BREXIT: A blessing or a curse ?

Le 23 juin 2016 est une date cruciale pour le Royaume-Uni. En effet c’est ce jour là qu’aura lieu le référendum sur le maintien du pays dans l’Union Européenne à la demande du premier ministre David Cameron.

Si à ce jour l’issue du résultat est toujours incertaine, les hypothèses sur les conséquences du retrait du Royaume-Uni et les réactions à propos du Brexit, elles, ne se font pas attendre.

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If there were a Brexit, what would be the consequences on the United Kingdom and the European Union? This is a question that is on everyone’s mind whether people are enthusiastic regarding Britain’s future or are, on the contrary, worried about it.

According to Open Europe’s last report, the UK GDP could be 2.2% lower in 2030 if Britain left the EU and failed to strike a deal with the EU or went back to protectionism. In a best case scenario, with the UK managing to agree on trade arrangements with the EU and the rest of the world, Britain could be better off by 1.6% of GDP in 2030 .

However, most people agree that it would be a disaster economically. Some of the main concerns are that it could increase the cost of transporting goods, discourage investors, and make it more difficult for businesses to operate across borders.  But more importantly, Brexit could also increase the unemployment rate.  According to Blackrock, the world’s largest fund manager, Brexit could have a major impact on the UK’s economy as it would most likely lower economic growth and investment. The British currency, Britain’s financial industry, the London property market and the fashion industry would not be safe either. Moreover the City could also be seriously affected by this exit as it contributes to Britain’s tax revenues. A loss of 10% workers could lead to a loss of £3bn in annual employment taxes for the government. Moreover, what makes Brexit problematic is that it could bring trade balance problems. Since most British exports go to EU countries, Brexit could have an impact on trade but also create a less hospitable atmosphere, poisoning future trade negotiations between countries. Many foreign companies might also choose to reduce their business in the UK. The Guardian reported that food corporations like Nestlé, car companies (Hyundai and Ford) as well as the U.S. investment bank Goldman Sachs have said that they might consider doing that.

Numerous public business figures agree with these reports and they all have different reasons to back up their claims.

« A disaster for UK science » says Stephen Hawking who, together with 150 members of the Royal Society, signed a letter in favour of staying in the UE. European students are the future of  British science according to him. If the country were to leave the UE, it would slow down  research in the UK because those who contribute to research projects mostly come from Europe. The country must then continue to attract these European students in order to attract other students from abroad. In addition, leaving the UE would cause a loss of free movement for scientists, which is an important consequence, as seen in Switzerland. In fact, Switzerland struggles to attract young students as it has approved a series of restrictive regulations concerning the free movement of workers. And the UK is likely to follow in Switzerland’s footsteps. For Stephen Hawking, science should be on an equal footing with infrastructure projects, farming or manufacturing. Moreover the link between science and the free movement of scientists matters as  much as the link between free trade and market economics.

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Public opinion is still divided about Brexit and so is the newspaper The Sun who has used the same tone for its 55 editorials on Europe : a sceptical one. But for the editor in chief Tony Gallagher, this does not mean that the newspaper has taken a side. Even though businessman Rupert Murdoch, the owner of The Sun, is a devotee eurosceptical, The Sun and its editor in chief did not officially back up Mr Murdoch. Gallagher recently told the Newsworks conference that the choice was left to the readers of the newspaper.

However if The Sun did not choose a side, it sure did on behalf of the Queen.

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This cover illustrates the Queen’s position except that it is not true according to Buckingham Palace who quickly complained to the Independent Press Standards Organisation. This goes back to 2011 during a lunch at Windsor castle when the Queen expressed her anger towards former deputy Prime Minister Nick Clegg during a discussion about Europe. Michael Gove, the pro-Brexit justice secretary, was pointed at as the potential source of the leak but nothing has officially been declared yet. The Sun still stands by its story, saying that its sources are trustworthy. Even if a discussion about Europe did happen in 2011 between the Queen and Nick Clegg, it did not necessarily have a link with today’s events. According to the Palace, it is just a coincidence. If Ipso stands by the Palace’s side, The Sun might be forced to publish a frontpage apology and it will not be the first time they do so.

Now if BREXIT really does happen, Britain will have to face difficult choices in order to bring the country’s stability back :

  • Beyond the border: Opening the UK economy to trade agreements with the rest of the world will be essential to post-Brexit economic growth. However, this would mean exposing UK firms and workers to whole new levels of competition from low-cost countries, and would therefore be politically quite sensitive.
  • On the border:  In order to be competitive outside the EU, Britain would need to keep a liberal policy on labour migration. However, most of the people who are in favor of a Brexit argue that limiting free movement and immigration are their main motivations. It will be tough for pro-Brexit voters to make a wise decision while staying true to themselves as labour migration will be necessary to maintain the country’s stability.

Lastly, Brexit could trigger a domino effect by encouraging other Eurosceptic parties elsewhere in the EU to leave the union. According to the online publication Politico, some parties in the Czech Republic have raised the possibility of a Czexit. The Politico article quoted the country’s state secretary for EU affairs who said that a Brexit would make it “politically much more acceptable” for others to propose exits. In the worst case scenario, this would mean the end of the EU as we know it.

Mona CHERFI, Nasla COMBO & Scilia TRAN

Sources:

http://www.theguardian.com/business/2016/mar/02/brexit-damage-uk-economy-blackrock

http://www.bbc.co.uk/news/uk-politics-32695399

http://openeurope.org.uk/intelligence/britain-and-the-eu/what-if-there-were-a-brexit/

http://www.theguardian.com/media/2016/mar/09/palace-sun-queen-backs-brexit-ipso

http://www.politico.eu/article/brexit-could-lead-to-czexit-tomas-prouza/

http://www.theguardian.com/politics/2015/may/14/brexit-what-would-happen-if-britain-left-eu-european-union-referendum-uk

 

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