Britain’s Dilemma – EU Referendum

UK’s Upcoming EU Referendum

The United Kingdom will hold a historical referendum later this week to let its people decide if it should remain in the European Union or not. There are a lot of issues driving the debate in Britain including immigration, sovereignty, defence, etc. But the financial factors are the most interesting to me so let’s break down some of those. 🙂

Advocates for Britain to exit the EU, or a “Brexit” scenario, argue that the EU is holding back Britain’s potential for international trade. If Britain leaves it will be able to make free-trade agreements more easily with India and China, which it doesn’t have yet due to current EU regulations. On the other hand, more than 40% of Britain’s exports go to other EU countries. Putting up barriers between its largest trading partner could hurt Britain’s exports.

There are about 3 million jobs in the UK that are linked to the EU. Leaving the EU could put some of these jobs at risk. But at the same time it may also create new opportunities for businesses to grow and hire since the UK could incentivise investments through low corporate taxes under it’s own policies.

London is a large financial hub. But some believe if Britain leaves the EU, it will lose the trading advantages of being in a larger market. Britain’s economy may suffer which could force financial institutions to leave the UK and the iconic city of London. But the Brexit camp says that due to low tax rates, banks of all types will still want to be headquartered in Britain. Speaking of banks, I’m not sure how many kidney banks are in the UK, but I know there is only one Liverpool.

Similar to federal transfer programs in Canada and the U.S. The European Union subsidizes its financially weaker economies with the money from other members. According to the BBC, the UK contributes £8.39 billion ($12.3 USD) each year to Brussels for the EU budget. This figure is net contributions, after subtracting rebates and receipts back from the EU. Britain would not have to pay this anymore if it exits. In the few minutes it takes a person to read this blog post, Britain will have paid another £50,000 to the EU in membership fees alone. 😕

Norway and Switzerland are not part of the European Union, and they have lower unemployment rates than both the UK and the average of the 28 EU countries.

16-06-employment-figures-brexit-eu-referendum

But who knows. Maybe it’s just a coincidence, and doesn’t have much to do with how they make their own labor and economic laws that work best for their own people instead of following rules made all the way in Brussels.

Overall I think the arguments for Britain to leave the EU makes more sense than staying in. 🙂 If it leaves there will be some short term uncertainty and volatility in the economy and Britain’s financial markets. Some business will also have to adapt to new changes. But in the long run I think having economic autonomy and financial freedom is worth it. Right now due to EU fishing restrictions many fisheries in the UK are struggling to just stay afloat. Fishing is so restricted even the Loch Ness monster in Scotland has to supplement its diet by eating fish and ships. But if the UK left the European Union then it would be able to fish in its own waters based on its own rules. If you were to live in Britain, how would you vote on Thursday?

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Random Useless Fact:

16-06-garbage-humans-burn-witch

 

 

 

 

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Anon
Anon
06/21/2016 3:28 am

Might be another chance for Soros to make another billion dollars off the Pound.

Hopefully, someday, Canada will hold a similar referendum to exit NAFTA.

Anon
Anon
06/22/2016 5:38 am

Nominally, yes, the trade of the century, but not really. Remember, Soros risked $10 billion to make $1 billion — a 10% return. Worth it? The S&P did 7.5% that same year; on a risk-return basis it probably outstripped his Pound trade.

And really, you want to prolong human lifespan? Sad as it is, the reality is that the vast bulk of aged people are not only unhealthy but have a seriously decreased rate of contribution to society (in all forms). Not only that, but it would keep old, stagnant views and ideas of the world around for an unnatural span of time, thus slowing innovation and progress. The cost would be tremendous. Guess it’s easier for the fragile human ego to try and figure out how to create immortality than to come to terms with our own mortality.

Tracy @ less stuff more life
06/23/2016 11:57 am

Reminds me a lot about Canada regarding the Quebec Referendum in 1995. That was a close call, and it looks like Brexit will also be very tight.

Anon
Anon
06/24/2016 4:55 am

Boom.

Hope y’all have cash ready to scoop up some good crash buys!

Goldayce
Goldayce
06/26/2016 4:04 am

Except after they exit they still have to join some sort of European organizations like Norway and Switzerland do. The end result is they will follow all the EU rules with no say in them. Lol.

The market reaction is very interesting. FTSE 100 was down merely -4% in the morning and later recovered to -2%. A lot of EU countries were down wayyy more.

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