If the British vote to leave the EU, what might it mean for us?
While the United States remains preoccupied with the presidential election in November, on the other side of the Atlantic an equally contentious issue has the full attention of the British people.
Through a referendum on June 23 of this year, the British will be asked to vote on whether Britain should stay in the EU, of which it has been a member for 44 years, or whether they are in favour of a British Exit, now referred to as “Brexit”. The Electoral Commission in Britain has granted seven million pounds each to two official organisations – Vote Leave and Vote Stay – to finance their campains.
The two sides have engaged each other over a cluster of “head- line” topics guaranteed to attract the interest of the British people. On the one hand, there are societal issues such as national sovereignty, immigration, crime, law and defence. On the other are the more economic issues such as finance, trade, jobs and international clout. And for every argument there is a counter-argument as the debate see-saws it way across the pages and television screens of the British media.
In essence, the battle for hearts and minds is well underway, with both sides amassing arguments as to the benefits of their position, and the dire consequences associated with following the other side. Those who argue to remain say Brexit is a “leap in the dark”. On the other hand, the man who leads the Leave campaign claims it would lead to the “democratic liberation of a whole continent”.
Politicians of every stripe, as well as business leaders and peers of the realm have joined the fray. The Labour Party, led by Jeremy Corbyn, is generally in favour of remaining in the EU. Corbyn, a long time critic of the EU, recently came out in favour of staying. He says membership has brought investment, jobs and protection for workers and consumers.
Turning allies into foes
Over in the Conservative party, however, Brexit has turned former allies into foes. For example, Prime Minister David Cameron argues to stay, but Michael Gove, his Justice Secretary, leads the Vote Leave campaign. London’s former mayor, Boris Johnson, a Conservative and one-time Cameron colleague, also argues vigorously in favour of leaving.
In a nutshell, the “euro-sceptics” believe Britain has surrendered to the EU too much control and decision-making over vital aspects of British life. They want these back.
For example, they claim the British parliament and British courts are in danger of losing their sovereignty, because too many of Britain’s laws are being made by dictates passed down by Brussels and rulings upheld by the European Court of Justice.
There is also the issue of the 10 billion pounds that Britain contributes to the EU every year. The euro-sceptics claim much of the money is wasted by bureaucrats at the EU parliament in Brussels and could be put to far better use at home.
One such worthy recipient of the money, they say, is the National Health Service, which is in desperate need of more funding. They believe pressure on public services due to a flood of immigrants from Europe is bankrupting the NHS.
And with approximately two million EU nationals living in Britain, this pattern of immigration is another pressing issue for the Leave campaigners. They maintain that Britain can never control immigration if it stays with the EU, because freedom of movement gives EU nationals the right to live there.
Emotion versus pragmatism
While these arguments strike an emotional chord within British hearts, the Stay campaign has been urging British minds to adopt a more pragmatic approach and to be aware of the possible damage to Britain’s economy and its influence in the world.
Warning that a post-Brexit scenario is fraught with uncertainty, business leaders have coalesced around the topics of finance and the potential fallout to banking, financial services and the City of London’s position as one of the world’s great financial centres. Two hundred senior business leaders have signed a letter supporting the campaign to stay.
Heavy hitters from outside Britain have lined up to bat on behalf of the Stay campaign.
Sir Richard Branson, entrepreneur and founder of the Virgin corporate empire has described Brexit as a “retrograde step”. Xavier Rolet, head of the London Stock Exchange, believed Brexit would be “devastating for the UK economy” and the fallout would also “trigger a major shift in geopolitical alliances”.
The Stay campaign maintains banks will flee the UK and the City will collapse because being inside the EU offers trading advantages that help to boost profits. The Leave campaign counters that the threat of capital fleeing the country is an empty one. London will remain a leading finance centre and banks will keep their headquarters there because of low taxes.
No one is certain as to what kind of trading agreements will emerge between Britain and the EU countries following Brexit. The “Europhiles” – those who wish to stay – stress that 50 per cent of Britain’s exports go to other European countries. Any action that could lead to barriers or trade tariffs with these trading partners would be counter-productive.
There are also nagging questions of what might happen to the value of the British pound and to interest rates. Mark Carney, Governor of the Bank of England, has warned that Brexit could mean higher interest rates and a slow-down in economic growth.
