The Brexit Issue – Executive Summary
by Roger Martin-Fagg
The UK has always been a major trading nation, with its government fully involved from the beginning.
The EU has created a single market in most goods, but the UK has comparative advantage in services which for the most part are not freely traded in the EU or the rest of the world.
The UK runs a trade surplus in services with the world, but a trade deficit overall because by value imports of goods exceed exports.
The UK sells 46% of its total exports to the EU, and the EU 10% to the UK.
The UK has trade deficits with Germany and Spain.
The UK is no.2 in the world as a destination for inward investment, and nearly half of this comes from the EU.
The UK is one of the least regulated economies according to the OECD. Planning regulations, environmental regulations and the living wage are all home grown. EU trading standards are fast becoming global requirements.
The EU Parliament is the second largest democratic institution on the planet but EU voters seem uninterested, as seen by poor turnouts at the 5 yearly elections. There is a difference between a Regulation (which must be embodied into national law) and a Directive which does not. The UK tends to copper plate regulations.
Based on experience so far it is not possible to have tariff access to the EU market unless free movement of labour is allowed. Canada is the notable exception but its trade deal has not yet been approved by the EU parliament, and it has taken 7 years to get this far.
UK business prefers to trade with countries which have strong cultural ties with the UK.
The UK is 91% British. The rest are migrant workers or students, roughly half from the EU and the other half from the rest of the world. The UK is currently at full employment with skills shortages in many sectors. If EU migration was zero we would still exceed the government’s target of 100,000 pa.
British exports are mostly not exchange rate sensitive, but a weaker currency boosts profits.
Based on knowledge to date a vote to leave will probably cause a three year recession initiated by collapsing confidence, cash preservation, static or falling house prices and higher than expected interest rates and inflation.
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