EU Ref Roundup: The economy, security, migration all better IN than OUT…

It’s the economy, stupid

Small exporters in Britain are suffering due to the risk of Brexit reports the Times.

Companies are less confident about their prospects than at any time in the past three years, amid fears about the global economy and uncertainty about Britain’s place in Europe.

London First say that staying in will boost London by £13.9 billion and several thousand jobs reports City AM.

Previous roundups have mentioned the risk Brexit poses to the pound.  Goldman Sachs are now advising to expect a 20% crash in the pound’s value if we leave (Guardian).

Immigration

Business Insider UK reports analysis by HSBC of why Brexit cannot reduce immigration into the UK:

Less than half of inward migration comes from the EU so any government committed to reducing immigration may need a wider policy than just EU exit.

Also, the UK could only restrict EU migration if it took a very hard approach to exit, ie if it were less integrated than Switzerland and did not join the EEA.

Where I live in East Kent, the presence of migrant camps in Pas-de-Calais is a major local issue, as it is nationally.  The PM’s comments yesterday that Brexit might lead to such camps in southern England attracted considerable attention across the press.

The Mail reported the remarks from the angle of fierce Tory infighting.

A Q&A format article in the New Statesman concludes that the UK border would likely move make from France in the event of Brexit.

Growth and Inflation

Finance Blog The Corner has news from Barclays that the bank sees the referendum and Brexit as damaging the economy.

We believe that uncertainty on the timing of the UK referendum on EU membership and its outcome will have a temporary negative impact on the UK’s economic activity, mostly through lower private investment. We expect growth to slow to 1.9% in 2016 from 2.2% in 2015 . We base our forecasts on the UK remaining a part of the EU , but should it vote to leave, uncertainties would persist beyond 2016 and economic activity could be hurt for a more protracted period.

The FT reports an estimate that Brexit would increase inflation by 4%.

Remain to fight crime

Rob Wainwright, head of Europol, says that Brexit would make us less safe from crime and terrorism, BBC (Video).

How you win or lose EU referenda: keep big business at arm’s length

An interesting article in the Telegraph discusses, among other things, Ece Atikan’s new book that examines a number of EU related referenda.  He found that:

  • Pro-EU sides (usually the side the government wants to win) often start with a lead that is too easily squandered.
  • Pro-EU sides lose if they are too closely associated with big business (e.g Volvo in Sweden’s referendum on the Euro)
  • Anti-EU campaigns tend to only succeed if they have a figurehead to rally around.

In-fighting between Outers

The BBC has summarised the contestants to become official IN and OUT campaigns, how they will be designated and the consequences.

There appears to be more intense rivalry between different OUT campaigns than on our side.  There is an interesting debate to be had about whether inernal competition makes a cause stronger or weaker overall.

The Telegraph suggests that the PM may try to play the different OUT campaigns off against each other.

TV deabtes

Digby Jones is calling for three TV debate for the referendum reports the Telegraph.

Corbyn cave-IN

The Express is very cross that Jeremy Corbyn has been persuaded to support IN.

 

 

 

 

 

 

 

* Antony Hook was #2 on the South East European list in 2014, is the English Party's representative on the Federal Executive and produces this sites EU Referendum Roundup.

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36 Comments

  • Our trade deficit with the EU has more than doubled since 2011 (from £39bn to £89bn) while our deficit with the rest of the world has shrunk (by £20bn to £36bn) over the same period, and is falling even excluding the effect of oil.

    Anyone care to comment?

  • Antony Hook Antony Hook 10th Feb '16 - 1:30pm

    Thanks RC,

    It just goes to show that the EU’S trade agreements with other parts of the world are benefiting UK business.

    It will be a nightmare if we have to leave and spend years making new agreements from scratch.

  • If the EU is solely responsible for the UK’s trading performance, following your logic, it shows that our membership of the EU must on the other hand be harming UK businesses.

    Why is it that our deficit is overwhelmingly with the EU and that the increase in our deficit since 2011 has come solely and exclusively from our trade with EU countries?

  • @antony

    Better for who antony?

    Better for business does not automatically mean better for everyone, you understand this right?

    If the powers that be had cared about how opening up Eastern Europe with no transition plans in place would affect less well off communities (especially when it came to issues like housing, schooling and jobs) we wouldn’t be in this situation.

  • Victor Grayson 10th Feb '16 - 9:47pm

    RC-where do you get such exact figures from. Are they published by our Government Office for National Statistics ? How is extra-EEC trade through ports like Rotterdam accounted for ? Is the UK economy completely dependant upon the EU selling cars and whatever to it ?

  • They are from the Office for National Statistics

    http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/december-2015/index.html

    What they show is that there is a huge hole opening up in our trade with the EU, while non-EU trade is heading towards balance.

