DIY Investor Magazine
/
March 2016
8
The referendum on the UK’s membership of the
European Union (EU) will be held on 23 June. The
Prime Minister has made it clear that he will campaign
for remaining in a “reformed Europe” (a British exit from
the EU has been given the label ‘Brexit’).
The starting gun has already been fired for the
referendum campaigns and both sides will bombard us
with statistics, facts, propaganda and rhetoric, all of it
impassioned, little of it balanced, and much of it openly
partisan. There are many factors which will determine
the outcome, not least people’s views on the emotive
subjects of sovereignty, border control and migration.
In terms of the UK’s economic relationship with the EU,
some context is useful:
1
•
Balance of trade: In 2014, EU countries were the
destination for 45% of UK exports and were the
source of 53% of our imports;
•
Investment: In 2014, EU countries accounted for
£496 billion of Foreign Direct Investment (FDI) into
the UK, 48% of our total. The UK is the largest
beneficiary of FDI in the EU.
•
EU funding: The UK is the second largest net
contributor to the EU budget (only Germany is
larger): in 2015 our contribution was £8.5 billion
and is forecast to fluctuate between £7.9 billion and
£11.1 billion a year between 2016 and 2020.
The EU is therefore important to the UK from an
economic perspective.
We’re not trading with an institutional bloc, however;
these flows represent trade between individual
countries and companies that are within the EU. Plus,
remember that the rest of our overseas trade (roughly
half of the total) is with non-EU countries. Although
David Cameron is on record as saying there is no Plan
By Alastair Irvine,
Jupiter Asset Management
B, if we leave it would nevertheless be incumbent on
the government to negotiate the best possible terms to
minimise the risk to that flow of trade and investment.
ANSWERING THE BIG QUESTION
And so to the referendum question itself: ‘Should the
UK remain a member of the European Union or leave
the European Union?’ The available answers will be
‘Remain’ or ‘Leave’. It’s a seemingly straightforward
question with a clear, binary answer. Or is it? In
fact there are many unknowns, particularly when
considering the decision to leave. If your decision is
to remain, you have a reasonable idea of what you’re
voting in favour of: continuing EU membership as now,
modified by the reform packages agreed between the
UK and the other 27 EU member states.
If you vote to leave the EU, though, what exactly does
‘Leave’ mean in this context? The Prime Minister is not
going to provide a helpful menu of the alternatives, as it
will be actively campaigning to remain. So to ensure an
even-handed and robust debate in which all issues are
fully aired, the ‘Leave’ campaign will need strong and
articulate leadership.
PUTTING THE ‘BREXIT’
QUESTION IN CONTEXT
