Economists at Berenberg claim the debate has been “shrouded in myths, rather than driven by facts or reasonable arguments”. Now the team is embarking on a series of reports that seek to bust those mis-truths.
CityAm reports that Berenberg has already made it clear that it thinks Brexit could be really rather bad for the UK, so it’s no surprise that the German private bank is sticking to its guns on the matter.
Its first report released this morning tackles seven different claims – here’s what the team had to say…
Myth 1: The balance of power
Berenberg’s team warns that a Brexit would leave the UK in a weak position when it comes to negotiations, noting that 15 per cent of the UK’s GDP is dervied from exports to the EU compared with just five per cent the other way around.
“In all post-Brexit negotiations, the bargaining position of the EU would be much stronger than that of the UK,” the group concludes. “The EU could use that to restrict UK access to the EU market for services, or to grant such access only if the UK complies with tougher regulations for financial and other services than before.”
Myth 2: Trapped in red tape
Far from being burdened by excessive bureaucracy, Berenberg argues that the UK is one of the most lightly regulated countries in the developed world – “and far less regulated than China and India”.
The bank continues
Ironically, the key areas where the UK has problematic regulation are unrelated to the EU. The EU is not responsible for the regulations on land and planning that are the root cause of the UK’s chronic housing supply shortage.
Likewise, the EU was not responsible for the recent introduction of the national living wage which could impact labour demand in the short-run and prevent the market recovering efficiently from a future recession.
Myth 3: A Brexit would help boost trade with China and India
Berenberg doesn’t tackle that claim directly, but rather argues that trading with China and India just may not be that straightforward.
“In terms of ease doing business, China and India perform badly compared to the UK and its key EU trading partners. Most EU countries are far more open too,” the economists argue. It also points out that being a member of the EU doesn’t prohibit the UK from exporting to these fast-growing markets.
Myth 4: So long, red tape
This point differs from the second myth in that the economists point out that red tape would continue to exist as long as the UK wanted access to the EU’s single market.
For whatever parts of the single market the UK wanted to access after a Brexit, the UK would need to adhere to the EU common standards. The UK would not be able to influence those standards, since that is the exclusive right of EU members.
Myth 5: The UK would have access to more trading partners
While acknowledging this is “true in principle”, Berenberg claims the reality would be for “limited” scope. It notes that if the UK were to stay in the EU, it would have preferential access to the other 27 EU members plus 53 other markets where the EU already has trade agreements.
Myth 6: The UK is in debt because of the EU budget
The UK’s net contribution to the EU is less than 0.5 per cent of GDP – or, as Berenberg puts it, “almost trivial”. And if the UK had stuck to the fiscal rules set out in the Maastricht Treaty in the years before the financial crisis, UK government debt would be lower today, the economists claim.
In fact, leaving the EU could end up costing the UK more:
Once outside, the UK may find it more difficult to negotiate a “rebate” such as the one which it has today.
Myth 7: EU immigrants are a drain on the UK’s economy
Countless other organisations have debunked this myth already, and Berenberg doesn’t hold back.
“Fact: EU immigrants are more economically active than natives”, it says. The team goes on to note that if the UK were to leave the EU but join the single market through a Swiss or Norwegian style agreement, the country would have to keep borders open anyway, giving migrants the same rights as native citizens.
And the team hasn’t forgotten the reforms that Prime Minister David Cameron secured earlier this year…
Under Cameron’s new EU deal, the UK could hit an emergency brake on welfare payments. It might not bring down the numbers too much, but it will ease the stress on public services budgets.