Britain's EU vote: Will facts win over fear?
I could clearly see the transformation of London; returning after
seven years, the evidence was everywhere. High-rise high-end apartment
buildings dotting a new Docklands skyline; construction cranes across
Zone 1 peering over the old city and shaping a new one; a new tech city
with a clustering of 'new economy' businesses alongside the established
'city' financial district; digital and creative-types drinking flat
white coffees amongst city workers - London had clearly continued to
transform itself and become one of the fastest growing cities in Europe.
And a magnet for people from across Europe seeking a piece of that
success, as much of the rest of Europe languishes with tepid growth. My
Uber driver on the ride from the airport, a Somalian immigrant and
British citizen of 20 years, was rather enlightened. "They are taking a
lot of jobs as Uber drivers, tube workers, plumbers and builders.
It is hard for people like us who aren't from the EU - they get first
preference. But without European migrants most places here wouldn't be
able to function. We all would be worse off," he remarked. In a way,
London is a victim of its own success. It wasn't surprising that
immigration had become such a top issue in the referendum debate.
A decisive moment
Over the past week, on the sidelines of a work visit, I've had a
chance to talk to a cross-section of Britons - bankers, journalists,
academics, lawyers, students, political activists - and no conversation
was complete without a discussion of whether Britons will vote to stay
in or leave the European Union, in the referendum vote taking place on
It's not surprising; it's probably the biggest decision British
voters will make in decades. Britain's, initial uneasy, relationship
with the EU took several decades to come to where it is today - from the
early days of the European Free-Trade Association, where Britain was not
part of the original European Coal and Steel Community or its successor
the European Economic Community, to finally making an application to
join the highly successful EEC in 1961 and finally entering in 1973.
Rhetoric, irony and fact
In the event of a 'leave' vote, the course of British society, polity
and the economy, as well as of course the European Union itself, will be
In my conversations on the referendum, I came to an early realization
- that it is not just in Sri Lanka where political campaigns being
fought on fear, division, and polarization, can easily gain ground over
campaigns based on fact and a sense of what's good for the economy more
holistically and in the long term. Economic evidence, for instance, by a
former teacher of mine at UCL Professor Christian Dustmann that proved
how European immigrants have been a net gain to Britain through higher
tax revenue and contributing to growth, are trumped by act-less rhetoric
and emotion drummed up by groups like the UK Independence Party (UKIP).
I couldn't help but notice a woman at a small supermarket, probably
in her late 50s, proudly sporting a 'Vote Leave - Save Britain from
Europe' campaign button, with Polish sausages and German rye bread in
her trolley, and a flyer advertising 'Cheap flights and holidays to
Majorca and Tenerife' sticking out of her handbag.
Ironically, it is Britain that did a lot of work to push cheaper
intra-European travel, and around 66% of foreign holidays taken by
Britons are to the EU, while 63% percent of tourists to Britain are from
Boris Johnson, the former London Mayor (and tipped by some to be the
Prime Minister in the event that 'Vote Leave' wins and Cameron is forced
to step down) argued in a recent ITV debate that his side (the 'Brexiteers')
is "offering hope, while the other is offering fear". Ironically, it is
the Brexiteers that are campaigning the most based on fear - fear of
migration and fear of regionalism.
Yet, the facts are clear. Most economists agree that Britain is far
better off inside the EU and a 'Brexit' would dent the economy.
Currently, 44% of total British exports go to the European Union
(counting goods and services; and 51% if it is just goods).
In the event of a Brexit, a lot of these items will revert to tariff
levels charged from non-EU countries, making British exports more
expensive and less competitive. On cars, for instance, British exports
would have to pay 10% tariff; and on fruit exports, roughly 22% tariff,
to export to the EU, compared to zero tariffs enjoyed now.
British businesses would hardly be saved from EU regulations and
standards - which Leave campaigners tout as restrictive impositions, as
any exporters would have to comply with those in order to continue to
sell to Europe. Negotiating new free trade deals with European trading
partners will take years, and it is unlikely that the rest of Europe
will hand Britain any 'sweet deals' after exiting their bloc.
In addition to negotiating a new trading arrangement with the EU
after exit, Britain will have to renegotiate trade deals with 50+ other
countries - all of which could take a long time and years and wipe
billions of pounds off British exports.
