BREXIT – My Kingdom For A Horse!

TO be or not to be – that is the question the British will need to answer on June 23 in a referendum to determine the future of the United Kingdom and Northern Ireland’s relationship with continental Europe.

For decades, the British have demonstrated sheer antipathy towards the EU’s creeping federalism through its idea of “ever closer union”, and have also expressed resentment for the manner in which the EU’s supra-governmental institutions have been bureaucratized and governed.

Margaret Thatcher’s biographer, Charles Moore, recently revealed that she wanted Britain to leave the EU, although she didn’t make her views explicit. Most pointedly, Winston Churchill famously said that “If Britain must choose between Europe and the open sea, she must always choose the open sea.” Now it appears the old naval empire is about to strike back, perchance sinking the economic and political dreams of Europe in its wake.

In the last few months, the fear of a negative impact of “Brexit” (Britain leaving the European Union) on the UK and world economy has reverberated in the corridors of EU governments and financial institutions. The former Deputy Prime Minister Nick Clegg has warned that Britain will be left with “no empire, no union and no special relationship” with the US if the country votes to pull out of Europe. US President Barack Obama has also cautioned British voters that the UK would find itself “at the back of the queue” for a trade deal with the US if they vote against staying in the European Union.

If the US President’s pronouncements are anything to go by, a lot will be at stake as Britain would likely lose considerable influence in US/EU geo-political and economic matters. In the 1970’s, when the abrasive Henry Kissinger (US Secretary of State under Nixon and Ford) asked to be “put on the phone with Europe”, he actually meant No.10 Downing Street. To this day, that special relationship has endured, but may soon be compromised if the “Leave Campaign” has its way on June 23.

There is little doubt that a British withdrawal would substantially change the dynamics of EU institutions and weaken the euro currency, even as the fate of the EU friendly Scotland is tied to a “Brexit” decision. Already, anxieties over Britain’s possible departure have shaken confidence in the pound sterling, prompting investors to hold off putting money into the UK until the results of the looming referendum are certain.
London, with its highly developed financial markets, is regarded as a sort of El Dorado for foreign investment. If “Brexit” happens, it’s almost certain that capital flows into the UK would somehow be interrupted, leaving investments and securities in US dollars the likely big winners. The credit insurer Euler Hermes calculates that in the first four years after “Brexit”, Britain could lose as much as 210 billion pounds, although the insurer assumes there will be “no sudden and massive capital flight” at first. Because the British and continental economies are so closely linked, no sector (politics, economics, agriculture, social affairs, trade, investment, etc) would be left untouched in this (unprecedented) process of disruptive institutional unravelling.

There are estimates of up to 38.8 billion euros in export losses (about 8% of exports), if London fails to secure free trade agreements after it formally withdraws membership. However, some analysts believe that the consequences will not be as dire as widely predicted, since other EU countries, with their interwoven economies, would continue trading with Britain in their own economic and political interests.

Interestingly, every time the term “Brexit” is used now, the word “Commonwealth” is usually not far behind. The reason is because many Brits are still convinced that their continuing membership of the EU “is holding the nation back from fostering stronger trading links with Commonwealth countries, many of which are growing at a faster rate than EU economies.”

The British Telegraph reports that “With the eurozone currently beset by economic troubles, some commentators feel that the UK should turn away from its stagnating neighbours in favour of broader global trade pacts. In 2013, according to World Economics, the Commonwealth economy overtook the eurozone’s, and the IMF forecasts that by 2019 the Commonwealth will have overtaken the EU contributing 17.7 per cent to the world’s output compared with the EU’s 15.3 per cent.”

On the other hand, David Jessop, a consultant to the Caribbean Council, believes Brexit represents a great risk for the Caribbean. In an article written a few months ago, he notes that “Although ‘Brexit’ may seem a distant issue, the Caribbean could be affected in a number of ways. These include uncertainty and a possible negative impact on trade and development flows; a diminution in the region’s ability to influence thinking on its policy concerns in Europe; a specific range of uncertainties for the UK’s overseas territories in the region; and a long period of uncertainty as Britain’s foreign, trade and development policy is reoriented. British withdrawal could also have wider consequences for example for Europe’s future relationship with the ACP, and accelerate the general trend towards dialogue with Latin America and the Caribbean as an undifferentiated whole.”

That a “Brexit” decision would likely have global consequences is perfectly understood, but why all this British scepticism about Europe in the first place? Essentially the ambivalence towards Europe by the British is rooted in the nation’s history and political identity and independence (for instance, its notion of Britishness and exceptionalism).

Even while Europe has expanded politically and engendered economic prosperity for the region as a whole (albeit against the backdrop of a migration crisis and an interminable euro mess), Britain has continued to jealously guard its sovereignty and to glorify its past, particularly its pivotal role in the Industrial Revolution. Further, a largely Eurosceptic press has spared no effort in reminding young Brits of the nation’s success in two world wars as well as being the first modern democracy. (The British frequently deplore the lack of democratic legitimacy within the EU).

At any rate, the British have always viewed EU membership as a sort of “Trojan Horse” to further extend the powers of the EU within the United Kingdom. That notwithstanding, it appears Britain has yet to come to terms with its diminished role in a post-empire, globalized 21st century, and this perhaps explains its ambiguous relationship with (as it sees it) an economically moribund and increasingly German Europe. After all, who would want to trade a Kingdom for a horse?

For comments, write to [email protected] – Clement Wulf-Soulage is a Management Economist, Published Author and Former University Lecturer.