Dubbed as the most important vote in Europe in half a century by the Washington Post, the EU referendum on 23 June has the whole world on tenterhooks. Will we Brexit or Bremain? The latest figures from the pollsters are calling the election for Team Leave (47% of the vote according to the latest You Gov poll) but the margins are so close that Britain’s fate within the EU still remains uncertain.
Were Britain to break ties with the union, Leave campaigners advocate that the UK will benefit financially (as there will be no more membership payments or bail outs) and the nation’s prosperity would flourish if no longer subjected to the red tape of Brussels. The UK will have the freedom to trade as it sees fit by making deals based on the domestic economic requirements of the nation and not that of the EU member states. Economist on the other hand argue that the UK businesses would suffer outside the EU. Britain would lose the power, influence and leverage it has enjoyed over the years as other nations would put the EU before the UK. Doing business with a collective of 27 countries is after all more beneficial than doing business with just one country.
The UK’s Super Power allies and trading partners want a stronger, closer Europe; so could a Brexit mean an end to the special relationship with America? According to President Obama and the White House the answer is yes- when it comes trade at least, there will be no more preferential treatment. President Obama has warned that if Britain broke away from the EU, the country would go to the back of the queue regarding US trade deals. China has offered its support by saying it would respect the decision made by the British people. However Beijing is wary of the implications of Brexit as it could have a damaging effect on the strength the unity of countries it regards as an important counter balance against the mighty US.
What is clear is that most, if not all trade agreements will have to be reviewed and re-negotiated. According to the Global Counsel, Britain will find itself severely dependent its relationship with its ex partners (other EU member states). There is an option for Britain to adopt the Norwegian model of trade which is a membership of the European Economic Area but, from a trade perspective, it defeats the main point of Brexit. There is also a Swiss model of trading option or a completely new and comprehensive Free Trade Agreement.
Another certainty is that Sterling’s value will fall but we cannot predict how low. Perhaps as low as USD 1.38 and EUR 1.23 or even lower to 2013 levels. A weak Sterling will make UK exports more attractive and affordable to overseas clients but on the other hand prices of imports will increase causing lower volumes to be purchased.
There is no doubt that the UK will face a long and difficult road to achieve international trading bliss should Brexit happen. Some predict that it will take a decade or more for feasible international trading agreements to be created and ratified. The UK will lose the strength in numbers, priority and influence it is used to; but will not be ignored entirely- she is after all the 5th economic power of the world and a very attractive export market for all.