43 years of EU membership has enabled the UK to gain an easier market and labour access in continental Europe, promote trade-driven growth and plug labour-market gaps…
At 8.05 hours, GMT, 51.9% of Britain voted for Brexit thinking they had shut the Pandora’s box of Britain’s problems like immigration, rising economic inequalities and security concerns. More than 33 million Britons cast their vote for a historic overthrow of former Prime Minister Winston Churchill’s vision of a ‘United States of Europe’ – a concept that ironically originated in Britain. With Brexit, the country has given up its chance to play an influential role for world peace, globalization and climate change where Britain was seen as a pioneer. Brexit is a victory for democracy but also for Euroscepticism. The right wing parties in The Netherlands, France and Italy are also calling for an exit-referendum. How strong is the EU anyway? Are there any winners at all? Can Britain be great again?
Forty-three years of EU membership has enabled the UK to gain an easier market and labour access in continental Europe, promote trade-driven growth and plug labour-market gaps. However, during the financial crisis in 2007, the UK was harder hit than its stronger partners like Germany, and France and took a longer recovery time to correct its market behaviour. Brexit does not bode well for the EU or the global economy. This was seen in the fall of the British pound to a historical 30-year low. EU financial markets have lost more than 10 percentage points that sent shivers among traders and investors in Frankfurt, Paris, Singapore and Tokyo. As a move to curb potential damages, the Bank of England announced a capital buffer of around 250 billion pounds to prevent a ‘black Friday’. Oxford Economics puts it that a Brexit could nose-dive the UK’s economic growth less than 0.1% in a low-impact scenario to 3.9% in a high-impact scenario by 2030.
Last year, the UK was Germany’s third biggest export market with a trade balance of 31 billion euros. Germany and the UK together hold a capital stock of 130 billion euros and create 400.000 jobs. Germany has reacted strongly to Brexit since the prices of German products will increase in the UK causing a plunge in revenues and may force German companies to cut costs and jobs, which is neither in the interest of the shareholders nor the state. Automobile companies such as BMW, Ford and Hyundai, and chemical companies that manufacture in the UK to export to Europe might face the first repercussions.
Brexit may altogether trigger a redistribution of trade and investment in the EU as businesses will seek to move out of the UK into low-cost regions in Europe. The EU stands to lose around 10% of its budget revenues from the UK’s contribution. The damage in traditional EU is however of more than a non-financial nature. It is the loss of a partner in a trade relationship based on trust. The EU will continue to play a dominant role in a world confronted by digital globalisation, climate change and ideological wars without Britain at the helm. Brexit is a win for democracy and the power of the people. It is in the hands of the people to make Britain great again.
Dr. Cordelia Friesendorf heads the International School of Management (ISM) in Hamburg and is professor of Economics and Finance
Khaleej Times ; 25 June 2016