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Should We Stay or Should We Go? Britain to Decide on its European Future

The UK's ruling Conservative Party is pressing ahead with its manifesto pledge to hold a referendum on whether Britain should leave the European Union — an issue which divides the country.
May 21, 2015, 2:40pm
Photo by Dave Kellam

It's tumultuous times for Europe. In the midst of its biggest ever financial crisis in the form of Greece's potential default, battling an ongoing migrant catastrophe which has seen thousands of people drown trying to reach European shores, now it's looking at its next big headache — a British referendum on whether it wants to stay in the union or forge its own path.

After winning the general election, Britain's Conservative Party led by Prime Minister David Cameron is pushing forward with its manifesto pledge to hold an in-out referendum on Britain's membership of the European Union (EU). It is a hugely divisive issue — indeed one that ripped the Conservative party apart during the 1980s and early 1990s — and one that has become a question not just of British diplomacy but of its very identity.

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Pro-Europeans argue being part of the union is hugely important for Britain's economy and that leaving would spell disaster, potentially costing millions in job losses and adverse trade impacts. It would also have a serious impact on British influence internationally, they argue, leaving it sidelined in transnational negotiations and a lone nation in Western Europe.

Those on the opposing camp believe that for too long Britain has been ruled from Brussels, with EU technocrats imposing endless dictats concerning everything from what shape bananas can be sold in British supermarkets to what human rights people are afforded. The free movement of EU member state citizens has resulted in out-of-control immigration into the UK, they claim, with people from poorer EU nations seeking to take advantage of the British health service and welfare payments.

Related: Foreign Policy: The Unmentioned Topic in Britain's General Election

On Thursday, David Cameron will fly to Latvia to meet European leaders for the Eastern Partnership Summit, where it is expected he will begin to push for the renegotiation of the terms of Britain's EU membership. Before the general election, Cameron pledged that if the Conservatives won, they would seek to reform its EU relationship, including liberating businesses from red tape, finding ways to block "unwanted" European legislation with other national parliaments, and restricting benefits to new EU migrants in the country.

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The government will then ask the British people whether they want to stay in the EU on this basis, or leave. An EU referendum bill is expected to be presented to parliament this week, laying the foundations for a vote in 2017.

"The EU is too bureaucratic and too undemocratic. It interferes too much in our daily lives, and the scale of migration triggered by new members joining in recent years has had a real impact on local communities," their 2015 manifesto reads. The party was in favor of a single market and free trade, it added, but the Conservative Party said "No to a constant flow of power to Brussels. No to unnecessary interference."

After Britain joined the EU's predecessor, the European Economic Community, in 1973, the question of whether the country should integrate further with Europe went on to cause deep divisions in the Conservative Party during the late 80s and early 90s, contributing to the downfall of Margaret Thatcher. It provoked Tory politicians to rebel against prime minister John Major as he signed the Maastricht Treaty, the treaty which created the European Union as we know it, in 1993.

Related: The European Union Wants an Army of Its Own

Fast forward to today and the European Union has become a single market which allows goods, services, and EU citizens to move freely around the 28 European member states.

According to the Centre for Economic Performance, part of the London School of Economics, trade has "increased substantially" with the EU since Britain integrated. In 1973 around 30 percent of UK exports went to the EU, but by 2008 this had risen to 55 percent. The EU is Britain's biggest trading partner, accounting for 52 percent of all trade, worth around $627 billion a year.

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If the UK did leave the EU, under what the CEP calls a "pessimistic scenario," it could suffer an income fall of between 6.3 percent and 9.5 percent of GDP, it said. Under an "optimistic scenario," a loss of 2.2 percent of GDP would be expected.

On Wednesday, the Confederation of British Industry, a business lobby organization, released a speech by its president, Sir Mike Rake, ahead of its annual dinner, urging Britain to stay within a "reformed" EU. "Business must be crystal clear that membership is in our national interest," he said. "The EU is key to our national prosperity." Speaking to the BBC, Rake said: "We need to remind ourselves that we're part of a market of 500 million people to which 50 per cent of our exports go."

But Eurosceptics argue that pulling out of the EU would not affect Britain's ability to trade with other European nations, arguing that British trade is too valuable for other nations to risk losing. With smaller firms free from the mountains of EU regulations they could actually make more money, says the anti-EU camp, with think tank Bruges Group claiming withdrawal from the union could create one million new UK jobs.

Also on Wednesday, the UK president of Airbus Group, one of the largest aerospace and defence companies in Europe, told Sky News that a withdrawal from the EU could risk future investment in the UK, implying his company would consider moving elsewhere. Analysts have suggested Airbus might move production to France or Germany in the event of a British exit from the EU.

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Earlier this week, it was reported that Deutsche Bank, which employs 9,000 people in the UK, is to set up a review considering whether to move parts of its British divisions to Germany if the country were to leave the EU. It is the first bank to publicly say it is formally examining the potential fallout, reported the Financial Times.

Vodafone has also recognised the advantages that the EU brings, stating "it would be good to stay in Europe and it would be good to support the creation of a single digital market."

Related: How Greece Could Change the Future of Europe

If Britain were to leave the EU, it could push other countries to withdraw. Last week, Danny McCoy of Ireland's largest business group, Ibec, warned that Ireland could also leave: "If Britain should decide on an exit, there will definitely be a debate in Ireland on whether we should not do the same."

Some businesses believe Britain could survive without the EU. The chairman of the construction equipment firm JCB recently said that Britain could exist on its own, "peacefully and sensibly."

The Conservatives want to hold a referendum by the end of 2017, but there have been suggestions that Cameron is intending to bring the vote forward to 2016 to avoid clashing with the French and German elections in 2017. Bringing forward the referendum sooner rather than later would avoid delay and uncertainty, as raised Andy Burnham, potential candidate for the leadership of the opposition Labour Party after Ed Miliband's resignation.

However, the urgency to bring forward the referendum, instead of investing time in renegotiating the terms of the UK's membership, could be damaging, says the think tank Open Europe which campaigns for major changes to the EU. Raoul Ruparel, head of economic research at the think tank, which has published a number of reform proposals on what the UK may wish to seek at the negotiating table, said: "There are some who are urging to bring the vote forward, to try and achieve a quick win — this has its dangers, however. The faster the deal the less likely there is to be big reform."

Follow Jenna Corderoy on Twitter: @JennaCorderoy

Photo via Flickr

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