On the wider impact, the numbers contained in a new report by The
Economist newspaper ('Mapping the Impact of Brexit') this week paints a
rather gloomy post-Brexit picture. It estimates that leaving the EU
would trigger a recession in Britain and set real GDP back by 6% by
Additionally, the uncertainty caused by a 'Leave' vote would upset
consumer and market sentiment, causing a 14-15% devaluation of the
British pound against the US dollar; while delayed investment and
spending decisions and weaker trade ties would cost £106bn over the next
five years. The Chancellor of the Exchequer George Osborne has argued
that Britain's exit of the EU could cost upwards of 820,000 jobs across
the country, and has asked voters to consider "why would Britain want a
DIY (Do It Yourself) recession?"
Although 'Leave' campaigners argue that the money Britain remits to
Brussels can be directed to domestic spending on the NHS and other
public services, the more likely scenario is that as the economy is hit
by lower exports and other negative economic impacts, it would reduce
the surpluses available to invest in the NHS. History suggests that when
the UK economy suffers, most public services - particularly the NHS -
Although the 'Vote Leave' campaign has gained substantial ground in
the past weeks, as indicated in opinion polls, what is particularly
interesting to observe is the level of private sector campaigning for
the 'Stronger In'/'Remain' side in the referendum. Businesses and
business leaders, British as well as non-British ones located in
Britain, have come out strongly and publicly with their opinion. Firms
including Airbus, Microsoft, and Rolls Royce have written to staff
setting out the case for 'Remain'.
The letter by Torsten Muller-Otvos, chief executive of Rolls-Royce
Motor Cars, to his employees is a lucid and powerful reminder of the
business cost of Brexit for Britain's global brands.
He wrote, "Free trade is important for international business.
Rolls-Royce Motor Cars exports motorcars throughout the EU and imports a
significant number of parts through the region.
"For BMW Group, more than half of Minis built and virtually all the
engines and components made in the UK are exported to the EU, with over
150,000 new cars and many hundreds of thousands of parts imported from
Europe each year. Tariff barriers would mean higher costs and higher
prices and we cannot assume that the UK would be granted free trade with
Europe from outside the EU".Meanwhile, Citi Bank's chiefs wrote to its
9,000 UK-based staff warning that the bank would "need to rebalance our
operations away from the UK" and warned of substantial UK staff cuts in
the event of Brexit.
Is pro-regionalism, anti-sovereignty?
The Brexit vote throws up a key question relevant for other aspiring
regional groupings too. To what extent are citizens willing to concede
power and policymaking to regional bodies, in which your country
certainly has a say, but is not the only say? Part of the 'Brexit'
sentiment is the astonishing level of animosity towards 'Brussels'.
Brussels - where the EU is headquartered- is blamed by 'Brexiteers'
for all Britain's ills - for "imposing regulations on Britain" (EU
regulation collapses national standards into one European standard), for
"taking away sovereignty", for "dictating terms to British citizens",
and so on.
Yet, what many 'Leave' supporters seem miss is that these
institutions are simply made up of all the countries in the EU, and it
is not as if there are 'super-bureaucrats' who are making policies
detached from what member countries vote for.
As other regions, especially in Asia, attempt to forge further
economic integration and design pan-regional institutions, rules, and
agreements, the Brexit issue leaves much to think about.
Denting a groundbreaking project
As I left the UK, I couldn't' help but wonder what this all means for
countries in Asia. The EU is better with Britain in it - its prosperity
and large market matters for Asian exporters; a Brexit would certainly
hurt that. Moreover, regional blocs like SAARC and ASEAN look to the EU
as beacon of hope - how a region wrecked by war, from Alexander the
Great to World War II, came together in a unique and groundbreaking
project, architectured slowly but surely, through consensus and
Everything may be not perfect with the EU, but its promise and
ambition is impressive. Yet, if the latest opinion polls prove correct,
in a few days time Britons could call it quits; influenced by myopic
economic visions, fears around immigration, and distorted facts purveyed
by opportunistic politicians. I couldn't help but wonder whether
Britain's exit of the EU would be a dent to the hope and promise of
regional integration everywhere.
The writer is the Chief Economist of the Ceylon Chamber of Commerce,
and his research and commentary has been published widely
internationally and in Sri Lanka. He is a graduate of University College
London and the University of Leeds Business School.