Reports by economists are usually read by few people other than economists, or perhaps a handful executives looking for a change of pace from boardroom papers while their drivers negotiate the London traffic. Ready for Brexit?, by ING’s James Knightley, deserves a rather wider audience, because it offers something largely absent from the debate about Britain’s membership of the EU: A sane and well-reasoned examination of the case for staying against that for leaving, and a sober assessment of what might happen if the latter becomes a reality.
Mr Knightley makes it clear that Britain would manage well enough on the outside looking in. It’s a big economy that (as last week’s figures made clear) runs a sizeable trade deficit with much of the rest of the world. So it would be in the interest of the much of the rest of the world to play nice with a Britain outside the EU.
Those arguing for an exit often suggest that this country could be a “big Switzerland” that does well out of its proximity to the single market without having to deal with many of the more irksome requirements of membership in the EU. Sound good? Unfortunately, it ignores the fact that Switzerland does have to deal with many of the more irksome parts of being in the EU, because it trades extensively with the EU.
Despite all the Eurosceptics’ excitable talk of a trade boom with Asia’s tigers and other fast-growing economies, were the UK freed from the dead hand of Brussels, the EU is our biggest trading partner and will remain so for years. We might not get hit by any (or many) trade barriers or tariffs if we exit, but if British companies want to trade with the EU they will still be bound by its regulations. Many of which, during our spell on the inside, have actually been made all the more irksome thanks to “gold-plating”, not by people in Brussels but by people in Whitehall.
Moreover, the UK has opt-outs when it comes to many of the right’s real bugbears (social requirements and the like). And as for a “flexible labour force” (one that means employers can hire and fire easily), well, we have one now too.
It is also true that while an exit might not be the disaster that some have claimed, there will be a cost. At a time when growth is desperately needed to help pay down our vast budget deficit, the Brexit could, according to Mr Knightley, lop as much as 2 per cent from GDP growth by 2018, if not more. Companies, especially international companies, will be put off from investing, and while Britain might be able to keep a lid on immigration, it would lose jobs.
In other words, it makes little sense from an economic standpoint, and not much more politically, especially if concessions can be achieved. What is needed now is for people with a rather wider following than the good Mr Knightley to start making the case – and loudly, because the increasingly febrile climate as regards the EU is already hitting investment to the extent that every single one of us is making a down-payment on the Brexit, even if we vote against it in a future referendum.Reuse content