    Since the main (only?) economic argument in favour of our EU membership is that it gives us advantages in accessing the European market, isn’t this now wearing rather thin?

    Why can’t we just join EFTA and have a free trade agreement, which would have benefits for both parties?

  • My analysis is that we have built up an increasing trade deficit, mainly with northern European countries because they are locked into a euro which for them is undervalued, particularly for Germany and the Netherlands, due to the presence of the southern Europeans.

    This means that instead of their currency appreciating, choking off exports and encouraging imports, they have carried on building up trade surpluses ad infinitum.

    Add to that the collapse in internal demand since 2011 across large parts of the eurozone and the comparative strength of internal demand in the much faster expanding UK economy and you have an explanation for the growth of our EU trading deficit.

  • Victor Grayson 11th Feb '16 - 10:12am

    Hi Petermartin, your contribution to an analysis of the UK economic position must be treated with great respect. Although never now discussed the balance of payments deficit would appear to be the major contributor to the governments borrowing requirement. We should call for a proper audit of figures relying to EU and world trade with the UK including invisibles at the time of such an important vote as this.

  • Victor Grayson 11th Feb '16 - 10:37am

    Hi RC – also excellent insight to our problems. As an explanation to the layman it looks like the Eurozone is benefitting the exports of north European countries because of the difficulties of the southern members which is undervaluing the euro in terms of exchange with other foreign currencies ? It would appear our leaving the EU would be no solution to this problem ?

  • “It would appear our leaving the EU would be no solution to this problem ?”

    Well, the point is, we are currently in a disadvantageous relationship with the EU in terms of trade which is worsening progressively and paying through the nose for the privilege. Not to mention the fact that we are also effectively importing other countries’ unemployment. Plus we are paying for the improvement in other countries’ infrastructure so that companies can relocate factories and jobs outside the UK.

    The whole situation is just barmy.

  • @ Victor Grayson

    “Although never now discussed the balance of payments deficit would appear to be the major contributor to the governments borrowing requirement.”

    The balance of payments deficit is due to us buying more of other countries’ goods and services than they buy from us.

    The government deficit is due to the government spending more than it raises in taxes.

    The two are not directly linked in any way, although clearly if we have a healthy industrial sector *and* it pays corporation tax and high wages, that will boost government revenue. The connection is at best indirect.

  • Victor Grayson 11th Feb '16 - 6:28pm

    RC-foreign countries must be buying government bonds to provide the flow of foreign currency to finance our excess expenditure on foreign goods. RC-what effect would UK leaving EU have on the exchange rate between the pound and the euro ? I do however think that the euro currency itself was a very inadvisable project without the federal structure of the USA.

  • @ Peter Martin.
    “You might like to acquaint yourself with Wynne Godley’s theory of sectoral balances before making such pronouncements. The concept isn’t that difficult.”

    Oh dear. This simplistic accounting definition version of economics rears its head again. It’s always misused.

    “If the UK is a whole is in deficit to the ROW then someone in the UK has to fund that deficit by borrowing. It’s usually the government!”

    Government borrowing is likely to be from both UK and overseas investors, but it is not the cause of the trade deficit.

    As a disproof of your theory, it is entirely possible to have a public sector deficit and a balance of payments surplus. This is currently the case with Italy.

    Just because sectoral balances mean that by definition what the public sector borrows, the private sector must lend doesn’t say anything about the geographical distribution of that borrowing and lending.

  • @ Victor Grayson

    “RC-what effect would UK leaving EU have on the exchange rate between the pound and the euro ?”
    Well, as stated elsewhere, it would lead to the depreciation of the pound, making our exports more competitive and imports more expensive.
    Leaving the EU would mean we had another £10bn a year to invest in our own infrastructure, training, research etc. to become more competitive in international markets, plus not subsidising our competitors’ infrastructure.

  • Victor Grayson 12th Feb '16 - 8:51am

    Hi Peter, forgive me but I find this discussion interesting. The exchange rate between the pound and the euro has depreciated by 8.5% over the past six months. From figures that I can garner the eurozone is running an average balance of payments surplus per month of 22 billion euros (Germany 15.6bn, Holland 4.2 bn all others 2.2bn). The UK is running a monthly trade deficit of 9.7bn- the biggest in the EU. Also as Anthony says the EU is massively increasing its trade with China, South Korea, and the USA. This idea that we could trade better with the rest of the world if we were outside the the EU seems spurious and an excuse for our poor performance.

  • Victor Grayson 12th Feb '16 - 10:13am

    Also Peter, what proportion of the monthly government borrowing requirement do you think is attributable to the balance of payments deficit ?

  • @Victor Grayson
    “Also Peter, what proportion of the monthly government borrowing requirement do you think is attributable to the balance of payments deficit ?”

