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Analysis
Competition of uncertainty

Competition of uncertainty

Why Remainers must send a positive message

by Mark Boleat in London

Thu 19 May 2016

On 23 June the British people will take part in probably the most important vote of any sort in Europe in a generation.

This referendum on European Union membership is irreversible and really does matter to the whole of Europe – unlike the Dutch referendum on the EU-Ukraine trade deal in April, which mattered to Ukraine but less so to the Netherlands. Even with a majority of just one vote for 'Brexit', Britain will leave the EU. There is no option of a second referendum with a better deal on the table.

As the vote draws closer, the more we can appreciate its significance. For most businesses, whether or not Britain is in the EU is of marginal significance. But for many, including small and medium-sized enterprises, it is vitally important. Directly or indirectly, many businesses take full advantage of the single market to buy and sell goods and services, and obtain skills in their workforce they cannot access domestically.

The EU's deficiencies are evident and generally accepted – in particular an inefficient decision-making process and the single currency project, which at best was poorly implemented and at worst misconceived. But it does not follow that Britain should leave.

When making any major decision, one has to assess the benefits and costs, including the transitional costs of moving to a new arrangement. The evidence is that, on balance, Britain has benefited from EU membership. This is true of the financial services industry: London has become a financial centre for Europe, bringing huge benefits to the UK in terms of jobs and tax revenue. A major concern in the City is the uncertainty Brexit would cause – and indeed to a limited extent is already causing, as property and recruitment decisions are put on hold.

One inherent problem in the debate is a competition between two forms of uncertainty. If the UK chooses to remain, many issues in Britain's relationship with Europe remain open. But this is nothing like the uncertainty attached to the Leave option. At a minimum the EU and the UK would face an unsettling two-year period setting the terms of a new relationship.

The different sides are at least properly evaluating the alternatives. The Leave camp seems to favour a loose free trade arrangement with the EU, such as that enjoyed by Albania. Others have talked about the Canadian free trade agreement as a model – even though this took seven years to agree and has yet to be implemented. Falling back on World Trade Organisation procedures has been mentioned. These three options have one thing in common – they exclude financial services, so financial businesses based in Britain would no longer have access to the EU market through the 'passport' system.

This is a debate in which business must be fully involved. Businesses and their representative bodies have a clear duty to spell out Brexit's implications for their business or sector in an evidence-based, dispassionate way, without seeking to tell people how to vote.

Only a handful of large companies have come out in favour of leaving the EU, while many, including some leading trade associations, support remaining. But winning the intellectual argument is not enough. The Remain campaign must also have a positive message – setting out the benefits of membership, rather than just the costs of leaving. There is still time for those who wish to stay to set out a convincing positive agenda.

Mark Boleat is Chairman of the City of London Policy and Resources Committee. This is No.61 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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