The U.K. leaving the EU is another nail in the coffin of the EU - June 07, 2015

The U.K. leaving the EU is another nail in the coffin of the EU

A Brexit would destroy trade, millions would lose their jobs and the government needs bailout from the IMF as sterling tumbling on the markets. These are some of the worst case scenarios about what might happen if the U.K. leaves the European Union.

Brexit

When David Cameron got re-elected it became even more interesting what might happen if the U.K. votes to quit the European Union in the upcoming referendum. However, investors has ignored the hype so far, a so called Brexit, referendum to be hold until 2017 on the U.K. leaving the European Union, doesn’t have any impact on the U.K. economy, says Matthew Lynn, MarketWatch’s financial journalist.

The EU has no intention to put up trade barriors against the U.K. and global companies will still invest in the country. Also, the U.K. won’t suddenly become Singapore and a free market offshore island. Being a EU member does mean politically different but the economy and the stock market are keep running with the same strengths and weaknesses as before, according to the journalist.

When the Queen accepted the re-elected Prime Minister David Cameron’s Conservative Party programme, he revealed that

the most important step would be to decide whether the U.K. will leave the EU or not.
Cameron promised to renegotiate the country’s membership and open the floor for discussion to the people.

Fighting for the votes

For now, it seems to be a close-fought contest. At the last European elections the fiercely anti-EU U.K. Independence Party won the polls. The Labour Party, which is against the referendum, was beaten at the election. A major part of the electorate clearly believes that Britain would be better off out.

It is not over yet. The Times most recent poll shows that

34 percent of people would stay EU member while 18 percent are certain to quit and 34 percent says they could be persuaded either way.
Global brands might leave the country

As we are approaching the date of the referendum there are more and more fights on the market and there are already plenty of warnings about what might happen if the U.K. quit the EU, says MarketWatch journalist. For instance, Deutche Bank has already warned to

leave the City of London if the U.K. left the EU
as well as some other important investors such as Siemens, Airbus and the Japanese car manufacture giants such as Nissan and Honda.

Those who are in favour of leaving the Union says that the country would be more independent getting rid of the regulations coming from Brussels and instead, would be able to deregulate its labour markets, to abandon the way too expensive energy politics and to freely import cheap food from anywhere in the world.

Ignore the fears

According to MarketWatch, no one can seriously believe that the U.K. quitting the EU would have any negative impact on the trade. Tariff and restrictions are regulated by the World Trade Union (WTO) and since Germany is the world’s third biggest exporter it is highly unlikely it would limit the British export. It would actually harm its own economy if it did. The journalist also says that it is unlikely to have less investor after the Brexit.

Companies come to the U.K. because it is a big market, has a stable legal system and flexible labour market and lower corporate taxes than other European countries,
says the journalist.

This will not change even if it quit the EU, the U.K. economy will attract investors.

The U.K. has a mature and developed economy with a democratic tradition, it won’t suddenly turn into a less regulated emerging market. Outside of the EU there will be more liberty in signing trade agreements with other regions, and the country might as well join the NAFTA (North-American Free Trade Agreement). However, the U.K. will no longer be able to shape the EU laws for its own advantage, which can hurt the City of London.

The MarketWatch also emphasises that a lot will depend on what France and Germany has to offer to the Prime Minister to keep them inside or they might already decided that the British are rather reluctant members of the Union and that they are better off without them. A lot will depend on whether the Prime Minister himself will recommend to vote in favour of quitting or not. Until then, even more scary stories are coming about the impact on the sterling, on the City and on the U.K. stock markets. In reality, trade will carry on.