STUDENT NAME

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PROJECT SUPERVISOR

PROJECT TITLE What would be the impact, if UK left the EU?

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 Table of Contents

Chapter 1: Introduction..................................................................................................................................................3

Chapter 2: Literature Review......................................................................................................................................4

2.1 The Europe 2020 Strategy.................................................................................................................................4

2.2 The Conventional Press in Britain......................................................................................................................4

2.3 Costs and Benefits of UK Membership of the EU..............................................................................................5

2.4 Impact on the Trade..........................................................................................................................................6

2.5 The impact of the recent expansion of the EU on the UK labor market...........................................................7

2.6 Impact on the Economy.....................................................................................................................................9

2.7 Impact on the Job Market...............................................................................................................................10

Chapter 3: Conclusion...............................................................................................................................................11

3.1 EU Regulation..................................................................................................................................................11

3.2 Payments to EU Institutions:...........................................................................................................................11

3.3 Inward Investment...........................................................................................................................................12

3.4 Conclusion........................................................................................................................................................12

References....................................................................................................................................................................14
Chapter 1: Introduction

The EU is an institution of enormous importance to the United Kingdom and to British foreign

policy. And although the Conservative Party has seldom shied away from frank criticism when

we have thought the EU has collectively been getting things wrong, we have equally been the

foremost champions of the EU’s greatest achievements – the single market and enlargement. The

European Union is set up with the aim of ending the frequent and bloody wars between

neighbors, which culminated in the Second World War. As of 1950, the European Coal and Steel

Community begin to unite European countries economically and politically in order to secure

lasting peace. The six founders are Belgium, France, Germany, Italy, Luxembourg and the

Netherlands. The 1950s are dominated by a cold war between east and west. Protests in Hungary

against the Communist regime are put down by Soviet tanks in 1956; while the following year,

1957, the Soviet Union takes the lead in the space race, when it launches the first man-made

space satellite, Sputnik 1. Also in 1957, the Treaty of Rome creates the European Economic

Community (EEC), or ‘Common Market’.

Chapter 2: Literature Review

2.1 The Europe 2020 Strategy

The role of “The Europe 2020 Strategy” appears to be vital and demands to have a critical and

realistic focus on the areas where European action can add value. As was set out in the European

Conservatives and Reformists Group’s submission on the new competitiveness strategy, the EU's

internal market needs to evolve further. This means completion of the single market in goods and

services, better enforcement of single market rules and full advantage taken of the opportunities

offered by e-commerce. Innovation is almost universally understood to be crucial to our

economic future, but our economies are being held back by fragmented licensing and copyright

regimes. The EU also needs to cherish its successes, so we must ensure that EU legislation does

not add to the costs of businesses or drive our enterprises out of the EU.

2.2 The Conventional Press in Britain

The mainstream press in Britain has long been largely anti-European but has, until now,

maintained the fiction that it wants a looser EU, not a UK withdrawal. At the moment it is

feasting on the euro’s problems and joyously predicting its imminent collapse. It would not take

much for them to show their true colors and call for withdrawal.

Within the British government coalition, the Conservative Party leadership is by far the most

Euro-sceptic we have had since becoming a member. Behind them are Conservative Members of

Parliament who are even more anti-European. David Cameron has perhaps surprised many in

Brussels by not taking as hostile a line in the European Council as many had feared. This should
not be misinterpreted; he remains an instinctive anti-European.  Cameron has though learned

from the recent history of the Tory Party that allowing the European debate to run freely through

his party is time-consuming and ultimately destructive. Cameron’s priority at the moment is

domestic policy and it does not want to be distracted from that. The presence of the Liberals in

the coalition provides him with the cover he needs to keep his right-wing at bay.

2.3 Costs and Benefits of UK Membership of the EU

Economically, there has been a prevalent liberalization of markets and an almost universal

restoration of monetary constancy; the UK itself, perhaps because it was in such a chaos in the

1970s, has been a pioneer of such programs, whereas market liberalisation in major parts of the

rest of the EU has made unpretentious, vacillating progress. Thus, in the favorite phrase of some

politicians, the UK, the world and the EU have ‘moved on’ since 1975; the aim of this essay is

accordingly to evaluate the UK’s relationship with the EU in the conditions of today, markedly

different as they are from those of 1975.

