Wealthy Nations Daily Update - Brexit

“Should the United Kingdom remain a member of the European Union or leave the European Union?” That is likely to be the even-handed question to be set before the 46 million strong UK suffrage by the end of 2017 (but could be as early as May/June this year). With the release of a 16 page EU renegotiation statement by Donald Tusk, President of the European Council, the pound continued to gain strength against the dollar (although only slightly from the 7 year low of two weeks ago) suggesting that the prescribed concessions were more than expected. But whether they will develop enough substance to sway the nationalistic British public to vote to stay “In” a reformed EU will be a question that only the eventual referendum will answer. Of the “four freedoms” that form the core ethos of the single market: people, capital, goods and services; no prizes for which of these will form the tipping point for the referendum.

Mr Cameron touted that, “A formal recognition of a more flexible Europe” is assured in the letter, quelling fears that “an ever closer union” could disadvantage countries like UK who wish to devolve more legislation to national parliament. Mutually desirable international competitiveness proposals were also met. Moreover the letter pledges not to discriminate between Euro and non-Euro EU member states and the business therein. Even the most contentious issue of controlling migration has received more concessions than expected. An emergency brake will allow in-work welfare to be, “graduated from an initial complete exclusion but gradually increasing" over 4 years; and benefits to parents with children abroad will adjust to their homeland rate.

This should help to “reduce the pull factor that our benefit system exerts across Europe”; but given the refugee crisis in Europe and the ongoing austerity none of these concessions will act as a barrier to stem migration. Recent Gallup and Ipsos/MORI surveys provide some interesting insight into UK public opinion on the most important issue the nation is facing. Whereas in distant shores of the US, immigration comes fourth on the list of top concerns after government, economy and unemployment; in the UK immigration was by far the leading concern. Over a quarter of people said it was the most important issue facing Blighty (the economy came second as the greatest worry of 12% of people) and for the first time over half the (polled) population are concerned about immigration.

The UK has managed to escape much of the recent financial strains amongst its European allies during the recent crisis. But the uncertainty surrounding an “ever closer union” may mean that the remedy for the Eurozone’s problems could become a cause of economic pressure for the British economy. An older Gallup poll, conducted at the beginning of this decade, found that a third of Britons would actually prefer to emigrate from the UK if they had the opportunity. Perhaps some will also bear that in mind before they consider voting to place restrictions on mutual borders.

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