Brexit and its effects on the EU

What subsequent plan should be adopted by the European Parliament in order to maintain
a mutually-beneficial relationship between the European Union and the United Kingdom, in case
the Brexit movement will be voted on by the British population in the 2017 referendum?
1.1.What is Brexit?
Brexit is an abbreviation of British exit that mirrors the term Grexit, refers to the possibility
of Britain's withdrawal from the European Union.
A number of British political parties support a referendum on EU membership, the most
prominent are the Conservative Party, which has promised a 2017 in-out referendum, if it wins the
May 2015 General Election, and the UK Independence Party (UKIP), which was founded in 1991
(under a different name) to oppose Britain's membership in the EU. A surge in the UKIP's popularity
in 2013 probably prompted the Conservatives to announce support for a referendum in that year.
1.2.Why Brexit?
Even at the best of times Britain has always been a semi-detached member of the EU. The first
post-war Labour governments turned down the opportunity to participate in the negotiations that led
to the birth of the forerunner of the EU in the early 1950s. Since then Britain has often been more
sceptical of the European project than committed to it; the country has been called the awkward
partner.
They eventually joined the European Communities in 1973 and everything seemed to be
working fine for the moment. The next Labour Government quickly held a referndum on the
membership in 1975, so its not the first time the UK wants to leave an european agreement between
several states, but they choosed to stay as a part of the European Communities, but over the past few
decades British governments have kept their distance as others within Europe pursued "ever closer
union".
The one thing that is certain about this referendum is that its unclear how it actually works,
given that no country has ever voted to leave the EU before.
Mr Cameron has promised to renegotiate the terms of Britains relationship with the EU before
such a vote, to get a better deal for Britain. If those negotiations, in areas like immigration, proceed
well then his government would presumably recommend that people vote to stay in the EU.
1.3.Pros and Cons of Brexit
The main argument pro Brexit is the fact that EU costs too much, has grown too much and
the bussines regulations are maybe too strict. Brexit proponents believe that after a yes vote, the UK
will be able to negotiate a free trade arrangement as Switzerland currently enjoys.
The Anti-Brexit side is rellying on the list of benefits the EU has brought to the UK from
bussiness advantages to the fact that London is the main financial centre of Europe.
Bussiness specialists say that UK should choose to remain in the EU to avoid damaging the
economy. For instance, in 2013 the Confederation of British Industry found 8 out of 10 of its members

pro staying. In the manufacturing sector, 85% of business leaders considered it was best to remain
within the EU, and similarly in the financial sector 84% believed it best to stay in the EU.
Also The benefits for Britain of staying in the EU are primarily - one could argue economic
the EU is a large market, accounting for 25% of world GDP. The EU is the biggest trading partner of
the UK; 45% of UK exports are to the EU and 50% of imports are from the EU. The attractiveness of
the UK as a destination for foreign direct investment (FDI) is enhanced by the countrys membership
of the EU, and access to its markets. In 2012 the UK was a recipient of FDI to the tune of 937bn.
Investment abroad by UK firms was 1,088bn. Nearly 50% of UK FDI, both inward and outward is
EU related. The UK, being a service-based economy, enjoys huge potential gains from membership of
the Common Market.

1.4.How much does the EU cost Britain?(Tim Congdon sept 2013)

Nature of costs
Direct fiscal costs

%of GDP
1.25%

Costs of regulation

5.2%

Costs of resource missalocation

3.25%

Rationale
!Gross payments to EU
institutions.
!Cost of employment,
financial, dangerous
substances and procedure
regulations.
Relating to CAP(Common
Agricultural Policy) and
EU Protectionism.

Costs of lost jobs

0.375%

!Job losses of UK-born

population due to
immigration from EU States.

Costs of waste, fraud and

corruption

0.375%

Unforeseen commitments
Total

0.25%
11%

Fish discard due to fish

quotas, bureaucratic
inefficiencies and corrupt
officials.
Health and benefit tourism.

