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EU referendum to weaken UK’s economy regardless of outcome

19:53 | 20.06.2016 | Analytic


20 June 2016. PenzaNews. Less than three days are left for the United Kingdom European Union membership referendum that will be held on Thursday 23 June 2016. The only question voters will answer in the referendum is: “Should the United Kingdom remain a member of the European Union or leave the European Union?”

EU referendum to weaken UK’s economy regardless of outcome

Photo: Graeme Maclean, Wikipedia.org

Latest polls showed a resurgence in support for the UK to remain in the European Union. An opinion poll by Survation for newspaper the Mail On Sunday showed 45% in favor of remaining and 42% in favor of leaving. Another survey conducted by YouGov for the Sunday Times put the pro-EU vote at 44% and Brexit support at 43%.

Meanwhile, campaigning ahead of the referendum has been resumed, following a pause in the wake of the murder of British Labour MP Jo Cox.

“It is not easy, in the wake of Jo’s murder, to turn to the question of Thursday’s referendum. But we must. For, as Jo had been pointing out so effectively over these past few months, our country now stands at a crossroads. We face an existential choice on Thursday. This country has a big decision to make – and there is so much at stake,” David Cameron wrote on Facebook.

Besides, the head of the British government, who supports the country’s membership in the EU, expressed confidence that he will stay as Prime Minister regardless of the result of the EU referendum.

“I just get on with the job. I have a very clear mandate from the British people to serve as Prime Minister in a Conservative Government, delivering a referendum. I think it’s very important that the individual careers of individual politicians don’t get caught up in this question. It won’t be a verdict on me, whatever the outcome is,” David Cameron told The Times Magazine.

However, representatives of the expert community and EU politicians still do not have a common opinion on the UK’s post-Brexit future.

According to Deutsche Bank AG Chairman Paul Achleitner, Brexit would be an economic catastrophe for the country.

“London bookies and the betting industry are still in the ‘remain’ camp. I hope they’re right, because if it works the other way, it’s an economic disaster for the UK and a political disaster for the EU,” Paul Achleitner said.

In turn, Spain’s acting foreign minister Jose Manuel García-Margallo suggested that negative consequences for the European economy in general and the UK in the event of a possible exit of the country from the EU are overblown.

Everything will depend on the relations that are established between London and Brussels after the referendum, he said.

According to British social geographer Danny Dorling, Professor of the School of Geography and the Environment, Oxford University, the referendum is a reflection of racist tendencies in British society.

“It is mainly a referendum about fear of other people and a distraction from the real reasons of many social problems in the UK which is our extreme economic inequality,” he told PenzaNews.

Britain is better in because the EU provides better social protection for workers and environmental protection for everyone, he believes.

“If we actually leave I think we will quickly decline economically but it could also be the end of the Conservative party as we know it so it’s not all bad news. But I would prefer us to remain,” the analyst added.

According to him, the referendum was not a farsighted solution of the British government.

“People in Brussels will wonder why we are so stupid and congratulate themselves and in the rest of the mainland on how they have stayed out of the UK debate. If we leave, then the young adults we get form the mainland will come in lower numbers. Young adults that we have not paid to educate. And our elderly will not got to retire to the mainland as much – some of our ‘ex pats’ may return – and we will need to then care for them,” Danny Dorling explained.

Thomas Sampson from London School of Economics shared the opinion that Brexit would reduce living standards in the UK.

“The negative effect of Brexit would come from reductions in trade and investment due to increased trade costs with other EU countries. We estimate Brexit could reduce income per capita in the UK by up to 9.5% though the exact size of the effect will depend on what trade relations the UK and EU negotiate following Brexit,” the expert said.

He also stressed the inevitability of a long transition period in the relations of London and Brussels after Brexit.

“If the UK votes to leave the EU, it will need to renegotiate all aspects of its relations with other EU members. This will be a complex and lengthy process that will take several years. At present, we do not know what the UK’s government objectives in these negotiations would be. I’d expect that in the short-run sterling will depreciate and hiring and investment in the UK will slow down,” Thomas Sampson said.

He also reminded that the latest opinion polls suggest the vote is going to be very close and could go either way.

In turn, Michael Liversidge, Emeritus Dean, Faculty of Arts, University of Bristol, said that regardless of the result it looks to be very difficult for David Cameron.

“The government will remain divided, and he is widely perceived as out of touch with whole sectors of the population who resent his patronizing attitude,” the expert said.

He expressed regret that too much of the debate has turned into speculation around David Cameron’s survival as Prime Minister and likely successor, which has diverted attention from the fundamental issue of whether the UK can recover its independence.

“If Remain wins, the relationship of the UK to Brussels will be changed: even Jean-Claude Juncker will have to take account of how many votes will have been cast against EU membership. If Leave wins, the European Commission will have to manage the political impact – the encouragement it will give to growing anti-EU sentiment in other member states – and the potentially disastrous economic consequences for the EU connected with massive job losses in Europe, which already has serious unemployment and economic fragility in most of the Eurozone countries,” Michael Liversidge said.

According to him, Britain will benefit from Brexit.

“It will restore national independence to the elected British Parliament, and return the authority of the UK Supreme Court. As the fifth largest economy in the world, Britain will recover its place in the World Trade Organization. The UK can grow its trade with dynamically expanding economies rather than the heavily regulated stagnating European market with its declining legacy industries and protectionist attitudes which are damaging to emerging nations,” the analyst explained.

Meanwhile, Sue Onslow, Senior Lecturer at Institute of Commonwealth Studies, stressed that Brexit consequences will not be instant.

“If Leave wins, it will take two years to negotiate extraction, but another eight years to deal with other consequential matters,” the expert said.

Moreover, it will immediately revive pressure for a second referendum on Scottish independence and pose serious problems for the Good Friday agreement of 1997, she said.

“The EU membership is viewed very differently by the metropolitan elites, large business, academia, science establishment, large scale farming and youth as opposed to provincial, rural constituencies and small business. The former are firmly for Remain, the latter are strongly for Leave,” Sue Onslow said.

“The youth vote – looking to education and travel – are more pro-EU than voters over 65. However, the attitudes of the older section of the population are very important taking into account their numbers and activity in the vote,” the analyst added.

She stressed that hostility to Europe is founded far less on economics than on immigration from the EU.

Oliver Morrissey, Professor of Development Economics at School of Economics, University of Nottingham, shared this view and said that Brexit politicians play on emotions rather than fact.

“They associate economic problems the public are concerned with – poor work conditions, high house prices, pressure on schools and hospitals – to immigration and blame this on the EU. However, the immigration is just another concern but not the cause of these problems,” the expert said.

The remain politicians have so far not been very convincing because they argue mostly on fear rather than a positive argument for the benefits of the EU, he added.

“Britain would definitely be far better off in the EU: economically there are enormous benefits in being part of the large EU market and the cooperation between firms, officials, workers, researchers associated with this. Socially there are benefits because the EU is more supportive of workers and the public sector and more socially and environmentally conscious. There is also a political benefit in being part of a group with a number of strong countries,” Oliver Morrissey said.

According to him, Brexit would lose these benefits and create at least a few years of uncertainty, and poor economic performance.

“Whatever the outcome, the Conservative party will not be able to heal the deep and often very personal wounds inflicted during the campaign. As the Conservatives are the government, there will be political instability and quite possibly an early general election so economic performance will probably be weak for a year or so even if the vote is to remain,” the analyst concluded.

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