I don’t know about you but I am already fed up with all these politicians ‘banging on’ about the repercussions of the referendum at the end of this month. Personally I have never seen anything so important that I am being asked to make a decision on, but nobody can give a straight answer. I suspect that is because nobody actually knows the answers.
I have asked many people the question – in or out, over the last few months, and I have to say I think it is about 2/3rds of people telling me out. I find it strange then, when I watch TV and they are telling us that the remain in campaign is well ahead in the opinion polls. But we all know how good the opinion polls were on 6th May 2015 at the general election don’t we?
The government have thrown everything apart from the kitchen sink at the leave campaigners, and followed this up with intervention from the Treasury, the Governor of the Bank of England, the International Monetary Fund, and for good measure Barack Obama. Now call me cynical but I have been to America enough times to hear the expression get to the back of the line, and not queue. So who wrote his speech? George Osborn or David Cameron perhaps? Whoever it was please remember Mr Obama only has one country’s interest at heart with his ‘advice’ to us, and that is the United States.
Is the European Union our biggest trading partner?
I attended an investment seminar in Manchester recently and the economist there provided information showing that the European Union is our biggest trading partner. However, the figures for 2015 show that we exported goods to the value of £134.3bn, but imported goods from the EU of £223bn. We export more services to the EU than they do to us. The figures being 89bn exported, and 68.1bn imported. So in total we imported 88.7bn in 2015. So, if as we are told that it will be a catastrophe if we leave the EU because we will not be able to trade with them, just who will come out the loser? I wonder what the owners of AUDI, BMW and Mercedes will have to say to their politicians in Brussels when they tell them that they cannot trade with the UK anymore.
The most likely fact in this is that nothing will happen at all. Trade will still take place after the referendum, simply because that is what countries do, and have done so since Vasco de Gama set sail from Portugal to India in 1497.
What will change if we leave?
We in Britain benefit from being the world’s fifth biggest economy. This is not another Greece scenario for the EU to deal with. In fact, if BREXIT does happen the implications for the EU are very serious indeed, in my opinion. I could see the whole thing imploding, and that is something that we certainly do not want to see. To stop this happening it is in everybody’s best interest that trade continues and that big economies are not put to any great harm. And this is why in my opinion there will not be a lot of change in the way we do business should we decide to leave the EU.
There are some people that say why take the risk, and things are not broken so why try and fix them. And this argument is a valid one. However, there are other issues with the EU that we have to take into consideration apart from trade and the economy. The EU is still an experiment in progress. It is not the finished article. There isn’t anywhere else in the world to my knowledge where countries club together with one currency, and one set of laws, and with an elected parliament based in one country. The EU will probably seek to become more federal over the coming decades. By federal I mean more and more integration. And do we want this? I am certain that I don’t.
Democracy is the single biggest issue after trade in my opinion. We have the right to get rid of bad governments and unjust laws if we so choose to vote against them. But the UK’s Parliament and courts are no longer sovereign. Supremacy now rests with the EU and the European Court of Justice. EU law takes priority over conflicting laws enacted by individual member states. So just at a time after the Scottish Referendum in September 2014, when the Westminster government talked about more powers for the rest of the UK, here we are moving to handing power over to Brussels.
The Referendum Race
Curiously it is probably not the issues that will sway the vote on the 23rd June, but the numbers turning out to vote. The smaller the turnout, the more likely is that we vote to leave the EU. This is because those most likely to vote are also the most likely to vote to leave the EU – principally the older age groups. Younger age groups are more likely to want to remain, but are also less likely to vote. Apparently the critical threshold is thought to be about 50% of those registered to vote. Simply put, below this level we ‘Leave’ and, above it, we ‘Remain’. Now this is where it really starts to get interesting, the turnout for general elections is usually at or above 60%, the turnout for European Parliament elections is nearer to 35%. When it comes to Europe, as a nation we just don’t care. The referendum is not just about Europe, however, it is about “Europe for the rest of our lives”. That should ensure a larger turnout than 35%, but how much larger? This question is where the risk really lies and, given that the referendum is such a one-off event, it’s unlikely that conventional political science can supply the answer. We are into the realm of forecasting with extreme uncertainty; consequently, the odds quoted in favour of staying or leaving the EU may not be reliable.
And for this reason I think that the race is literally too close to call.
So While risks to the domestic economy are yet to prove problematic, they do leave it
vulnerable to external shocks, notably a possible Brexit following June’s referendum.
In my view, this has also led to indiscriminate selling and potential buying opportunities.
While we do expect a degree of market volatility and bouts of further sterling weakness in the lead up to the vote. If there is a leave vote, then I would expect a lot of further volatility in the short term. However, I do expect this to settle down and eventually if things are not nearly as bad as our Prime Minister is currently telling us, I expect the markets to actually kick on. If the polls have got it right and we decide to remain then expect a significant boost to markets on the few days following the referendum.
One thing for absolute certainty on the morning of Friday 24th June, no matter which way the vote has gone, the sun will still come up. And people and businesses in the UK will continue to manufacture goods and sell their services. And they will continue to sell them both into the EU and beyond.