UK Would Lose 8% of Its Economy By Quitting the EU

UK Would Lose 8% of Its Economy By Quitting the EU

Britain's E.U. debate focuses on the economics, so let's be clear the biggest cost of a Brexit would be losing the 8% (£150 billion) of the U.K. economy that is Scotland.

Pick up any book on Britain staying in or leaving the E.U., click on any blog post or listen to any debate about a 'Brexit' and chances are it's the economics that people argue about.

While that can seem logical enough, it distracts from wider changes to Britain that a vote to leave would unleash.

Scotland is the best example. Polling is clear that while Scots are not the flag-waving Europhiles they are sometimes made out to be, it is clear they want the U.K. to stay in the E.U. If Britain quit the E.U. then we should not be surprised if the Scots rethink their decision not to quit the U.K.

Losing Scotland would at a stroke mean the U.K. loses 8% (£150 billion) of its economy and 5.5 million of its population. A host of political, social, defence and legal costs would come along with it.

The U.K.'s economic union - a single market that works far more effectively than the EU's single market - would be badly damaged with heavy costs for both Scotland and the remaining U.K.

Scottish nationalists, like Eurosceptics, often overlook or downplay the costs of exiting the U.K. or the E.U. For followers of both, this is about more than economics; it's about sovereignty and nationalism.

Nevertheless, economic arguments abound in both debates, with no shortage of predictions of what might happen if Britain quit the E.U.

In their recent report Open Europe produced four detailed scenarios for a Brexit, with outcomes ranging from a U.K. economy 2.2% worse off in 2030 through to one that is 1.6% better off. Forecasts by other organisations and groups are often either more pessimistic or overly optimistic.

In presenting the report, Open Europe's director Mats Persson was right to argue that how Britain copes with a Brexit depends on what type of country Britain wants to be outside the E.U.

To be a success, Open Europe believes a post-Brexit Britain should be a country that takes the opportunity to deregulate further and have an open immigration policy to attract the workers it needs from around the world. This is in addition to securing a deal with Brussels that allows British business largely unobstructed access to the E.U.'s single market.

The problem is that what economy we want Britain to have and what country we want Britain to be are related but distinct.

If we want the U.K. to be a country that loses a large part of itself, that has to manage the fallout from the end of a successful 300-year old union, then that will be the country we can expect it to turn into post-Brexit.

Some in the rest of the U.K. might welcome Scotland's departure, seeing it as a drain on the rest of the country. Scotland and the remaining UK would of course continue to trade (the £150 billion won't simply vanish into thin air) and perhaps in the long run the remaining U.K. and Scotland could prosper from separating.

More likely the short-term costs alone will be highly damaging, disruptive and emotionally painful for many on both sides.

Losing Scotland will also not end the tensions between the remaining parts of the U.K. Most will think of Wales and Northern Ireland. More problematic is London.

Anyone familiar with the U.K. will know how London's population, wealth and economics dominate the country. If, as polling suggest, Londoners voted to stay in the E.U. then it would reinforce a sense by many that the capital city is an increasingly distant and foreign place.

It's not as if the dangers and costs of a UK break-up have not been aired. The Scottish referendum delivered a clear enough sense of what that would entail.

It's the dangers and costs to the E.U. of a British E.U. exit that a U.K. in-out referendum is intended to help get across to the rest of Europe. David Cameron believes that only by doing so will the rest of the E.U. listen to Britain's demands.

Based on the behaviour of some in Westminster after Scotland's vote - which was much closer than many were comfortable with - we should not be optimistic that anyone in Brussels will take much notice of a U.K. vote.

We should find it absurd that for some of Britain's political class it has for a long time been the E.U. that is the main concern when the U.K. itself is passing through a period of crisis, when London can appear a distant foreign place which rules from on high, and when the idea of a federal U.K. has to be taken seriously.

Instead some in U.K. politics bang on about the E.U. as the crumbling union, of Brussels as the distant foreign place which rules from on high and poses a threat to the future of the U.K., and of federalism as a dirty word for centralising power rather than the means by which any union accommodates diversity.

In his history of British unionism, Professor Colin Kidd argued that one of the dangers for unionism in Scotland and the rest of the U.K. is that the union is taken too much for granted.

If referendums deliver shocks then the Scottish referendum is only now - and in large part thanks to the surge in support for the SNP who may be pivotal in deciding the next government - hitting home with some Eurosceptics, many of whom have long taken for granted the unity and future of the UK.

If the union comes to an end as a result of a Brexit then it seems it will come as a real surprise to some in Westminster.


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