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Brexit: Economic Benefit vs Political Gain

05/07/2017 11:50

"Brexit means Brexit" the famous buzz line, the words echoed by senior Government ministers and the prime minister, time and time again over the last year and yet the so called simplistic line, used to describe to the British public and media, what leaving the EU means, seems to have disappeared from our papers, but why?

Well, when Theresa May decided to call a snap general election, after i'm sure what was strong advice from her inner circle, that if she did so, she would crush Jeremy Corbyn (in a political sense I stress) and win a landslide majority, the saying Brexit means Brexit turned into another 3 word buzz line from the Government "strong and stable".

What's interesting about these buzz words, is they don't really mean anything and are meaningless words used to grab the public's attention and are strategically placed from a political gains viewpoint, however political gains might be reasonably accepted during normal political activity (in some peoples view anyway) but, and it's a big but, when it comes to the departure from the European Union, political gains must not take precedent, and ministers will do well to remember this.

Last week I attended meetings in Both Berlin and Brussels within my role as Youth Ambassador of the UK within the EU parliament, working on ensuring the Brexit negotiations focus on the youth, and in turn matters such as youth employment, education, travel and social cohesion. However, it became clear that European countries are not entirely happy with the United Kingdom, after what was clear from the UK Government, that controlling immigration would be top priority over other matters when negotiating the terms of reference in the departure deal.

With the UK also having hundreds of thousands of British citizens living, working and retired in member states such as France, Germany, Spain and Italy to name a few, this strategy must be looked at again, if we want to have any positive bilateral trade deals with member states going forward.

Now, this article isn't to discuss why individuals voted to leave, or remain, what I must stress is the strategy which I believe is vital, which is to strategically look at economic issues before political issues during the next two years and potentially beyond that.

So, let's look at the economic agenda surrounding our departure from the EU. It is no surprise that different sectors are extremely keen to be involved and aware of conversations happening at the Brexit negotiation table.

Take for example, the financial services sector, this sector which according to recent figures from the Financial Times employs 1 million people and makes up 7% of total UK GDP/the economy, is concerned. Concerned as if the UK leaves the single market, the UK and more importantly, the city of London loses control of financial passporting rights to trade with EU member states. Now of course, negotiations could give the UK a deal built of equivalence by which Brussels would deem UK regulation to be sufficiently similar to its own standards, of which the UK could retain passporting rights, however it would be naive and narrow sighted to think, this is probable, as both Frankfurt and Paris both big financial cities in Europe, will be arguing against this deal.

Financial services, of course isn't the only sector which needs to be at the forefront of the departure talks. The agriculture sector, which employs around 476,000 people (World Bank, 2015) and accounts for £8.1bn towards the UK economy (Financial Times, 2017) is also a sector which economically needs to be considered during the departure. According to figures from the Financial Times, 68% of all UK food exports go to the EU and 92% of all staff in the sector come from EU countries and are non-British.

In addition to this, in 2016 the EU Commission reports from its agricultural policy, stated that £2.7bn was given to UK farmers in grants to support the UK sector, this accounted for 55% of their income. Now although the UK Government could continue to match this level of yearly funding and support another important sector, the worry is that with the Government giving the Northern Ireland Government a cash injection of £1bn and with the departure deal likely to cost the UK around £70-90bn based on conversations had in Brussels, the agriculture sector worries about its future outside the EU.

Finally, the Higher Education sector, a sector which employs as of last month, 752,000 employees and generates £11bn a year in export earnings, therefore being important for the UK economy. This sector is another major beneficiary from the EU, being given £800m a year in grants and contracts from the EU and accounting for 14% of the British university research income, according to Universities UK. This sector again needs to be considered, likewise for both the financial services and agricultural sectors.

I mention these three sectors as these sectors along with the services sector and the manufacturing sector, are all the top five sectors in terms of UK-EU business. In any case, the Government need to look at this economically, however worryingly, the Government have not said that money which came from the EU into these sectors, would be matched by the UK Government after departure, which as you can imagine is causing short term changes in business budgets in these sectors, as seen with companies like JP Morgan spending around £100m on new offices in Dublin and Frankfurt, one of many companies looking at operational changes as a contingency for a poor deal for their sector.

The Government, need to put party politics at the back of their minds and really focus. This deal at the end of 2019 will be arguably the biggest economic deal the country has had to make in over 40 years and with political instability in countries like China, India and the United States, the UK must ensure that with the EU, of whom 44% of all trade goes to, more than double countries, I just mentioned, that the deal makes 'economic sense' and those two words will be important as we delve deeper into these negotiations.

Only time will tell if the Government are putting the country first and party politics second.

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