Brexit: beneficial or burdensome for the British economy?

Flickr/Giampaolo Squarcina

Amidst a world seemingly plunged into chaos, with tensions escalating daily in the Middle East, and the consequences of the global economic crash of 2008 still yet to be fully realised, one of the biggest issues within Britain remains to be whether or not EU membership is worthwhile.

The purpose of this series of posts will be to inform readers of the facts surrounding the matter, and whilst I will try to be as nonpartisan as possible, my stance on the matter will become increasingly apparent as you read along.

Breaking through the ever so subtle, propagandist, jargon littered, 10 point case set out by the Get Britain Out campaign the cracks are easily visible in their unsubstantiated arguments in favour of the exodus from the EU – or more commonly termed ‘Brexit’.

In this first post I will begin by breaking down some of the jargon and demonstrating why our membership to the EU has numerous benefits.

Freedom to spend UK resources presently through EU membership in the UK to the advantage of our citizens. 

The resources to which this poorly written and unclear point is referring to is the £55m per day, or £20bn per year, that The Get Britain Out campaign claims that EU membership is costing British taxpayers. This figure is based on spurious assertions made by UKIP party leader and professional manweasel Nigel Farage during the LBC Leaders debate.

If you take a look at the UKIP Brexit manifesto you will see that this figure has now increased to £150bn per annum based on factors such as the gross cost of membership, the cost of market regulation, and the influx of ‘700,000 eastern europeans into Britain since 2004, taking away jobs from over 100,000 UK born people’.

Unfortunately for UKIP, their focus on inaccurate gross contributions highlights a fairly transparent flaw in their argument. They simply don’t take into account the fact that we receive almost half of this amount back in rebates under clauses such as the Common Agricultural policy. It also ignores the net figure, as it doesn’t provide the sensationalist headlines that their campaign is dependent on.

In reality Britain is in a relatively privileged position compared to other EU states, as those who joined the EU during its 2004 expansion who are not afforded such rebates.

The actual figure of gross contributions are closer to £14bn per annum, based on figures from 2013, which rebates reduced down to a net contribution of £8.6bn.

Now if you take into account that our government has just announced a budget of £742bn for the year, it becomes apparent that in context, it’s not such a big figure. Especially when you consider that it it buys us the benefits of being in a single market with substantially more buying power than we could hope to have as an isolated state.

Freedom to make stronger trade deals with other nations.

The Open Europe report establishes that the realistic economic impact of a Brexit ranges from a 0.8% permanent loss to GDP by 2030 (where the UK strikes a comprehensive trade deal with the EU but does nothing else), to a 0.6% permanent gain in GDP in 2030 – where it pursues free trade with the rest of the world and deregulation, in addition to an EU FTA.

There is a high likelihood that if Britain were to leave the EU, we would be able to establish some form of preferential trade agreement, similar to that of Norway or Switzerland. However, as neither of these models would suit the needs of Britain, the issue lies in what that agreement will entail.

Now the easy part would be establishing a trade agreement for goods such as cars, chemicals, aerospace, and machinery. In other words, products that other EU states have a surplus of, but that Britain has a deficit in.

In essence, they have the supply, and we have the demand. it’s clear to see why such an agreement would appeal to the other EU states, as it would be profitable for them, and necessary for us.

A more challenging and pressing issue for Britain, would be to establish preferential trade agreements for services, such as the 41.4% of our finance services that are exported abroad. If we are unable to reach an agreement on services we are putting nearly half of one of our most profitable sectors at risk.

The question that has to be raised is whether or not the trade deals we are able to establish post Brexit will be ‘stronger’. In order to achieve the more realistic goal of a 0.6% increase in GDP by 2030, it would be a necessity to open up trade to the rest of the world.

This would be an essential aspect of any economic growth post an EU exit,  however we would be subject to whole new levels of competition from low cost countries such as China and India.

Remaining competitive outside the EU would require the maintenance of a liberal immigration policy, which undermines the emotional motive for most Brexit enthusiasts. Additionally, any amendments to regulations that have been implemented into UK law would have to pass through parliament, and any MP’s that were against exiting the EU.

Considering how difficult the process of a Brexit would be, and the subsequent effort that would be required in order to overcome the challenges preventing and exit from being beneficial to Britain in the long term. Surely it’s more logical to accept the security of the situation that we’re currently in, and use the effort that would be required to make an exit worthwhile, to push for necessary reform within the EU – that would be beneficial to both ourselves and the rest of the EU.

This covers my review of the economic implications of the Brexit. Keep posted for my follow up on the more emotional aspects of the argument, such as the impact of our current immigration policy, and EU influence over UK law.