The EU: in or out? The campaigning begins!

Since 2010, polls have indicated that the British public is divided on the question of EU membership. The largest ever poll (of 20,000 people, in March 2014) by Lord Ashcroft showed the public evenly split on the issue, with 41% in favour of withdrawal, 41% in favour of membership and 18% undecided.  Interestingly, when asked how they would vote if Britain renegotiated the terms of its membership of the EU, and the government said that British interests had been protected, more than 50% said that they would vote for Britain to stay in. If this poll is accurate, the UK’s future in Europe will ultimately be determined by the perceived success of Prime Minister David Cameron’s attempts to secure major changes to Britain’s relationship with Brussels before the referendum is held.

The referendum must take place by December 2017, although some have speculated that the government plans to hold it as early as June 2016. In the meantime, the arguments for remaining in and leaving the EU have started to gather pace with the launch of both campaigns.

“In” and “Out” campaigns

The campaign for withdrawal, branded Vote Leave, draws together groups pushing for a British EU exit, or ‘Brexit’, from within the Conservative Party government, the opposition Labour Party and the business community. Its main argument is to end the supremacy of EU law over UK law, but Vote Leave jostles for attention with a rival grouping called “Leave.eu”, founded by Arron Banks, another businessman, and supported by Nigel Farage, leader of the United Kingdom Independence Party (UKIP). The Electoral Commission will officially designate one campaign to make the “leave” argument; the big danger for the “leave” camps is that too much time will be wasted as they jostle with each other to become the ultimate voice advocating the UK’s withdrawal.

The official, Stuart Rose-led, campaign to remain in Europe, Britain Stronger in Europe, has also been unveiled, with Lord Rose arguing that the UK’s economy would be “weaker outside Europe”. Rose has the support not only of the three living former prime ministers, John Major, Tony Blair and Gordon Brown, but also of a clutch of other pro-EU business figures, including Richard Branson.

Trade

Those in favour of an exit argue that the UK would be free to establish bi-lateral trade agreements with other countries, including fast-growing export markets. Vote Leave advocates negotiating “a new UK-EU deal based on free trade and friendly cooperation”.  Britain Stronger in Europe, on the other hand, argue that the UK would have better negotiating power to secure beneficial trade deals as a member of the EU than as an individual player. They argue that “negotiation as part of a 500-million-strong economy also gives us clout we could never have on our own.”

Costs

The UK’s balance sheet is a key focus of the Vote Leave campaign, the argument being that an exit would mean that the UK could “spend the £350 million we sent to Brussels every week on our priorities like the NHS, schools, and fundamental science research”.  Meanwhile Britain Stronger in Europe makes the point that the membership fees associated with being a part of the EU are outweighed by an average of £26.5 billion of investment into Britain per year from Europe and by the average person in Britain saving around £450 per year due to trading with Europe driving down the price of goods and services.

Jobs

Britain Stronger in Europe highlights the fact that Confederation of British Industry estimates that 3 million jobs in Britain are linked to trade with the rest of Europe. Some have warned that an exit could result in millions of jobs being lost as global manufacturers move to lower-cost EU countries. Others have argued that with small and medium-sized firms freed from EU regulation, there could in fact be a jobs boom, particularly among the large proportion of the UK economy that is not involved in trade with Europe. Vote Leave argues that exiting the EU will enable the UK to stop the current immigration system that “means an open door to the EU while blocking people who could contribute to the UK coming from non-EU countries”.

Influence

Britain Stronger in Europe points to strength in numbers when it comes to the UK’s influence on the world stage, and particularly with regard to its national security. Vote Leave on the other hand says that “Britain would have a far greater ‘influence’ if it successfully pursued an alternative national policy”.

(Legal) detail will be crucial

If the UK were to exit the EU, the impact on the UK and UK business in particular will depend on the detailed terms of the UK’s exit and of any relationship it has with the EU (or individual countries within the EU) following its exit.  Much UK law and regulation is based on EU law: how an exit would affect current law or its interpretation post-exit is not yet clear.

Looking beyond the immediate impact of an exit, there are various consultations underway for the future implementation of EU law at member state level. For example, a key focus of the European Commission is building a capital markets union in the EU, including consulting on a simplified prospectus regime for companies admitted to trading on SME growth markets. In the event of a UK exit, would the UK continue to follow Europe when updating its capital markets regulatory regime (to remain a competitive environment for SMEs) or would its regime begin to diverge from the EU’s?

No precedent

With no precedent for a country leaving the EU, neither side can predict with complete certainty what impact a UK exit might have. We will be monitoring developments with interest as the debate continues.