Brexit, a shortened word meaning Britain exiting the EU, recently became a hot potato after David Cameron, the prime minister of the Britain, mentioned this issue at the Davos Forum(WEF) in 2013. This issue rapidly became the number one topic of debate in the UK among politicians; moreover, the stakeholders of this issue, especially businesspeople, are actively participating in this discussion. What is this issue about and what are the major clashes in this issue? This article would explain specifically about the Brexit under small topics from the most basics to the complicated disagreements of this debate.
What is ‘Brexit’?
Brexit is a shorted word of ‘Britain’ and ‘Exit’. This combination is originated from Grexit, which also is a combined term of ‘Greek’ and ‘Exit’. These two words both mean those nations exiting the EU because of several grounds such as the restriction in individual policy planning
The biggest advocates of this issues are small businesspeople since one of their biggest barrier of their industry is the increased limits of the EU guideline for the service and finance industry.
These are some of the main arguments of the Brexit supporters.
1) Increased financial burden due to the EU financial crisis.
The EU financial crisis started in 2012, and the crisis leads to increased financial burden to each member countries. The UK, especially was not happy about this fact since they had to contribute to solving the crisis even though they are not included in the so-called ‘Euro Zone.’ To further analyze, the Britain had to spend £8.5bn as their membership fee, which is about 7% of their national budget; however, received merely nothing.
2) Trade conflicts
More than 50% of the Britain trade rely on EU countries. The EU has imposed several FTAs with diverse countries and is currently negotiating with a lot more countries including the US. Nonetheless, the UK believes that they would rather give up these benefits of the EU and start a ‘new trade’ by signing new trade agreements. The main reason was that the Britain cannot allow the continuous financial supervision of the EU due to the Britain highly rely on the financial service industry.
Under the EU law, the Britain cannot prevent anyone from the EU member country entering or even coming to live in the country. The UK, however, cannot withstand more immigrations in the status quo; and the government officials say that ‘regaining their border control’ would be the best solution.
On the other hand, megabanks like the Goldman Sacs are warning that the Brexit would lead to devastating results. No one can deny the fact that the U.K take the biggest portion in the EU. AS the UK exit the EU, the aftermath would occur regarding economics and politics.
1) Impact on the Britain National Risk
In the status quo, the UK’s National credit is ranked top 10; however, this would decrease following the Brexit as suggested by the S&P and the Moody’s. Other countries would impose disadvantages toward the UK, which would lead to severe results such as the decreased pound value up to 20%.
2) Tremendous effect on the EU.
No one can deny the fact that the UK is the leading country of the European community. Therefore, many experts estimated that the economy of countries such as Luxembourg, Belgium might collapse. Furthermore, the Brexit might lead to more ‘exits’ since it might incite other nations, like Demark to leave the EU.
3) What the megabanks are concerned about…
The UK is one of the starting point of the megabanks in Europe. Brexit, which would lead to an enormous impact on the UK’s economy, would also influence the UK’s finance industry which takes 8% of the GDP. Major megabanks including the HSBC and JP Morgan are warning that they would move away from London and might select another major city in Europe as their springboard.
Brexit is a double-edged sword which might make a new economic boom in the UK but also might lead to a collapse. The crucial part of the referendum is that you should carefully compare the benefits and the harms since no one can conclude which would outweigh such sides. The big, exciting game is held on Thursday, 23, June.
Written by 김형근