Brexit: A Review of Current and Future Economic Affairs

The British government decided that a referendum will be held on 23rd June 2016 to determine whether Britain will remain in the EU or leave. The decision British voters will take counts a lot towards shaping not only Britain’s future; it will also send a message to all those keenly watching the outcome as to the weight of the arguments on both sides of the fence.

 

In 1967, voters in Mauritius had to vote by a majority for the country to become independent from Britain, this being a precondition set by the colonial government. There were strong apprehensions that Mauritius would not make it on a stand-alone basis, given the fragility of its economic and social condition; nearly half the voters voted against independence but the others swayed the scales in favour of independence, going for ‘freedom’. The road since then hasn’t been all that smooth but we feel far more spirited and elevated in our endeavor as a free country than if we had continued to remain a colony of Britain.

True, in the event British voters decide to remain in the EU on 23rd June, they will not exactly be “colonized” by the EU but they will have to abide by Brussels’ constraining decisions on occasion, as a price to pay for the association. This article puts into perspective how much Britain’s fate in or out of the EU hangs in suspense and what considerations are visiting upon British voters’ minds a little more than two months before the fateful day.

With just over two months until Britain’s in-out referendum, economists around the world are riveted on the potential calamitous consequences of Brexit. A term that has ironically gained wide popularity following British Prime Minister, David Cameron’s statement in a speech: “Britain will be safer, stronger and better off in a reformed European Union (EU)”. After this, the possibility that Britain will withdraw from the bloc is constantly raking a more attentive eye in the press.

On the EU renegotiation day, late in February 2016, Cameron demanded four baskets of reform. These included sovereignty, migration, competitiveness and protection from further Eurozone.

On the sovereignty front, the Prime Minister demanded and received confirmation that Britain be excluded from political integration in the EU. Regarding migration, demands for an emergency brake to eliminate in-work benefits to new UK migrants and child benefits to be paid at the rate migrants would get in their home countries were requested. These requests were difficult to address, but the union ultimately settled for emergency break of seven years to suspend payments benefits and the child benefit request was not granted. Concerning competitiveness, a plan to reduce regulations arising from Brussels and an extension of a single market to the banking and insurance industries was granted. Finally, the protection from further Eurozone integration included a request for explicit recognition that the euro is not the only currency of the EU; therefore, countries outside the Eurozone should not be materially disadvantaged. This demand was granted as well.

Armed with these negotiations, David Cameron had envisioned Britain stepping into a zone of strength within a reformed European Union. Yet, the extent to which this revision will benefit Britain may not seem as grand as it once appeared. Hence, when British citizens will cast the ballot to choose where the grass will be greener, they will likely sway towards a decision with foreseeable certainty. With the possibility of Britain leaving the EU, quite the opposite of certitude lurks around the corner. In fact the global uncertainty surrounding Brexit, is captivating a multitude of speculative attention attached with negative consequences. As it currently stands, an up-to-date Brexit poll tracker on the Financial Times shows that a Bremain and a Brexit have a roughly equal percentage of voters, with only a slight tip in favor of staying . However, after last year’s surprising election result, many experts say the polls are not to be trusted in such a situation. Hence, to analyze the gears that will steer the wheel towards or away from Brexit, one should pay attention to the certainties that affect British voters, who will take a collective decision that will have a resonated effect across multiple nations.

A vote for Britain to remain within the European Union would first and foremost ensure a stable trading economy. As Artur Fischer, joint-CEO of the Berlin Stock Exchange pointed out, 50% of UK’s trade is with the EU. If Brexit were to happen, 50% of trade will be placed in jeopardy and every household would have a disadvantage. In addition, the Sterling has already slumped 2.7 percent against all of its major peers this year, due to mere speculation that the UK will leave the world’s largest single market. Coupled with this week’s widened current account deficit to the largest percentage of GDP on record, traders are concerned the economic and political uncertainty from Brexit could deter future investment inflows from overseas. Hence, British citizens who are leaning towards staying with the bloc will perceive a decline in the growth of the economy as an imminent restriction to their lives.

On the other hand, a vote for Britain to exit the European Union is heavily based on the persuasiveness of Brexit campaigners. Since the announcement of the referendum, several notable figures such as Michael Howard, former leader of the Conservative Party, Boris Johnson, current Mayor of London, and Michael Gove, current Secretary of State for Justice have taken a bold stance to break free of the bloc’s rigid control. Considering these three men, who were strong supporters of the current Prime Minister during his tenure, are now strongly advocating against a reform, the British population may lose confidence in David Cameron’s promises and choose to leave the bloc. By choosing to leave, the country would have greater ‘freedom’ to draw up its own regulations regarding its laws, trade, immigration stance and international influence. The word ‘freedom’ is a powerful tool in the public’s hands. For example, it has been estimated that British taxpayers stand to gain about £12 billion per year from the reduced contributions to the EU budget. With this large sum of reduced contributions, plans to reallocate the funds towards improved healthcare – an important matter of consideration for the British – improved scientific research and expansion of current industries seem like the best path towards ‘freedom’.

The closer we inch towards 23 June 2016, debates from campaigners will sprout exponentially. The cloud of pressure surrounding the people of the United Kingdom will thicken and whichever way the crowd decides to march, the outcome will have a profound effect on the world economy. Brexit or not, the referendum will create changes that are unprecedented and forge a fresh path for the future of the country.

“Brexit poll tracker,” EU referendum poll of polls. [Online]. Available at: https://ig.ft.com/sites/brexit-polling/. [Accessed: 01-Apr-2016].

*  Published in print edition on 8 April 2016

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