Some pros and cons…
On 23rd June 2016, Britain’s inclusion in the European Union will be put to a public vote. The run up to this has seen an increasingly murky and mucky political fight with both sides making outlandish claims. So what are we to believe and what will the vote mean for Britain’s economic status and property market?
As Europe picked its way through the post-war rubble in 1945, countries sought a way to power share for the socio- and economic benefit of all – and to put an end to the in-fighting that had seen much of Europe raised to the ground.
The core six countries: Belgium, France, West Germany, Italy, Luxembourg and the Netherlands established in 1950 what was later to become known as the European Union (1993) and as more countries joined, the constitution was revised accordingly.
Britain joined when it was in its EEC incarnation (European Economic Community) in 1973 and it has been an uneasy partnership from the start. Just one year in, Britain was calling for policy and budget reforms; ten years later Britain fought for and won agricultural subsidies in line with other member states; and by 1997 had announced that it would not be joining the single currency. Part of this unease is the fact that Britain came late to the party and had no say in its terms so has always tried to assert its independence while reaping the benefits – the equivalent of enjoying the drinks and canapés while telling everyone how much better the party would be if it had organised it.
That said, Britain IS one of the three big players in Europe alongside France and Germany and whilst it is true that consensus must be reached with the 28 member states before any policy can go ahead, the UK has tremendous influence within that sphere.
So what are the arguments to Remain? It is significant that respected economists, business leaders and financial institutions have noted that leaving would have a negative effect on Britain’s GDP. This is because Britain currently benefits from a united trade agreement that helps companies comply with the regulatory barriers across different national markets. For example, a country manufacturing parts for toasters needs to comply with the different power supplies, different components, different safety tests and different legal guarantees of all the different countries it is supplying, and the EU automatically provides that support. While Britain may no longer be a manufacturing powerhouse, it still benefits from the associated trade deals of the member states and preferred trade deals with the rest of the world. It is naive to imagine that without the support and backing of the EU that Britain would be able to negotiate these same deals with other nations – and the US, Japan and China have all said this.
Much has been made too, of the sums of money being sent to the EU. The Leave camp claims £350 million a week is being swallowed by the EU and noted it could be better spent internally. The HM Treasury was quick to debunk this figure claiming that it is actually £190 million a week and pointed out that that would need to be spent anyway to access the common market which provides trade and investment opportunities that strengthen the British economy. Opportunities such the European Investment Bank’s £280m UCL funding to improve facilities, its £700m Thames Tideway Tunnel funding, its £360m British Gas’ smart meter project funding and its £16bn investment in Crossrail and Manchester’s Metrolink. It’s hard to imagine that any of this would have been considered for a non-EU country.
So the compelling arguments to Remain are economic ones, but so too is the argument that as a member of the EU, Britain has a significant say in the European agenda and the policies it sets. In fact, a comprehensive, independent and painstaking review of Britain’s involvement in the EU was undertaken from 2012 to 2014 (the Balance of Competences Review). It studied the benefits and failures in every significant area of British life of being an EU member and concluded beyond doubt that Britain had nothing to complain about from the deal and it should just pipe down and enjoy the canapés.
So what are the arguments to Leave? The political and economic counterpoint is as follows. There’s a growing sense that laws and policies are being decided by an ‘unelected’ body trying to find a one-size-fits-all solution to the differing needs of EU members. That the amount of money being sent to the EU is unacceptable, especially when that could be better spent on British infrastructure and services. The Leave campaign is also nonplussed about the economic arguments that the Remain campaign has made, primarily that by leaving, EU tariffs could be removed from imports making goods cheaper to buy thereby raising living standards. As Britain is a bigger importer than exporter, its buying power is the most significant factor and that will remain unchanged by it leaving the EU.
As for the issue of immigration, under EU law any citizen can move freely throughout Europe and choose to settle where they believe they’ll have the best quality of life. For many, there’s a belief that the welfare state makes Britain an attractive option and that as a nation, Britain will be overwhelmed by people taking out of a system without paying into it. Britain won’t be able to invest in its infrastructure and services (such as schools and hospitals) at the same rate as population growth which will result in services being stretched to breaking point and costs rising.
At ground level, the housing shortage is seen as indicative of this. With house prices rising beyond the reach of average-wage earners because of the increased demand of buy-to-lets, not to mention the increased profitability of buy-to-lets with rents rising faster than inflation. If Britain were to leave the EU, it is quite possible that this demand for property would fall, house prices would fall too and first-time buyers would be back in picture for the properties on the market.
It is possible, but not certain. No outcome is certain. No consequences can be claimed with any degree of certainty and both the Leave and the Remain camps acknowledge this.
There are some things that will change should Britain leave: the UK legal system, which has evolved in partnership with the EU over 40 years, will see a complete and utter overhaul. Britain will have to reformulate its relationship with Europe – and quickly – to work out how residents, both Europeans in Britain and British people in Europe, are to be treated and relocated. Plus it will take years to build a comprehensive strategy and trade framework with Europe and the rest of the world – not to mention the working out of monies owed on either side through investments, loans and business agreements. There are also things that will change if Britain remains, such as how it accepts and implements EU rulings from a renewed position of strength. One thing is certain though, the vote may be a simple in or out but the outcome will be more complex than anyone is truly prepared for.