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It seems Brexit (Britain exiting the European Nations) has shocked the world – it was not expected to happen. For those on the outside of the United Kingdom (UK) it seems like a strange decision, however 51.9% of Britons voted to leave the European Union (EU). It has caused uncertainty in financial markets and has left us wondering why? The answer is, it presents the opportunity of a lifetime for the UK to gain back its sovereignty and forge ahead with its own trade and financial future.
The benefits include:
1. Britain Can Shape Its Own Future
For the first time in 40 years the UK will be able shape its own future, it will be freed from the constraints of the EU. The UK joined the EU in 1973 and possessed 20% of the votes. Over time, this has been reduced to a low of only 9.5% of the votes. Between 2009 and 2014 British MEPs voted against 576 EU proposals, however 485 still passed. This indicates a disjoint between the majority of EU officials and direction the UK wants to head. Exiting the EU will give Britain more power over its own destiny.
2. No Longer Financially Burdened by EU Affiliation
The main premise of the EU is that it is meant to operate as a single entity, where there are no internal boarders or other regulatory obstacles. It was designed to facilitate the free movement of goods and services. Its downfall, it seems, is it only works if all the countries are equal. Looking at the disparity in unemployment rates alone is enough of an indicator that not all is equal. Britain has only 4.9% unemployment. In comparison, 11 countries in the EU have unemployment higher than 9%, notably Greece (24.2%), Spain (20.1%) and Croatia (14.6%). The EU has been in decline for years. It has suffered high taxes, low economic growth and over-regulation. Britain however is performing well with low inflation, low unemployment, a healthy housing market and strong purchasing power. It is evident that well performing nations are being used to help sustain other underperforming members of the EU.
*UK figure are February ** Hungary figures are from March
3. Significant Red Tape Burden Can Be Removed
There are more than 40,000 legal acts in the EU, not including 15,000 Court verdicts and 62,000 international standards. All of these must be adhered to by the nations of the EU. Over the last 25 years in particular, the EU has extended its hold over not just trade issues, but also energy, social policy, culture, tourism and public health to name a few. It has extended into governing how citizen interact with each other. It has become a bureaucratic super beast.
Since 2010 alone, there have been more than 3,500 new regulations affecting British businesses. The British Chambers of Commerce estimated “the total cost of EU regulations is £7.6 billion per year’. It also added that since the Lisbon Treaty came into force in 2009 “it has cost British businesses £12.2 billion (net) in extra regulations”. Britain will be freed from this red tape and financial burden, it will be able to decide what is best for its people.
4. Global Trade Opportunities
The loss of export markets was one of the main reasons the ‘stay movement’ gave for not leaving the EU. However, Britain on its own will be a stronger force on the world stage. Britain will have the ability to negotiate free trade agreements independently with countries like America and Australia. This will provide an enormous opportunity to increase economic freedom and develop even stronger links with allies. Switzerland, for example, is not a member of the EU yet it successfully operates as a single market. It is free to negotiate is own trade deals. It currently has a better performing economy and better living standards than many of the EU member countries.
One of the issues with the EU is that forming trade agreements is a complex process. It is not just two countries, together nutting out a deal. It is 28 countries combined negotiating with one country. When removed from the EU the UK will not have to take into consideration 27 other viewpoints when forming trade agreements. There will be nothing stopping Britain from making bilateral agreements with countries of its choice. Deals that are negotiated on their own terms. It will open up opportunities with the Asian markets, such as China and India. The UK is the 5th largest economy in the world. It is an active member of NATO and the UN. The UK is more than capable of looking after its own regulations and negotiating its own trade deals.
There are many benefit to the UK leaving the EU, but that is not to say that it will be all smooth sailing. Potentially the greatest concern of Brexit is the uncertainty it will cause financial markets. It has the potential to carry on for years. Under Article 50 of the EU Treaty there is a two year window for negotiation of the UK’s departure. This has not been triggered yet, so the timing of the two year countdown is uncertain. It is likely therefore that markets will remain volatile not just in the short term. There is also speculation it could cause uncertainty in the rest of Europe with other nations considering following suit and/ or trying to negotiate better deals with the EU. Brexit has forced the British Government into taking back its control. It is an uncertain time but that does not mean that it will be negative in the long run.
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