Should UK leave the EU?

Will Great Britain leave the EU? If you asked me this question 5 years ago, probably my answer would be `not likely`. However, Britain's probability to leave EU has grown since 2010 and David Cameron promised British people to have a referendum about it in 2017 if they won the 2015 elections. Now the question is; `What is the economical consequences of leaving the EU for Great Britain?` In this article, I will try to answer this question objectively with the data.

Trade

Firstly, EU membership has economical benefits and one of them -perhaps the most important one- is `Single Market` which allows free movement of capital, people, goods and services between EU members. If Britain leave the EU automatically that means leave the Single Market -at least in a short period-. What are the consequences of leaving Single Market for Great Britain?

From 2002 to 2012, UK's total export increased rapidly from 280 billion pound to 492.8 billion pound. In this graph, what is interesting about UK-EU export relationship is in 2002, 52% of UK's goods & services exported to the EU members. From 2002 to 2007 or in other word until the recession started in EU, at least 50% of all UK's export was to the EU members. However, after 2007, EU's share in UK's export started to decrease and As seen in the graph, the gap between UK's Total Export and UK's Export to the EU members increased. In 2012, EU's share in UK's total export is just %45. Why UK's export increased rapidly to the rest of the world but to EU decreased? This is mainly because of the euro-zone crisis, purchasing power in Europe to UK's goods & services decreased. However, specially USA, Asian and Arabian countries' demand to the UK's goods increased and that makes UK's Total Export increased.

On the other hand, UK imports more goods & services from EU every year and In 2012, it reached to the peak which is 265.5 billion pound. Therefore, UK's balance of trade is -44.5 billion pound to the European Union. Perhaps, If UK leave the European Union, importing and exporting goods & services will decrease because of the increasing cost, and UK's companies will face barriers to trade unless UK stay in the Free-Trade zone.


Anyway, UK has successful examples such as Norway and Switzerland. But Swiss Model or Norwegian Model can be useful for UK? I think answer of this question can give us the consequences of leaving EU.

Furthermore, EU and UK are still the largest trade partners and it has for both sides more benefits than cost. As everyone knows, EU is protectionist. In other word, EU will always favor EU goods & services more than Outside of the European Union's goods. In this case, EU is protecting his members from outside of the union. For example; If you want to bring car to the EU from outside the EU, you have to pay 10% as third country duty. But inside of the Union there is no tariffs as you know and this is huge benefit for country's economical welfare, imports and exports.

Investment

According to data, United Kingdom's Foreign Direct Investment (FDI) is 13 Billion pound in the first quarter of 2014. It is really huge compared to the France or Germany. In France, FDI is just 395 million pound, in Germany it is even minus. Basically, UK has the largest foreign direct investment (FDI) in European Union and US companies has the largest part of it. Perhaps, this is because British culture very similar to the USA and they have the same language. Therefore, American companies which want to reach to Europe invest in UK first.

However, European Union's shares in UK's FDI is the largest one after USA. Therefore, we can easily assume that, If United Kingdom leave the EU this FDI will decrease significantly because of the barriers and higher cost. Anyway, this is not the main point.The main point is, Americans or any other big economies such as China, Japan etc. invest in UK to reach the European market easier. United Kingdom is the gateway to the Single Market for them. And If UK leave the Single Market, there will be significant decrease in the Foreign Direct Investment and FDI will shift to the EU.

In Conclusion

For UK, EU Market is less important than it was and this will not change in the early future. But still it is very important for the economy. Brexit indicates that `EU is sick-man and Britain is not a doctor.` Yes, it is true that EU is sick, EU has recession over 4 years, EU has crisis... But EU has a lot of economical benefits to the UK also. I strongly believe that the best option for United Kingdom is try another alternatives than EU such as European Economic Area (EEA) Membership. In this case, Britain will not lose any economical benefit from Single Market but at the same time, it will not be in the EU. Win-Win situation for all.