Heavy hitters from outside Britain have also lined up to bat on behalf of the Stay campaign. US President Barack Obama is among them, as are eight former US treasury secretaries, all of whom emphasise that the “Special Re- lationship” between the two countries has benefited from having a strong Britain within Europe.
The International Monetary Fund (IMF) has also had its say. Quoted in a leading British newspaper, IMF chief economist, Maurice Obsfeld, described Brexit as one of the “biggest threats to global recovery”. According to him it risks causing severe global damage that would drag down UK growth for years to come. Trading relationships would be “torn up” if Britain backs away, which will lead to a longer period of heightened uncertainty.
For decades, wealthy Brits have had a “thing” for owning a second home in Barbados. But a weak pound, and therefore higher real estate costs, could make it less appealing…
There are so many more questions than answers. There is no blueprint for life after Brexit. Clearly the British people have a great deal to think about over the next several weeks, and this includes approximately two million British who live and work in European countries, who own businesses or who have retired to places such as Portugal and Spain. What will be their immigrant status be? How might the EU retaliate?
And then there are the Scots. Two years ago Scotland held a referendum of their own on whether to stay or leave the Union of Great Britain and Ireland, of which Scotland has been part since 1703. Those who voted to stay won the referendum, but another referendum could rear its head if Brexit goes through. In a nutshell, the Scots like being part of the EU. And if Britain leaves the EU the Scots might well vote to leave Britain.
In summary, for Britons the Stay campaign is about trade and economics, whereas the Leave campaign emphasises sovereignty and the supremacy of British laws. Even so, a win by the Leave campaign poses existential threats for the Union.
Effects on Barbados
But if Brexit should happen, what might it mean for Barbados? Would it benefit us or hurt us? On balance the negatives seem to outweigh the positives.
Global investors don’t like market uncertainty, and they could pull money out of Britain in vast quantities if Brexit occurs. This flight of funds might not last for a long time. However, it could put serious downward pressure on the value of British pound against other major currencies, including the US dollar to which the Barbados dollar is tied two to one.
If the pound drops in value, the British will get less for their money in Barbados. This could have a serious effect on our tourism industry, as well as to the pattern of British investment in high-end real estate to which we have become accustomed.
The British account for approximately 40% of visitors to the island each year. This means that by nationality they contribute the largest portion of the revenue Barbados earns from tourism each year.
But a weak pound makes a Barbadian holiday more expensive, and the Brits could look for beaches and warm weather in cheaper countries until the pound regains lost ground. (Barbadians, other hand, would find holidaying in Britain much more affordable.)
By nationality, the British are the most numerous owners of luxury villas and condominiums on the island. Many of them spend several months of the year here, and during those months they spend a lot of money with local businesses and services.
For decades, wealthy Brits have had a “thing” for owning a second home in Barbados. But a weak pound, and therefore higher real estate costs, could make it less appealing; except perhaps for the extremely wealthy who aren’t easily spooked.
A weak pound might also convince British villa owners in Barbados to sell and repatriate the funds. Since they will sell in Barbados or US dollars, a weaker pound means they will get more sterling per dollar. Such a move would drive down the price of real estate in Barbados as homes go on the market.
But here is a less decisive scenario: Britons vote by a marginal number to leave. Since leaving the EU won’t be easy or quick, this triggers a new set of negotiations after which the UK is ultimately offered a better deal to stay, perhaps incorporating reforms of the EU Commission and parliament. This then leads to a second referendum in the future.The downside of this scenario is that it could drag on for years with the uncertainty sapping the UK economy and the value of the pound. But some see a silver lining in a Brexit vote. Would Britain, excluded from the EU, turn to its former colonies to establish preferential trading relationships? Furthermore, countries like Barbados have not had an easy time from the EU in terms of their financial services industries. Would an independent Britain be more sympathetic?
Polls suggest the Stay campaign will have a narrow win, but we won’t actually know until Britan votes on June 23. Either way, Barbados may escape scot-free from the turmoil, particularly the threat of a weaker pound, because the long-running British love affair with Barbados may remain rock-solid. Let’s hope so, but let’s not depend totally on love.