Why ‘Brexit’ is possible, and it’s time to find ways to cope with it
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Why ‘Brexit’ is possible, and it’s time to find ways to cope with it

business Updated: Jun 10, 2016 07:14 IST

LONDON: It may now be time to seriously consider what would happen if Britain left the European Union.

For months, opinion polls indicated that Britons would vote on June 23 to remain within the 28-nation union. But recent polls have shown a lead for the “leave” camp, including one that puts it five percentage points ahead.

“Brexit,” as Britain’s potential exit from the EU is known, would be a big deal. It could batter global markets, weigh on economic growth, alter the balance of power in Europe, and affect the United States’ relations with the continent. Just as it would be a mistake to read much into a few polls, the recent move toward Brexit should not be dismissed out of hand. First off, the polls may be more accurate than their critics give them credit for.

True, the betting markets are predicting that there is a 72% chance that Britain will vote to stay in. But bettors seem less sure after the recent polls.

Sometimes, just one issue can have a big influence on an election. Immigration may turn out to be that issue for the Brexit vote.

The “leave” campaign’s recent surge in the polls appears to have been prompted by the release of new numbers on net migration into Britain. The latest figures showed a net inflow of 333,000 people in 2015. Those in favour of leaving have brandished the figure to try to damage the standing of Britain’s prime minister, David Cameron, who wants Britain to remain in the European Union.

From an economic perspective, Britain appears to benefit from immigration. Immigrants from Europe pay substantially more in taxes than they receive in benefits. And Britain appears to need more workers. Its unemployment rate is 5.1%.

But the “leave” campaign can exploit economic insecurities that don’t show up in headline employment numbers, including any fears that Britain’s curry houses are understaffed.

Immigration may have more pull as an issue of sovereignty. Those who support Brexit believe that the EU has taken too many powers from the British government. This generally prevents Britain from placing restrictions on legal immigration from nations in the EU. By coming out of the union, it would regain that power.

Still, the “leave” camp may just be enjoying a brief moment in the sun. The “remain” side may recapture strength as the vote gets closer, especially if the economic costs of leaving begin to seem too high to the voters.

Brexit could cause stocks in British companies to plunge, and bond yields to rise. The pound is already heading lower. After leaving, Britain’s exporters might not have the same access to the huge ly important European market. And over time, other businesses might relocate to countries within the European Union.

Peter Kellner, an experienced British pollster, noted on Monday: “And while the record of past referendums does not guarantee a shift to ‘remain’ in the final days of the current campaign, it does suggest that such a shift is more likely than not”.

That is hardly the most reassuring prediction for those who want Britain to stay in the EU. But it may be all they have to cling to in the next 2 1/2 weeks.

First Published: Jun 10, 2016 07:14 IST