Revealing the Economic Truth behind Brexit Myths
The topic in the forefront of everyone’s minds is no doubt the European Union referendum looming in the coming month of June. With the UK population being faced with arguably the largest question in the democratic history of the 21st century, the responsibility of whether to maintain and morph the future organisation bringing Europe together or leaving the undemocratic institution is weighing heavily on people’s minds and shoulders. With the troublesome trio of Farage, Johnson and Duncan Smith it is not astonishing that misrepresentation and scapegoating has manifested itself within the Brexit campaign. In this article I will attempt to tear up these Brexit roots using the strong economic platform upon which the Remain campaign is built as well as highlighting the factors often neglected by those who wish to leave.
With the balance of trade and annual GDP rate being such a fundamental aspect to the British economy, its further impact on the exchange rate value and inflationary pressure would lead one to believe that the fiscal impact of an exit cannot be underestimated. Currently the European Union operates as a collective trading bloc providing solidarity and a dominant presence on the world stage; however, the disintegration of this unity has been triggered by the volatility of the prospect of leaving, let alone our official exit. After Boris Johnson announced his affiliation with the ‘leave’ campaign, Brexit uncertainty lead to a depreciation of the pound to below $1.40/£. With sterling maintaining a stable level of between $1.45 and $1.70 since the financial crisis this prospect of further volatility could spell disaster for the British come an official exit from the EU.
If this potential disintegration of the union was completed on the 23rd June, then the unified bloc would leave Britain as a solo trader in a sea of sophisticated team players within the EU as competition. On the European stage alone it would leave the United Kingdom six times smaller than the unified EU with a GDP that although is 6th internationally, trails behind Germany and France both of which are in the EU. To complement this the Confederation of British Industry estimates that 3 million jobs in Britain are linked to trade with the rest of Europe, none of these statistics present the UK to be in a stable or affluent situation upon leaving.
You may believe that leaving the European Union would mean we could continue to trade with those countries through an alternate form of trade agreement, which is partly accurate. The UK would be freed from the burdens of EU regulation and hence may be able to boost trade with faster growing parts of the world, by eliminating tariffs and signing trade agreements without the constraints of EU membership.
Yet, underpinning this assertion is the belief that the UK has a big enough economy to be an effective trade negotiator in its own right and that the new agreement would provide the same benefits that we currently receive. In conjunction with this view, at the moment when we negotiate with America, China or Japan, we are doing so as part of the world's largest trading bloc, which accounts for nearly 20 per cent of world GDP. Washington, Beijing and Tokyo have to take Brussels seriously as a trade partner. If we were on our own, the balance of power would be quite different. The US economy is seven times as big as ours, the Chinese is five times as big, and Japan's is twice our size.
These economic reasons to remain within the European Union are only a select collection from the bank of reasoning the Remain campaign is presenting. To clarify, I do disagree with the bureaucratic red tape and undemocratic air surrounding the Brussels centric union, but in order to reform such an institute with roots in benefits, our nation must be a member. Ultimately the UK is facing an existential crisis and one can only hold their breath and wait for the decision affirming our acceptance or rejection: to be or not to be “European”.
Photograph: Flickr / SP Duchamp