Bill Jamieson Brexit – or vote again?

COMMENT

BILLJAMIESON | Executive Editor of The Scotsman

Brexit – or vote again?

As they said of England on a previous momentous occasion – it’s not over till it’s over. Maybe not even then.

All over bar the shouting? British voters will soon be voting on whether to hit the Brexit button or remain in the EU. If the weight of dire warnings from senior business figures, the UK Treasury and the Bank of England is any guide, an overwhelming vote to Remain would seem assured.

Many of the UK’s biggest companies would wish to remain in the EU. And the continuing signs of an economic slowdown add to apprehension about what the future holds. But that view, particularly across the small and medium sized enterprise (SME) sector comprising 5.2 million companies or 99 per cent of all businesses, is not unanimous. Many small firms struggle with ever-encroaching EU regulation.

And ‘what the future holds’ is what most concerns them. This is not just about staying in the EU as it is. It is about staying in the EU as it will look in 2025 or 2035. What sort of organisation is it? And how will it develop?

Pro Remain supporters say that fears of ‘ever closer union’ are exaggerated. However, a report last year by the five presidents of EU institutions advocated the strengthening of monetary union by 2025, a eurozone Treasury and ultimate political union.

John Longworth, former head of the British Chambers of Commerce, has sought to counter some of the fears over Brexit. Contrary to the belief that Britain’s economic health is dependent on EU trade, he points out that just six per cent of businesses export to the EU and only 13.3 per cent of the UK economy is associated with exports to the EU – yet the other 87 per cent is burdened with the costs and regulations of Brussels.

What of concerns that we can only do business internationally if there is a trade deal? The vast majority of world trade takes place between countries who have no trade deal. China, for example, trades with both the UK and the EU without a trade deal. And the UK enjoys a trade surplus in services with the US with whom we have no trade deal.

Business understandably hankers after security and political stability. But that is not guaranteed in the EU. It faces social and political turbulence as a consequence of mass immigration from the Middle East and Africa. Far Right parties are on the rise in France, Germany, Spain and the Netherlands. That social democratic consensus is under challenge. France has also had to face violent demonstrations against the government’s proposed labour reforms.

Remain campaigners can point to a deluge of studies and forecasts warning about Brexit. But even here there is no unanimity. Last month eight economists argued that the UK would flourish outside the EU.

Certainly, the weight of established economic opinion has favoured Britain staying in. But that does not mean that the dissenters can lightly be dismissed. They include Professor Patrick Minford, formerly one of the ‘wise people’ advising the Treasury in the early 1990s, and Gerard Lyons, former chief economist at Standard Chartered Bank.

Many of the UK’s biggest companies would wish to remain in the EU. And the continuing signs of an economic slowdown add to apprehension about what the future holds. But that view...is not unanimous.

The Bank weighs in

The ‘Remain’ case was bolstered by Bank of England Governor Mark Carney’s letter to MPs warning that Britain risks a period of weak sterling, higher prices and lower growth if we vote to leave the EU.

The BoE’s analysis is that a 10 per cent fall in sterling would push prices up 2.75 per cent over four years, raising the annual inflation rate by about 0.75 per cent a year. But any boost to growth would not apply in the case of Brexit because “if increased uncertainty were a key underlying cause of this depreciation, aggregate demand might be affected…Greater uncertainty could lead firms to postpone some investment projects and households to defer some spending.”

But even among Bank governors there is no unanimity. Interviewed recently, the previous Governor Mervyn King said he was deeply unimpressed with the current debate, which he reckons consists largely of “exaggerated claims about either the cost of leaving or the benefits from leaving.”

Nor was he interested in “all these letters signed by various people telling us what to do.” King pointed out that far too often economic forecasts turn out to be plain wrong and that nearly all the claims made during the 1975 referendum campaign were hugely inflated.

“The idea that somehow it’s either going to be bliss if we leave or a complete disaster...is a gross exaggeration.”

As for the report from the Organisation for Economic Cooperation and Development (OECD) claiming that leaving the EU would result in three per cent lower growth than would otherwise be the case by 2020, many have questioned the credibility of projected forecasts of lost household income a decade out.

And ‘Vote Remain’ always has an escape hatch. In the unlikely event of a Brexit vote, would not the UK not be asked to vote again in a second referendum in the best EU tradition – as the first was clearly ‘a rogue poll’? n