Brexit? (2)

I commented on some of the aspects that make a Brexit problematical a couple of days ago. and just above, in a post about the “others,” I touched on one of the hot button issues in the Bexit debate: immigration or, more directly, the future of British society.

Screenshot 2016-06-15 12.42.02Now, The Economist Intelligence Unit, a separate subscription service run by that newspaper, has published a special report on the Brexit debate that is, I think, available, at least in part, to the general public. The report deals with several subject areas:

  • The political cost;
  • The economic costs; and then
  • Specific analyses of the retail, automative, healthcare, energy and telecommunications sectors.

The Economist does not pretend to be neutral, it says, up front that “we are convinced that a decision to leave (a so-called Brexit) would be bad for Britain, Europe and the world.

First, The Economist Intelligence Unit (EIU) presents a possible timeline:

Screenshot 2016-06-15 14.20.10

Then it presents a hasty analysis of its findings:

“The effects of a decision to leave the EU will not be distributed evenly however, either across economic sectors or across time. The Economist Intelligence Unit expects the shock of a “Brexit” will be front-loaded, but will stretch out to at least 2020 (see chart below for our assessment of how Brexit will play out chronologically)

Some sectors of the UK economy, such as the automotive sector, might be better placed to withstand the uncertainty that a Brexit would bring. Others, such as financial services would not. This special report maps the impacts of Brexit by industry sector … in particular:

Financial Services: The UK financial services would lose access to its economic hinterland in Europe causing firms to shift away from London to ensure access to the single market.

Retail: UK retailers will face greater supply chain complexity and regulatory divergence as domestic sales slump while consumers wait on the outcome of negotiations.

Automotive: The UK is a sizeable market in its own right. In fact an EU exit may create opportunities for locally based carmakers. However, supply chains would experience disruption.

Healthcare: Pharmaceutical exports, access to medicines, and research grants could all be at risk if the

UK leaves the EU. Any economic downturn would also affect NHS spending.

Energy: Regardless of Brexit the UK will need to remain intrinsically linked to the European energy market and the frameworks which govern it.

Telecommunications: Investment and revenue in the UK would only see a slight fall but uncertainty over the future of pan-European roaming charges could put consumers at risk.”

I am not going to cover each sector in any detail, suffice to say that the UEIU concludes that:

If we are correct in thinking that the UK government would seek to conclude negotiations with the

EU swiftly, a deal would be likely to take shape by the end of 2018. We assume that the UK would gain restrictions on free movement of labour and smaller contributions to the EU budget while retaining access to the EU’s market for goods, but face new and prohibitive barriers to trade in services.

If we assume that the UK’s new relationship with the EU would come into force in 2019, then from this point the economic story would become less about uncertainty and more about the reality of the new UK-EU relationship. By this point domestic demand might be starting to recover from its new lower base. However, the combined impact of restrictions on migration and the likely relocation of firms (particularly in the services sector) would mean that the UK’s labour force would decline in 2019, exacerbating existing problems with weak productivity. Loss of access to the single market for services would also lead to a step decline in services exports. In 2015 almost 40% of UK services exports went to the EU. The likely loss of the majority of this export revenue would produce a heavy drag on real GDP from the external sector in 2019. By the end of our five-year forecast period in 2020 the UK’s economic environment would probably have stabilised, but our projections suggest that by this point real GDP would be about 6% below our non-Brexit baseline forecast.

But my point, today, is not that Brexit will be bad for Britain, bad (arguably worse) for islam-in-europeEurope, and, in fact, bad for the whole world; my point is that the cogent arguments made by the EIU are being ignored by the vast majority of brits. They, like many Americans and Canadians are feeling visceral fears of the unknown, the strange, the foreign, the “others,” … especially of a wave of new, unwelcome migrants and they blame the EU for opening the floodgates. Once again, the solution is not to try to disengage from Europe ~ it would be much better to force the EU to reform itself from the inside, I think ~ the solution is to propagate (sell) a qualitatively better narrative.

So, there it is: “extremist” killings in America and the Brexit debate linked by a fear of the “others.”

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