There has always been lots of emotion surrounding the UK’s membership of the European Union (EU) not least in the recent period following the June 2016 referendum. We’re in the final furlong of preparation for Brexit but as you’ll know there is a growing clamour for a second referendum given the parliamentary problems with the deal struck by Theresa May.

A second referendum may not be your first choice, but it may be the only way to help decide the final path for the UK given the lack of consensus within Government. Not only that but there is a growing number of leave voters who are beginning to regret their decision given that Brexit is not turning out the way that was expected (more of this later).

With these facts in mind I thought it would be helpful to keep away from emotion and try to focus on some of the most important facts – things we ought to be aware of in case we’re asked to make our choice again at the ballot box.

All of this is really important (obviously) as, for reasons that will become obvious, any decision we might make in the future will be irreversible (at least on the current terms we have).

What are the Benefits of being in the EU?

(source: https://www.independent.co.uk/news/uk/politics/eu-what-has-european-union-done-for-us-david-cameron-brexit-a6850626.html

The benefits to the UK of being a member of the EU can be summarised as follows:

  • It gives freedom to UK citizens to live, work and retire anywhere in the EU’s other 27 countries
  • It sustains millions of UK jobs – because of the EU customs union and single market
  • UK businesses depend on European markets
  • Holidays within the EU are much easier – and safer
  • You are less likely to get ripped off – there are numerous forms of consumer protection
  • It provides greater protection from terrorists, paedophiles, people traffickers and cyber-crime
  • The UK has greater influence at a world level than it would have in isolation

The UK’s economy has grown disproportionately strongly

(source: FT https://www.ft.com/content/202a60c0-cfd8-11e5-831d-09f7778e7377)

The UK has been part of the EU since it joined the EEC in 1973 (the UK applied in 1961). In the following 45 years the UK has gone from being the “sick man of Europe” to one of the wealthiest. Being part of the EU has allowed the UK economy to grow faster than the average rate achieved by Germany/France/Italy and become more prosperous than the average of these three largest EU economies. It is theorised that being a member of the EU has exposed UK industries to competition to a point where while some suffered many, many more became much more competitive and have capitalised on the European market opportunity.

 

UK growth rate vs G/F/I

And academics have shown that the financial benefit to the UK has massively outweighed the annual cost to us of membership, especially after the rebate and inflows from the EU structural fund (see later) have been taken into account.

(source: http://www.cbi.org.uk/insight-and-analysis/our-global-future/factsheets/factsheet-2-benefits-of-eu-membership-outweigh-costs/)

The CBI summarises the benefits to the UK of EU membership as follows:

  • Access to a $16.6 trillion p.a. single market of 500m people – no tariffs, and common standards. Our trade growth with EU countries is probably 50% higher than if we had remained outside the EU
  • EU is a springboard for trade for UK and produces a higher quality of trade deal with other parts of the world than we could ever achieve on our own
  • Membership has increased flows of investment to the UK
  • Free movement of labour has brought economic benefits to the UK – plugging skills gaps and filling positions UK people simply don’t want. And UK citizens have also had the chance to work unimpeded in Europe. At least 750,000 UK born citizens live elsewhere in the EU.

What do we pay for EU “membership”?

Annual net contribution is currently 7.3bn or 0.4% of GDP. This is only £116 per person, and less than Sweden, Denmark, Finland, German and the Netherlands. The UK is the second largest net contributor to the EU budget after Germany. The UK’s net contribution compares to €16bn spent by the UK on foreign aid (inc. in India and China which should no longer really be thought of as less developed economies).

EU country net contributions

(img source: https://fullfact.org/europe/claim-about-uks-eu-contribution-correct-meaningless/)

The UK’s regions receive EU funding for economic development

(source: https://www.telegraph.co.uk/news/2016/06/01/mapped-where-in-the-uk-receives-most-eu-funding-and-how-does-thi/)

There is undoubtedly a large flow of EU structural funds to the recently-joined states such as Poland, Baltic states, Czech and Slovak republics, etc. But within the UK there are regions that currently benefit substantially – in fact Cornwall and West Wales will receive similar amounts to Romania and Bulgaria.

