Brexit unforeseen consequences?
To believe in one's own abilities is both natural and good, however we should always temper that self belief with the knowledge that "after pride cometh the fall". While, it is increasingly becoming clear, the UK will vote to "Brexit" and there is nothing to suggest that we cannot succeed by going it alone, we should make sure that this is not a decision made out of hubris.
Those promoting remain have a difficult sell. They are locked into the argument "the devil you know is better than the one you don't". The balance sheet is particularly difficult to draw up, as many of the benefits are intangible and difficult to quantify. What makes things even more difficult is that there is much about the EU that we can justifiably feel unhappy about.
The politicians on the leave side are by and large the more charismatic, but their message that "the grass is greener on the other side of the fence" is suspect. Just as we have learnt that once we get to the other side of the fence there are as many rocks and weeds as on our side, so it is likely to be when on our own.
Our referendum is about initiating divorce proceedings, and, as many who have gone through divorce will tell you, a reasonable settlement is often beyond reach and contrary to logic. We all have a tendency to see things from our own perspective without fully understanding the picture from the other side.
The Balance Sheet:
The remain perspective;
1. Our Banks have net indebtedness to the Euro-Zone Banks somewhat in excess of £700 billion and projected to exceed a trillion by 2020.
2. Our main exports outside of armanents and whiskey are, the motor industry and Financial Services. Both of these, to a large extent, are dependent on free access to the markets of the EU. The motor industry particularly so as it is virtually all foreign owned and less than 15% of it's sales are to UK citizens.
3. Our food is effectively being subsidised by the taxpayers of Europe.
The leave perspective;
1. Membership of "the common market" implies freedom of movement for workers, which leaves us out of control of immigration.
2. Uncontrolled immigration acts as a wage suppressor in the UK because migrants from the poorer areas of the EU are prepared to work for lower wages than our own citizens.
3. EU regulation of industry acts as a break on our own industry creating a cost structure that makes us less capable of competing in other markets. Remember that the EU does not preclude us from other foreign trade, it only demands higher standards and workers rights.
Where does this leave us?
There is no doubt that the UK can run a successful economy outside of the EU, however to imagine we will negotiate full access to the EU markets without bearing any of the costs is simply "pie in the sky". When we say that the EU is more dependent than us for trade to continue, we are failing to see that the Euro-Zone generates a current account surplus of well nigh £100 billion a year … our contribution to that surplus is less than half.
The existing models for access to that market are "The Norwegian model" or the "Swiss Model". Norway per person contributes almost 80% of what we do in the UK! The Swiss, who contribute much less accept all trade and industrial regulation including freedom of movement but have no direct access to the Financial markets, this being achieved through subsidiaries in London.
I have heard some say that we will simply open subsidiaries in the EU to carry on the financial trade, I suspect that this might not suffice without the UK there to negotiate the "special exemptions" from regulation for London we might soon find the EU decides to fill part of it's budgetary shortfall by insisting that not only subsidiaries but headquarters as well need to be domiciled in the EU.
We could also see a strong call for relocation of much of the motor industry to the Eastern European states that are sorely in need of investment. Given that these same European States that are crying out for investment, will have a veto right over any deal with the UK, for many will see "Brexit" as a means of enhancing their own economies.
An even more dangerous scenario would be if the ECB insisted on all British Bank debt being consolidated within the ECB with the ultimate objective of establishing formal repayment terms. Even if stretched out over 100 years this could amount to an annual drain on the UK economy of more than £7 billion a year. I dont foresee this as probable, but it is a possible scenario. More likely they would require that the UK indebtedness to the Euro-Zone be frozen and we have to find another source of funding the £30 to £40 billion shortfall in trade with the EU.
Overall the negotiating strength might well be on the other side of the fence. "Brexit" could prove the most catastrophic economic decision of all time, bringing about a UK with rising wages and prices and a shrinking economy. Migration has been one of the main drivers of growth within our economy, with less than 10% of the EU migrants not being fully economically active, it is hard to see the growth without them.
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