    None of it, because none can be attributed. There is no causal link.

    “This idea that we could trade better with the rest of the world if we were outside the the EU seems spurious and an excuse for our poor performance”

    There is a genuine underlying weakness in our trading performance (in goods at least) which is definitely not to do with our membership of the EU. But given that we are much closer to balance in our trade with the rest of the world, paying substantial amounts for membership of the EU where our trading position is both poor and rapidly weakening seems to defy common sense.

    @Petermartin 2001

    To respond to your earlier comments, I am not “blaming the EU” as such, merely observing the verifiable facts – that the expansion of our trade deficit has come from our trade relationship with the EU and not from the rest of the world.

    And I mention Italy, not as an example (because clearly it isn’t) but merely because it disproves the theory that we have a government budget deficit because of our trade deficit. When you say: “That deficit is the source of all our budgetary and debt problems in both the public and private sector,” you are putting two different concepts together in a way that is quite wrong. A government deficit does not create a trade deficit.

  • Nor vice versa

  • Victor Grayson 12th Feb '16 - 9:33pm

    @[email protected] figures are very difficult to dig out it would seem that the UK receives an average of £22 billion per month and invisible earnings of about £6.7 billion per month. This inflow actually dwarfs our trade deficit ! Would we argue that it is EU membership that is facilitating this position ? The upward pressure thus created on the value of the pound must make it extremely difficult for uk exporters and manufacturing industry in general.

  • Victor Grayson 12th Feb '16 - 9:34pm

    £22billion in foreign investment that is, sorry.

  • @RC @petermartin2001 @Victor Grayson
    “Not to mention the fact that we are also effectively importing other countries’ unemployment. Plus we are paying for the improvement in other countries’ infrastructure so that companies can relocate factories and jobs outside the UK.”

    I’ve just been reading your exchanges with interest, as someone who is fairly clueless on this can I ask you a question regarding the statement above from RC. It’s a scenario type Q.

    We have a factory making chocolate (used because I like chocolate 😉 ), it sells 100 mills worth of chocolate in the UK, 50 mill to the UK and 50 mill to the ROW. The factory takes advantage of all the EU funding being made to Poland, plus their low wage costs and moves production there.

    Doesn’t this mean that not only have we lost the 100 mill in exports (as it will all be exported from Poland obviously), but that we are also now importing 100 mills worth of choccy? So we would have to find 200 mills worth of other goods just to get us back to where we were in the terms of trade balance (150 mill to the EU and 50 mill to the ROW)?

  • Victor Grayson 13th Feb '16 - 11:26am

    Hi Chris-sh, that’s a great question that you asked and a great answer from Peter. Our exporting jobs abroad would only seem to make any sense if we had higher value jobs to replace them with such as clean energy technology etc. Otherwise the only benefit would be to shareholders in the form of increased profit/dividends, which would become part of our invisible earnings. If we are only moving to McDonalds type jobs then that’s why we’ve got this huge trade deficit.

  • Hi Peter
    thanks for the reply, I think I get what you’re saying, time will tell 😀

    Hi Victor
    thanks for the reply, I would agree 110% that we need a high technology sector with strong R&D, but I would also say that I believe we still also need a strong “bread and butter” manufacturing base as well, imho there are 2 good reasons for this:

    1. The high tech sector can be great in good times, but not so good in bad as many high value items become a luxury buy if money is tight (e.g. no more gadgets/deferred projects), where as people will still buy the mundane items of life, e.g. washing powder, needing to replace a washing machine etc.

    2. You have no guarantee on how long high tech/high value items are going remain in that group. An example of this is memory chips, when home computing was starting to take off in the 1990s memory was a high value item, I remember buying a 4MB simm for over £100 in about 1994, by 1996 the price had plummeted. The link below will illustrate what I mean, 1994 shows a price of $32/MByte, 1996 showed a price of $5.25/MByte and we are now at around $0.0037/MByte. http://www.jcmit.com/memoryprice.htm

    But like I say, I’m not an expert and it’s just a layman’s opinion.

  • Victor Grayson 13th Feb '16 - 6:57pm

    Hi Chris-sh, the economic costs and benefits of us being in the EU seem to be so difficult to weigh up without detailed accurate information. And even then it would seem to be just a matter of opinion as to what’s best for us. I do remember though that before we joined the old common market our economy was struggling and things seemed to improve once we were in. However when he kept vetoing our application De Gaulle used to say that the uk economy was different from mainstream European and he may have been correct !

  • Hi Victor
    You’re not wrong about that, there are so many variables that I don’t think anyone knows what would happen in either scenario.

    I would guess that people will just stop listening to the various economic arguments eventually and go with their gut.

  • @Peter
    ” So what hope have they for knowing what the world economy will look like in the next twenty years?”

    Amen to that 😀

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