karoshi – Worked to death.
Our Environment Agency is virtually non-existent and in some regions does not investigate pollution reports any more. Even China is now realising that to be sustainable as a Country you need to balance the economy, Society and the environment.
I don’t understand why they have to be swept away? We will be able to make our own decisions on how our country is run and we can campaign for any changes we want to make – unlike at present, when unelected officials dictate how they want things to be.
They don’t have to be swept away but the evidence is showing that they would be.
For all of the faults of the EU it does at least protect us from the excesses of our own governments. Personally I can not even enter the debate on the EU until we have a PR system for General elections which will stop the extreme swings of government policy every 5-10 years.
I agree with you that our electoral system simply doesn’t work and I would replace it with a form of PR. If this was going to be progressed then the obvious time was after the election when it was so plain to see that the outcome didn’t come remotely close to representing the voting intentions of the people of the UK. However, nothing will happen, as the two main parties have too much to lose from losing first past the post. But much as I despise our electoral system I would still rather our laws be decided in Westminster by our own MPs than imposed on us by Brussels.
Doesn’t that rather prove the point about how much sovereignty countries lose by being a member of the EU, if you advocate staying in so that we are unable to remove laws that have been imposed on us, that you happen to agree with? You’d presumably be all for leaving if laws emanating from Brussels took away legislation that you agreed with that our own government had introduced? What about laws Britain could introduce if it weren’t a member, such as removing punitive tariffs on goods imported from poorer countries? The EU is inherently protectionist and inward-looking and at odds with Britain’s natural leanings toward free trade and engagement with the wider world.
An interesting point but not one that reflects the reality of the situation (for me) currently.
But again most of your points relate to Economic issues, Our government has already stated that it wishes to remove the Human rights act and is making moves against workers rights such as paid holiday.
Not to mention that Brexit would mean that we can actually make our own laws once again – laws that are in the British interest. Not have to go begging around Europe to change our Benefits system for example. Or to banish Abu Hamsa.
And we could control our borders rather than have to admit anyone from the EU.
Plus that £55 million a day net contribution will build a fully equipped hospital every week.
A no brainer as the Americans say.
I don’t believe that we need permission to change our (3rd least generous in Europe) benefits system just to try and exclude migrants from them and as evidence has shown a good deal of our economic growth has been because of immigration in an otherwise static world economy.
Limits to growth perhaps?
The issue with immigration is with having to strictly limit the level of non-EU immigrants because no limits can be put on immigration from within the EU.
Agreed!
How will we ever get a clear picture when both sides of the argument are so politicised and even EU politicians are joining in.
How does the story go… if we leave then trade deals lapse after 5 years… project fear says that these will not necessarily be reinstated but as EU does far more business with us than we do with them it’s probably not true. However, any deal that is agreed then needs to be ratified by each member state (No guarantee of that either) and so the full timeline could show that it would take up to 10 years to find out if we have left or not.
That could be project fear in action or just be the reality of EU process :o)
“Being in Europe costs us a around £55 million each and every day.” Someone who was interviewed on the radio said that most of that will still be payable even after we leave the EU. He gave examples of other countries who are not in the EU who still have to pay the fees but don’t getting any voting power over what is done with the money. He argued that leaving the EU will give us less power over decisions in Europe without removing the negatives of fees and legal obligations. I was probably going to vote to leave until I heard that interview. Now I’m totally confused. Do you know any more details about these points?