The UK referendum debate has been truly awful. Neither side has made a clear argument balancing the pros and cons of membership, which of course there are both. Instead it’s been a litany of half-truths and speculation, spun by each side with ruthless political inefficiency.
Let’s take the touted “£350mn the UK sends to the UK each week”, taken from the side of the Leave campaigns snazzy German made bus (a Neoplan made in Stuttgart). This is true to the extent this is the starting point of what the UK should pay the EU. But it excludes the rebate we have secured. So that knocks off £100mn or so. It also excludes the money we get back from the EU (that is what the EU does with the money sent to it, it spends it in the Union). So really it’s about £160mn per week (what Britons spend on the lottery each week, where there is a 1 in 14 million chance of winning). Basically a pittance in a £1.8 trillion economy of over 60 million people. Fullfacts break it down nicely: https://fullfact.org/europe/our-eu-membership-fee-55-million/
The result is, the only thing voters really know is that they can’t believe a word that comes out of politicians mouths. Project fear then morphs into the psychological damage inflicted over the past twenty or more years by the British media’s ardent anti-EU agenda and borderline xenophobic fear mongering. A fact successive governments have used to hide their own economic and political incompetence (or pursuit of agendas that they support, but which doesn’t wash so well with the electorate). Immigration is vital for the UK economy as the costs of aging and underfunded pensions bite.
The notion that all our regulations are imposed by the EU and can be simply abolished is pure fantasy too. Standardisation of rules actually helps cut costs. And a UK manufacturer would still have to abide by these rules if they wanted to export to Europe whether we are in or out. A UK consumer would still demand high safety and quality standards whether we are in or out. A cheaper but more flammable UK sofa is not that appealing.
Cheap air travel happened due to EU regulation, not because of some vision in Westminster. Free mobile phone roaming is happening due to EU regulations, the same bureaucrats that ruled mobile phone connection charges were unlawful, which is why your phone plan now includes 1000’s of free minutes. There are plenty of other examples that the Remain campaign miserably fail to sell to voters but are a huge benefit to them.
The fact is a lot of the harmful red tape is self-inflicted, there is ample room for reform within the confines of EU membership. Perhaps that debate is not so politically convenient for the Westminster elites. It is always politically easier to blame someone else.
It is ironic the one key voter group that backs Brexit is the one which has actually gained the most from the mass immigration that motivates them to vote to leave. Pensioners. It may have escaped their notice, but they were the only income group to see income growth over the post-crisis period. While other government departments were torn to shreds and benefits for those of working age cut back and means tested, pensions and pensioner benefits faced no scrutiny whatsoever. The government managed to reward their key voting constituency because they got the economy growing again, immigration has contributed significantly to that growth.
Cheap foreign labour from the new EU entrants might well have kept wages low (after all real per capita income is barely above where it was in 2008). But it boosted the working age population. That’s the group that pay the vast majority of taxes and draw the fewest benefits. They are not the real benefit scroungers, the real scroungers are the people on £50k pensions who still receive a free TV license, bus pass and £250 winter fuel allowance (still paid despite the collapse in energy costs).
The grey generation, it should be noted, has also gained from the squeeze in demand for goods this population growth has created, they own the bulk of housing assets, they also are the Nimby’s who try and block housing (or any form of) development needed to meet this new demand. They have no need for schooling anymore, so care not about the lack of places or workload of teachers. They care not Students are burdened with debt to pay for their triple locked pensions. They care not government investment has been slashed. They care not because by the time these problems manifest themselves they will be pushing up daisies.
It seems clear – if the UK makes the huge mistake and votes to the leave the EU – which group should bear the economic costs of leaving.
From an investment perspective given how the polls look (being UK based and a natural GBP long) one could do worse than buying dollar exposure, the pound will suffer severly (the euro would suffer too). It would also be a shock to global markets. I’ll probably buy a mix of short S&P500 ETF (benefitting from FX ains and an equity short) and some short-dated US bonds (2-5yr) as a low risk counter weight to balance that. But do your own research.