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A guide to break-up

A guide to break-up

How Britain could leave – and perhaps join again

by William Keegan in London

Fri 20 May 2016

Gerard Lyons is an economist who began his City career with a firm of stockbrokers and moved on to a series of international banks, where he gained widespread experience of what is now referred to as the 'globalised' economy. After 27 years he made the somewhat challenging career move of becoming economic adviser to Boris Johnson as mayor of London.

Lyons, the author of The UK Referendum: An Easy Guide to Leaving the EU, presents the book as a 'balanced view' aimed at helping people understand the key issues the referendum campaign has raised. He aims to make the European Union 'accessible to all'. Unlike some experts on the subject he writes with commendable clarity, doing his best to avoid 'eurospeak'. In short, easily digestible chapters he offers a history of the EU and pithy summaries of the single market’s workings – as well as obvious issues such as the cost of the UK’s EU membership, the economic pros and cons of migration, Brexit’s impact on the City of London and the debate about trade agreements.

However, as the title implies, this is not really a balanced account. Lyons is strongly pro-Brexit, and seems to minimise the problems that might arise in renegotiating trade and other arrangements from what most of us in the Remain camp would regard as a position of weakness.

Much of what he says is perfectly sensible. For instance, some of the more passionate Remainers overstate their case by giving the impression that half our trade would halt if we left. This kind of exaggeration is an easy target for Lyons, as are the EU’s obvious imperfections as it stands, let alone the euro area’s design. But he becomes quite cavalier in claiming, 'Presumably if the UK were to vote to leave in the 2016 referendum – and if the EU proved successful – then there is nothing to stop the UK voting to rejoin.' Oh no? And what is to stop our former partners saying, 'Allez vous en!'? Precious little I should have thought.

Lyons concedes there might be a short-term cost. But why incur one in pursuit of speculative long-term gains? Recent economic statistics seem to indicate that the very prospect of that short-term cost is already damaging investment.

I have long admired Lyons' work. But he and others seem to underestimate the economic importance of the UK’s EU membership for the investment decisions of multinational corporations. They ignore the degree to which so many firms spread their operations throughout Europe in complex networks which Brexit would severely disrupt. The idea that British industry would, after Brexit, be free to expand in other markets is a chimera. It already is.

I did not get where I am today by imagining Brexit would mark the end of the world. I just think it would be pointless, and that for reasons which demonstrate a severe failure of leadership, indeed statesmanship, on David Cameron's part. The British prime minister has gambled the good work of decades when we tried to join what is now the EU for short-term, internal Conservative party reasons.

George Soros was right when he said that, by being members of the EU but not the euro area and the Schengen agreement, the UK has the best of both worlds. Much that we – and especially the younger generation – take for granted in the EU would disappear after Brexit.

This is the first in an irregular series of reviews of books on the EU referendum and associated topics by OMFIF advisory board members. The UK Referendum: An Easy Guide to Leaving the EU is available for download from Amazon as a Kindle Single. Gerard Lyons is an independent economist and former Chief Economic Adviser to the Mayor of London. He is a member of the OMFIF Advisory Board.

William Keegan is Senior Economics Commentator at The Observer and a member of the OMFIF Advisory Board. This is No.62 in the series – the 100th article will appear on 23 June.

OMFIF’s series on the UK EU referendum presents a wide variety of perspectives from Britain and around the world ahead of the 23 June poll. We are assuring a balance between many different points of view, in line with OMFIF’s overall neutral stance on the issue.

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