Brexit – Making some sense of the scaremongering.
Over the past few months and especially the past few weeks, we’ve heard tales of economic woe and ruin, but what does the future hold – or what might it hold? In this blog we’ll explore what impact the EU has on the UK economy and what are trading relationships might look like post BREXIT. There’s also been a lot of chatter about UK leaving the EU triggering a recession, will it? We’ll also explore some of the other BREXIT issues such as Boris Johnson wanting to be Prime Minister, immigration and UK safety/counter-terrorism.
The UK economy – Brexit will destroy trade links
There is a lot of scare tactics that is the UK goes for a “vote leave” at the UK/EU Referendum on 23rd June that the drawbridge will be pulled up and huge trade tariffs put in place for trade. The big question is why would the European Super Power Germany do this? The UK is Germany’s biggest EU trade partner, indeed since in 1998 the UK has constantly run a trade deficit with Germany. This means that Germany export more goods to the UK than what the UK exports to Germany. So therefore it would hurt the like of BMW, Mercedes and Audi to put up trade barriers with the UK.
It has been cited that by leaving the EU, we would turn our backs of the biggest trading bloc in the world because the EU has a population of approximately 500 million. But, China has a population of 1.3 billion and is currently the UKs 4th biggest trading partner. The US has a population of around 300 million and is currently the UK top trading partner. Plus, unlike Germany, the UK runs a trade surplus with the United States of America.
Brexit will cause a recession.
Another scare tactic used is that Brexit, an EU exit for Britain, will cause a UK recession within 3-5 years. This is a misuse of economic data for the pro-remain camp. In reality there probably will be a recession in 3-5 years’ time, but not because of Brexit. No, the reason why there is likely going to be a recession is that history suggests there will be!
|1919-1921||1919-21 Recession||The end of World War I|
|1930-1931||Great Depression||US Depression|
|1956||1965 Recession||Motor Industry|
|1961||1961 Recession||“Rolling Adjustment” in US|
|1973-1975||Mid-1970’s Recession||Oil crisis and union wage demands|
|1980-1981||Early 1980’s Recession||Deflationary UK Government policy|
|1990-1991||Early 1990’s Recession||US Saving and Loan crisis|
|2008-2009||Great Recession||US sub prime mortgages|
The data suggests that approximately every 10 or so years there is a major recession, with the exemption of 1940’s but that period was dominated by war. So, just by simply applying the dates a UK recession is due 2018 onwards. Also, the historical information reveals that out of the last 8 recessions 4 were linked to the US and not Europe, a further 2 were linked to internal issues and the remaining were global such as oil crisis and World War. Since the 2008-09 Great Britain has economically outgrown and outperformed the EU. Indeed, the EU has been fairly stagnant since 2008 and has only out performed Antarctica in terms of GDP growth.
Boris is only self-interested
There’s been a lot of attention paid to Boris Johnson and his political aspirations, really they need to be separated from the Brexit debate. The Remain camp are stating that Boris only supports Brexit so that he can go head to head with David Cameron and then mount a leadership campaign against him. I find this hard to believe, and here’s why. So, we wake up on the 24th June 2016 and discover that the UK has indeed voted to leave the EU. The apocalyptic scenario starts to unfold, as the Remain campaign stated. The pound plummets in value, suddenly huge trade barriers are put up shutting off mainland Europe trade routes and there a hint of war in the air – oh and David Cameron steps down as the leader of the Conservative party. Why would Boris Johnson want to lead this type of Britain? I would strongly suggest that the once pro-EU BoJo has done his research and truly believes the Britain is better outside of the EU.
It has been suggested by Nigel Farage, and others within the Vote Leave / Brexit camp, that the UK should implement an “Australian style” points system. This has been ridiculed by the Remain camp and they’ve highlighted the fact that Australia has higher immigration than the UK currently experiences. But I think the Remain camp miss the point. The point of the points system isn’t to stop immigration, it is to control immigration and encourage people to come to the UK where there is currently a skills shortage and deter people from coming to the UK where there is no call for their skill set.
Another point to note is the current immigration policy is skewed in the favour of EU residents at the cost of non-EU countries. Yes, the UK is a member of the EU and we should absolutely look to the freedom of movement of people within the bloc to fill our skills deficit, but at present this is at the cost of non-EU citizens. We shouldn’t forget that the UK is head of the Commomwealth and there are Commonwealth citizens that cannot get access to UK jobs because of the current quotas.
Safety / War
It has been suggested that the UK is safer in the EU because of information sharing about terrorism, but this is a flawed argument. I imagine the Remain camp think the Europe would withhold information about terrorists and not talk to Britain, despite the UK having world class foreign intelligence.
Honey Bee Accounting
Carl Ford is the founder of Honey Bee Accountancy. Carl has extension knowledge of the retail and recruitment sectors which is utilised to help grow successful businesses for the clients of Honey Bee Accountancy.
Trading Economics – website
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