To be or not to be

For the British voter, it’s a rare moment. The results of the June 23 referendum, the second vote in 41 years on United Kingdom’s place in the European Union, will have implications for generations to come. But unlike in 1975, when those Britons who wanted the country to remain within the European Economic Community had a clear lead over those who wanted it to exit, this is a neck- and-neck race. According to one poll tracker, the ‘exit’ camp has a one percentage point lead over the ‘remain’ lobby in the weighted average of recent major polls. There is widespread resentment among voters against the current terms of Britain’s membership in the EU, and sections of the Tories and other far-right politicians are trying to exploit this. The Brexit camp argues that owing to the EU membership, Britain is not allowed to make changes in existing laws and take independent economic decisions. Such restrictions have cost the country economically and are partly responsible for high unemployment. The camp also blames the EU’s immigration policies for migrant arrivals. But most of these arguments appear hollow as a post-Brexit scenario could throw up even worse outcomes.

Beyond the rhetoric, the Brexit lobby is yet to make a convincing case in support of the argument that leaving the EU would benefit the U.K. economically. On the other hand, the Treasury assesses that Brexit would slow down growth, and could lead to a loss of £36 billion in tax receipts. In the short term, a ‘No’ vote will throw the country into political instability as Prime Minister David Cameron is likely to resign. There will also be economic uncertainty as Britain will have to negotiate its new relationship with the EU within two years. A bigger problem would be trade. Currently, almost half of Britain’s exports go to other EU countries. The economic impact of losing access to the EU’s single market will be huge. One alternative is to follow the Norwegian model. The Scandinavian country is not part of the EU but has access to the single market. But Norway has had to make huge concessions for this access, including making payments into EU budgets. Another option is for Britain to negotiate a free trade agreement with the EU. But this route has at least two problems. First, free trade deals are unlikely to cover financial services. Second, the U.K. will face competition from other economic powerhouses such as the U.S. and India in negotiating a trade agreement with the EU. On its own, the U.K. will be at a disadvantage compared to the bigger markets. Moreover, Brexit would put the idea of a united Europe in danger as it could have a domino effect. The voters’ decision will have serious effects on not just the country but on the whole region.