UK regional funding from EU

Here are some examples of how EU funding has helped the UK’s regions & discover how EU funding has helped your local area by searching your post code here.

The UK’s Favourable Opt-Outs

(source: https://politick.co.uk/uk-opt-outs-from-eu-legislation)

Over the years as the has EU developed policy and legislation the UK has negotiated a series of highly valuable opt-outs. In the following areas the UK is not bound by these rules or has other special arrangements:

  • Economic & Monetary Union
    • No obligation to join the Euro
    • No participation in the Banking Union – the UK supervises its own banks
    • Cannot be penalised under EU rules
  • EU budget rebate – considerably reducing the UK’s net budget contribution
  • The UK is not a member of the Schengen agreement – it has control over its border (i.e. passport control)
  • The UK can choose whether it wants to participate or not in new EU justice and home affairs
  • UK labour law is not trumped by EU law

All of these opt-outs have been hard fought for – it is virtually impossible to see any other member state ever having such generous arrangements. Should the UK leave the EU and at some later date wish to rejoin it would not benefit from them again – it would not have the negotiating position to be able to. So, the UK’s current deal with the EU should be seen as the best it will ever have.

What are People’s Concerns about the EU?

(source: https://www.theweek.co.uk/brexit-0)

Given all the positive facts about how the UK benefits from its membership of the EU it may seem extremely odd that 52% of voters wanted the UK to leave. So, what were factors driving people to vote that way?

  • Loss of UK sovereignty and the belief that the EU structure is inefficient and too dictatorial
  • Immigration – the UK doesn’t have control of its borders (though this is only relevant to EU nationals)
  • Jobs – EU nationals are “taking our jobs”
  • Resentment about how the EU spends its budget – and that by inference the UK’s net contribution doesn’t justify the benefits it confers (e.g. trade and inward investment)
  • Given that the majority of UK SMEs don’t trade with the EU it is unreasonable that they are “saddled” with all the regulation and bureaucracy
  • The UK needs to be a truly independent nation with broader connections around the world

Some of these issue and concerns have been addressed above. It seems that while it is possible to show that annual budget contribution does provide significant value for money it has simply been impossible (so far) to get this message across to the UK public. But what about the issue of immigration from the EU and the impact on UK jobs?

Which UK jobs are now typically done by EU migrants?

(source: https://migrationobservatory.ox.ac.uk/resources/briefings/migrants-in-the-uk-labour-market-an-overview/)

The “loss of jobs” to immigrants is one significant factor in people’s perception of the EU and its impact on everyday life. However, it’s important to differentiate between EU and non-EU immigrants:

  • The % of UK total employment represented by foreign-born people rose from 7.2% in 1993 to 18.0% in 2017 BUT 51% of the absolute increase was from an increase in non-EU nationals.
  • As at 2017 there are 5.5m foreign born workers but only 2.3m of these were from the EU
  • There are proportionately more EU born workers in lower skilled jobs (e.g. retail and hospitality) while proportionately more non-EU nationals in professional jobs (e.g. pubic administration and education).
  • In 2017 40% of food & drink processing workers were EU born while 25% of doctors were non-EU born

Anecdotally it is said by those who employ EU nationals in relatively lower skilled jobs that they do this because they cannot find UK nationals who are prepared to do the work. If this is true then who will do this work if EU nationals start to leave the UK?

What are the Economic Implications of Leaving the EU?

