Ever since David Cameron announced that Britain would hold its referendum on EU membership this summer, the internet has been overflowing with analyses, polling data, and op-eds. The great “Brexit” debate has begun, and trying to keep abreast of every new article is honestly like trying to drink from a fire hose. From the Heritage Foundations’s op-eds supporting freedom and decrying the evils of international organisations to Niall Ferguson’s warnings that if Britain “Brexits” it will need to “Breturn,” there is no shortage of views. Ultimately, though, I’m not sure that it matters because it’s looking more and more as if the campaign to stay will win.
Britain has always had an interesting and complex arrangement with the EU. It is a member, but it reserves certain rights that don’t apply to other EU members. For example, Britain retains its currency, the Pound Sterling, and is not a part of the Schengen Zone. However, even these exceptions are not sufficient for some in Britain. Many Britains think that the EU has encroached too much on British sovereignty and is overly meddlesome. Nigel Farage, the leader of UKIP, is a clear manifestation of these feelings. In response to growing frustration with the EU, David Cameron promised voters he would renegotiate the UK’s position in the EU and then hold a referendum. With the negotiations now concluded, the lines are being drawn.
Supporters and detractors of EU membership don’t fit neatly into party lines, and there has been quite a bit of internecine conflict, even at this early stage. For example, despite Conservative PM David Cameron firmly supporting staying in the EU, top-ranking Conservative cabinet ministers and the Conservative Mayor of London have lobbied for withdrawing from the EU. The Labour Party, by contrast, has allied with Cameron in pushing for remaining in the EU despite their fundamental disagreements on other issues. The business community is equally divided, with certain companies complaining about EU regulations and others warning that market access will be significantly curtailed in Britain were to leave.
Ultimately, it seems that staying is the best course. If Britain were to leave, it would have to renegotiate over 40 bilateral trade deals with countries that already consume 44% of Britain’s exports and would also have to redesign its entire immigration policy, potentially hurting its current access to the broad European labor pool. Withdrawal from the EU would also make Britain ineligible for the TTIP, a massive trade deal being negotiated between the EU and U.S. It is also unclear how markets would take it. After all, the mere announcement of the referendum date was enough to trigger the biggest one-day drop in the Sterling’s value in 11 months. Finally, there is the question of Scotland. As a region that has recently considered leaving the U.K., Scots are paying particularly close attention to the referendum on EU membership. The vast majority of Scots strongly support staying in the EU, and there is widespread speculation that a “Brexit” would trigger a new Scottish secession movement, except this time it would almost certainly succeed.
The good news, though, is that Britain will almost certainly not leave the EU. While it is far too early to call, I think there are a number of structural factors that make it very unlikely that the UKIPers get their way. First, British people, by and large, don’t want to leave. English people do. Thus, I think there is good chance that the Welsh, Scots, and Irish come out in force to ensure that their interests aren’t subsumed by the pesky Londoners. Second, early polls didn’t account for the active campaigning by the “IN” group. While it is true that the “OUT” camp held an early lead in polls, the “IN” group now holds a 15 point lead. As the “OUT” supporters face more and more opposition, it’s likely that their support will drop even further. Indeed, we are already beginning to see factionalization emerge within the “OUT” group as the anti-immigrant lobby clashes with the free-traders. Finally, I legitimately believe that leaving would be bad for the UK, and I have faith that British voters and industry lobbies will recognize this fact. Leaving the EU essentially shuts out the British service industry – an area in which Britain possesses a comparative advantage – from the common market while still allowing EU exports into Britain on account of WTO regulations. With so many powerful industries poised to lose so much, I just can’t see how Britain votes for anything but to remain.