1.5.Factors that influence the population regarding Brexit

The main factors that play a role in changig people minds regarding Brexit are as follow:

Financial Regulation (sensitive are for Britain)

Non-Financial Regulation (prohibit dangerous substances and processes)
The Common Agricultural Policy (CAP, considered by the pro brexit side to be a
huge waste of money leading to an uncompetitive domestic agricultural sector
dependent on subsidies (monetary assistance granted by the government) to survive)

Immigration and benefit tourism (probably the main source of doubt, the British
Government being afraid of potential invasions from Eastern Europe and not only,
seeing this as a threat to the job security for the ones born there, even though those
immigrants to the UK from the EU are better educated than UK nationals with 32%
having a degree compared to 21% of UK subjects.)

1.6.What would the alternatives be if Britain voted in the referendum to leave the EU?
The EU has entered into three main types of agreements with non-EU countries:
1. Allowing membership of the Single Market (EEA)
This would simply mean that the UK would still abide by the same Brussels-imposed
regulation domesticallu that currently applies and still have acces to the common market.
However Britain would not be able to influence negotiations on the formulation of
regulations as it would have lost its seat at the table.
2. Membership of the EUs Customs Union
This is the type of relationship that exists between the EU and Turkey. The UK would
remain outside the Common Market, but would retain some of the trade benefits of
membership, in particular for the trade in goods.
3. Free Trade Agreement
The EU has a large number of FTAs with various countries. These are similar to Customs
Unions, but are generally agreed on a product by product basis, and would not interfere
with the UKs existing FTAs with other non-EU countries. However there is serious risk
that the EU would not include goods and services that the UK wanted.
1.7.Whats the trend? Do the british people want to leave the EU at the moment?
The Greek debt crisis has made Britain far more likely to vote for an exit
from the European Union, because traditional Labour voters are shocked at the
savage deal imposed on Athens, a leading City commentator has claimed. In a
note to investors Albert Edwards, global strategist at French bank Societe
Generale, described how the left in British politics has become disillusioned with
the European project following Brussels' treatment of Greece.
The humiliation of the Greek leftist Prime Minister Alexis Tsipras by Europe
had resulted in a "massive change" in British politics, stated Mr Edwards.
He said it was the biggest unforeseen impact to come out of the deal between
eurozone leaders, which came a little over a week ago after all-night talks
between Europe's most senior figures, including German Chancellor Angela
Merkel and Mr. Tsipras.
Mr. Edwards added: "If the treatment of Greece tips the balance in an
already close referendum and the UK leaves the EU, then eurozone leaders will
be left to reflect on the wider impact of last weekends crushing of Greece.
"For if even a Europhile such as I, who believes strongly in the unlimited free
movement of labour across the EU, reaches the point at which he is likely to vote

for a Brexit, I would think it is time for investors to prepare themselves for that
momentous outcome.
But still, all the advisors, including Barack Obama, urges Britain to resist
Brexit and stay in the EU, so you cant actually call the trend.
Conclusion
It seems that opinions regarding Brexit are two sided, close in numbers and
more impotant that anything very easy to pass to another one. We can never be
sure whether the British will be influenced by facts or promises and neither can
you be sure what will happen until the Referendum (scheduled sometime before
2017), but some might see this Brexit as a very ingenious leverage to use in the
discussions at the EU table, because after all the UK is a power in any field and
as much as it would damage them to leave the EU, it sure will damage the EU as
well.
Useful links:
http://www.economist.com/blogs/economist-explains/2015/04/economistexplains-29
https://www.invescoperpetual.co.uk/site/ip/pdf/Invesco-Brexit-the-pros-andcons.pdf
http://www.euractiv.com/topics/brexit
http://www.express.co.uk/finance/city/592733/Greek-crisis-makes-Brexit-MORElikely-due-to-left-wing-anger-claims-top-City-expert
http://www.investopedia.com/terms/b/brexit.asp
http://www.cnbc.com/2015/07/07/why-europes-city-of-love-could-gain-frombrexit.html