The trade-off: Britain’s economic gamble
The economy is one of the most important issues in politics: involving wages, prices and jobs. Are the warnings from most economists of trouble if we leave the EU enough to make us stay?
When the MP Jo Cox was murdered on Friday afternoon, both sides of the EU referendum immediately stopped campaigning. But, as MPs gather in Westminster today to pay tribute to the ‘utterly amazing’ woman who lost her life, the march towards Thursday’s vote has resumed its pace.
Yesterday David Cameron, the prime minister, focused once again on the economic arguments for staying in the EU. As Britain’s economy ‘hangs in the balance’, he said, voting ‘Out’ would leave Britain ‘permanently poorer’.
He has the bulk of experts on his side. Leaders of the Bank of England, the International Monetary Fund and the World Trade Organisation have all warned that leaving the EU could trigger a recession in the UK that would put jobs and trade at risk.
EU membership gives Britain — as part of the EU’s single market — access to 500m customers; this means that anything made in Britain can easily be sold in, say, Belgium, and vice versa. It also means that Britain is part of the EU’s trade agreements with around 50 other countries, which would all have to be renegotiated after Brexit. During these negotiations the UK could face new tariffs on imports, pushing up prices until new agreements are made.
Experts have also warned that in the event of a ‘Leave’ vote exchange rates for sterling would plummet, increasing import prices; interest rates, including on mortgages, would probably rise to counter inflation. Customers would lose out on both counts.
But Leave campaigners reckon all this short-term confusion would be worth it to free Britain from the shackles of the EU’s lumbering economy. Growth on the continent has been slowing, while Commonwealth countries are expanding rapidly — in fact, the Commonwealth’s share of global GDP has already overtaken Britain’s major European partners.
If Britain took advantage of these and other non-EU opportunities, say Leavers, it would be far better off in the long term.
The evidence is clear, says the Remain camp. Leaving the EU would be a foolish gamble with the country’s finances. The ‘bumps’ that the Leave camp admits Britain will face are not theoretical: they are people’s jobs and livelihoods. It could take years for Britain to negotiate its way to stability again; people’s futures should not be callously sacrificed in the meantime.
The risks are worth it, insist Leavers. Experts also warned that Britain would suffer from not joining the eurozone, but they were wrong. The truth is that economies are never 100% secure, and whenever Britain has endured financial troubles it has always emerged stronger. It did so by being bold and looking towards the future. We cannot let fear stop us from taking the next step.
- Is the economy an important issue for young people in the UK?
- Would leaving the EU be worth the financial risk?
- Imagine that you are the governor of the Bank of England. Write a speech to the British people advising them on Thursday’s vote.
- What do you want to do when you grow up? Choose a job that you find interesting and research how it might be affected by leaving the EU.
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Q & A
- How would Brexit affect my family’s jobs and incomes?
- It depends. EU regulations are so complex that each industry could be affected differently. Farmers get around 55% of their income from EU support so they would be worse off. Fishermen, who are restricted by EU quotas, could increase their hauls. Clothing prices could go up but chocolate might go down. The financial sector could struggle but energy bills might fall.
- Does the UK spend £350m per week on the EU?
- No. This figure is often used by Leave campaigners due to the UK’s £18 billion annual membership fee. However, it gets a discount of around £5 billion, plus around £4.5 billion of EU spending. So the annual contribution is closer to £8.5 billion a year, or £163m per week. This does not include the financial benefit from EU trade.
- Jo Cox
- The Labour MP was murdered outside her weekly surgery in her West Yorkshire constituency. Her attacker appears to have links with far-right, neo-Nazi groups.
- A decline in economic activity and a fall in a country’s GDP. It is impossible to know if this would happen or not after Brexit, as the situation is unprecedented — no country has ever left the EU before.
- Trade agreements
- The EU, as the world’s largest trading bloc, negotiates to secure access to more markets and better trade deals. The question is whether the UK could achieve better and more suitable agreements on its own.
- Duties on goods which come in and out of a country. There are no tariffs charged on trade between members of the EU’s single market. However, the EU does impose tariffs on non-member countries’ products (eg, cars, clothes and food) when imported into the EU.
- Exchange rates
- These determine the value of the pound in comparison to other currencies.
- Interest rates
- The cost of borrowing which is added to the amount borrowed when a loan, such as a mortgage on a house, is being repaid.