The Gamble – A View On The EU Referendum

The EU referendum has been on the world’s mind; whether it is businesses inside or outside of the EU, workers in the UK or the millions of Brits employed abroad. The decision on our future role within Europe is imminent.

Some see a vote for independence, others see a gamble that could lead to possibly darker times bringing huge uncertainty and the potential for an economic crash.

With such an even split in the most recent polls the uncertainty has created market volatility leading to the pound taking its biggest plummet since 2011, which is a direct repercussion of the anxiety causing sterling to weaken against the Dollar. How the pound will react to either decision both in the short term and longer term is unclear. The only positive that can perhaps be taken from the weaker pound is that UK based service providers now have higher bargaining power, due to their services becoming cheaper by default. This could actually help them to gain new custom that could potentially be retained if or when the pound returns to its former strength.

Those travelling abroad for their summer holidays will face a weakened exchange rate and feel the effects first-hand, however major UK exporting companies face harder times as they must negotiate to keep their profit margins stable.

Whether it’s importing or exporting the UK has strong ties to Europe, 44% of our exports go to EU members and 53% of the products and services we purchase from overseas comes from the EU, illustrating how effective the ‘Single-Market’ is for trade.

Arguments from the Brexit campaign have focused on the possibility of trading with ‘new emerging markets’, when in fact as an EU member we have access to the EU’s extensive range of ‘free trade deals’. To highlight this point goods exported to China from the UK have more than doubled between 2010 and 2015, from £7.3B to £18.1B. This highlights how EU legislation can be advantageous for trading with markets outside of the EU. In 2015 the UK exported £229Bn to countries inside the EU, demonstrating how an enormous amount of our exports are reliant on our EU membership, and many suggest that without this our economy would consequently suffer.

Taking a different stance on this topic and looking at it from a ‘micro perspective’ can offer insights, which may have been brushed aside by many. At Johnston Vere we recruit engineering personnel on a global scale allowing us the benefit of seeing first-hand how important the movement of people and easy access to various markets is.

Engineering is crucial to many nation’s economies, and this is certainly the case in the UK as the country directly employs 2.6 million predominantly high-skilled workers. The goods this engineering workforce creates accounts for 44% of our overall exports.

From both an employer’s and an individual’s point of view, the issue of free movement of labour is a vital one as frequently it is necessary to bring expertise in from elsewhere should certain skills and experiences not be available. Should the Brexit campaign be successful, the future terms of this would depend on the negotiations that would follow a Brexit decision. We would hope for an agreement similar to the ones in Switzerland, Norway and Iceland whereby regulations concerning workers stay the same as if we were still part of the EU, even after exit. Without an agreement like the above recruitment would slow down, which would have a negative effect on the economy as employment is necessary to generate a sustainable economy for the future.

At JVAL we have great connections throughout Europe, 60%+ of our revenue comes from our EU neighbours, upholding an excellent reputation amongst our clients. From a business perspective we are well positioned to keep those clients if we go down a Brexit route, however gaining new clients could be more difficult, even with all of our industry expertise, extensive network, technical insight and language skills. This is due to clients being social by nature and leaving the EU would place us outside of some key social groups. Would companies get involved with a newly independent UK?

From our perspective being in the EU is crucial because without this open network our future growth could be effected, and narrow our scope of operation as it may force us to focus on a UK centric market.

For the UK as a whole, it would likely set us on track for a short recession, causing large cuts to reduce overheads, which would mean more redundancies and higher unemployment, which in turn reduces recruitment opportunities across the board.

The main debates over the future of the UK (within the context of the referendum) are nearing their end, and the public now has to decide which campaign to back. Even several political figures have shown uncertainty with the recent switching of two Conservative Brexit campaigners, Sarah Wollaston MP and Baroness Warsi deciding to switch sides to the Remain campaign for differing reasons.

There are many arguments on either side of the debate; the Brexit arguments have centred on immigration, the cost of our EU membership being too much and their interference with our laws, thus reducing our own democracy.

The Remain points are more varied and encompass a range of topics include economic stability (directly relating to trade), jobs and the cost of importing and exporting; freedom of movement, global influence, security, welfare, environmental and the ability to tackle global issues that cross national boundaries including corporate governance.

Another major last point used by Remain supporters is that the EU is a safety network for us all, and leaving the EU would pose great risks at a time when global uncertainty is high with numerous conflicts going on around the world. Let us remember that the original movement which developed into the EU was formed for the purpose of securing peace and democracy throughout Europe.

The most recent polls as we near the end of the campaigns suggest that people are being drawn towards the Remain campaign for reasons above in addition to the belief that negotiating change from within the EU is better than leaving altogether.


Jan’s Comment Section:

“Those who assume we would get a deal similar to Norway or Switzerland could be said to be ‘wishful thinking’. The UK doesn’t have the negotiating power it once had in the years of the commonwealth and industrial revolution. Firstly the two countries mentioned above were never actually in the EU. Switzerland has mass wealth acting as a ‘tax haven’ for many businesses worldwide. Norway also has a significant negotiating factor for their trade deals. Norway is rich in oil and gas and to make this money expand they invest their income so wisely that they now have what is considered the largest sovereign wealth fund, estimated to be worth $1T. So without this type of power how would the UK get such a good trade deal if it left the EU?”

“What appears most disturbing is that those Brexit campaigners have no economic explanations for why they are leading us into the dark. Surely it would be better to negotiate from within with a view to maximise our benefit from EU rather than just moaning.  An example… When I was in the poorest region of Spain I noticed all the roads being ball bearing smooth. On the side of every road there was a lovely placard proclaiming the financial support of the EU. Perhaps our civil servants and legislators should focus on extracting this EU money instead and use it to make our infrastructure robust.”

“Ireland is English speaking making them a convenient substitute for foreign investment for countries such the US, China and Japan who would trade with the EU via Ireland, this could massively marginalise the UK.”