(source: https://www.bbc.co.uk/news/business-46338585)

In general leaving the EU’s Single Market will create barriers to trade and reduce investment in the UK. This will reduce competitiveness and also mean the UK workforce will become less productive (GDP/head). Various Brexit scenarios (including “no deal”) have been modelled by a number of respected organisations and include:

  • NIESR/People’s Vote study – by 2030 our GDP will fall short of baseline by 3.9% or £100bn p.a. (equivalent to the output of Wales or The City of London). Under a “no deal” Brexit these numbers are 1.4x worse
    • Trade with the EU will halve.
  • Bank of England:
    • Disruptive exit – GDP falls 3% in 2019; House prices fall 14%, Unemployment reaches 5.75% (currently 4%)
    • Disorderly exit – GDP falls 8% in 2019; House prices fall 30%, Unemployment reaches 7.5%. A much worse outcome than the recession following the 2008 financial crisis.

Brexit financial scenarios

Why did People Vote to Leave the EU?

(source: https://en.wikipedia.org/wiki/Causes_of_the_vote_in_favour_of_Brexit)

Prior to the vote the most important issues facing the UK were seen as migration (48%), UK sovereignty (re. the EU) (32%) and the economy (27%) – the Leave campaigners focused on migration & the EU and the Remain campaigners focused on the economic impacts of leaving. The Remain campaign was very poor – they failed to make the case to stay; they failed to sell the significant benefits of being part of the EU.

The situation was not helped by the fact that the UK population feel and act less European than the populations of any other EU member country! Irrespective of why this might be it does mean that there is less respect for EU institutions.

Also, was the vote simply a chance to vent more general frustrations? For instance a widening North/South divide with the North feeling left behind. And people who feel left behind are more prepared to gamble for a brighter future!

Also there is a view that there was a media bias (intentionally or otherwise) towards the Leave message.

What do recent polls tell us about people’s feelings?

(source: https://whatukthinks.org/eu/opinion-polls/uk-poll-results/)

Polling companies have been tracking opinion about the EU for many years, and of course since the 2016 referendum there has been a particular focus:

  • “If there were a referendum on the UK’s EU membership how would you vote” – a majority would vote “Remain”, and by a clear margin. AND it’s interesting that the % Remain has grown from c.38% in early 2012 to 52% now! (apart from the blip in June 2016!)
  • “If there were another referendum…” – all 6 polls since early November 2018 have Remain in the lead
  • “In hindsight do you think Britain was right/wrong to vote to leave the EU?” – since September 2017 the vast majority of polls show people think Britain was wrong to vote Leave, and the gap has been growing strongly since June 2018. As it stands the gap is now 12% (56% Wrong vs 44% Right) [YouGov 4/12/18]

Brexit “Facts vs Fear” Video

A 12 minute video narrated by Stephen Fry which attempts to separate fact from fiction.

Conclusion

It seems to us the chain of events goes something like this:

  • History (and perhaps geography) has dictated that UK citizens feel less European than other members of the EU
  • Facts tell us that becoming a member of the EU has allowed the UK’s economy to grow much more strongly than it would otherwise have done. We are all the richer for it and the financial benefits have greatly outweighed the costs.
  • UK governments over the decades have failed to “sell” the benefits of the EU to to UK citizens. In fact it may feel to your average UK citizen that the UK government is more at odds with the EU than in line with it, although in general this is probably not true
  • A failure by the UK government to equalise the benefits of economic growth around the nation has led to frustrations that have simmered for years.
  • The June 2016 referendum:
    • was ill-judged in the first place
    • was not fact based
      • the Leave campaign was well organised but based on fiction
      • the Remain campaign attempted to focus on facts but was badly organised and never gathered any momentum.
  • As at December 2018 the draft Brexit agreement seems to be Brexit in name only. It does not deliver on the Brexit “promised” by the Leave campaign. All evidence now suggests that to leave on these terms just so the government can claim they’ve achieved Brexit is complete folly. The UK will be forever damaged economically and it will accelerate its decline on the world stage. This is not what people voted for. It is time to reverse this decision before it is too late.
  • The UK should remain in the EU:
    • to continue to capitalise on the inherent benefits of the economic and cultural grouping
    • to help shape its future and reform it from within, rather than running from it because we fear it
    • and every older UK citizen should try to be more European in their outlook – our younger generations already are!