The EU treaty that the UK joined in 1973 has been under continuous change while, as we

have seen, the surrounding political and economic circumstances have also been changing

dramatically. Treaties come and go in the history of nations, as their interests change; and the EU

relationship is just another treaty. It is not an indissoluble commitment; it was not for example

dissolution of the nation into a wider political union, such as a federation. It might be rejoined

that the preamble of the Rome Treaty UK signed in 1973 spoke of ‘ever-closer’ union and

related ideas; however, UK politicians at the time stressed that such phrases were non-binding

rhetoric and that the treaty merely committed to certain key areas of practical cooperation,

including and especially in trade. The nations currently in the EU have different views about how
the EU treaty (technically still the Rome Treaty as subsequently amended) should evolve. A

majority, led by France and Germany, want greater central power, as exemplified by the draft EU

consti-Introduction and Summary tuition produced by M. Giscard d’Estaing’s Convention. Most

UK citizens do not want this: hence the UK negotiating position, even under the current

government, which has taken an enthusiastic stance on EU integration, has, on the whole, been

one of reluctance in a series of areas.

The factors “Whether EU majority give up on centralization?” and “Will the UK agree after a

referendum to a federal Europe with strong central powers?”are important questions and they are

now at the centre of political debate in the UK and to a large extent also in other countries of the

EU. There are many other intriguing aspects of a UK exit.

1. What would be the response of Scottish union?

2. What would be the impact on farming and fisheries work, as the UK disentangles

itself from EU?

3. Additionally, what would occur to the residence and working rights of EU

citizens in Britain, and British citizens abroad?

Sir Stephen Wall, who is very keen on the UK remaining in the EU, concedes that in economic

terms, the consequences of leaving should not be exaggerated. "Catastrophe it isn't," he says.

2.4 Impact on the Trade

In the year 2002, 59 per cent of UK exports of ‘goods’ were exported to the other 14 EU

countries. However, it is more usual to count exports of both ‘goods and services’ and, in 2002,

UK exports of goods and services to the EU comprised about 52 per cent of the UK total. In

particular, if the UK left the EU, it is unlikely that UK companies would be denied access to
other EU markets. The latest figures are for the period before enlargement and show that the

other 14 members exported more to the UK than they imported from UK. It might be said that

they need the UK more than the UK needs them. Moreover, about twenty countries as diverse as

Switzerland, Gambia and Mexico have free trade agreements with the EU (with another sixty

holding discussions), and it would be extraordinary if the UK could not negotiate a similar deal.

In trading relations, self-interest tends to prevail, but in any event the EU’s average external

tariff on non-EU imports is down to about 1.5% and the World Trade Organisation would

prevent any ‘retaliation’, however improbable.

2.5 The impact of the recent expansion of the EU on the UK labor market

Analysis of the characteristics of the workers who have come to the UK since 2004 and data

from a number of Eurobarometers (2004-2007) as well as the 2005 Work Orientation module

International Social Survey Program to look at the approaches of residents of these countries.

Eastern Europeans report that they are dejected with their lives and the country they live in, they

are dissatisfied with their jobs, and they would experience difficulties finding a good new job or

keeping their existing job. Relatively high proportions express a desire to move abroad. Eastern

Europeans’ expectations for the future of their domestic economies and their personal situations

remain low, but have improved since 2004. There has been some deterioration in the availability

of jobs in the UK as the economy moves into recession. However, the UK is an attractive place

for Eastern Europeans to live and work. The disperse; flows of Eastern European workers to the

UK could remain strong well into the future needs further analysis. The European Union began

its process of enlargement in spring 2004 and since then its membership has grown from fifteen

to twenty-five countries. This process has greatly benefited the UK; since 2004, nearly nine
hundred thousand workers from the accession countries have registered to work in the UK. In

contrast to other EU countries, the UK government allowed full access to its labor market by the

nationals of eight former Soviet-bloc countries (the Czech Republic; Estonia; Hungary; Latvia;

Lithuania; Poland; Slovakia; and Slovenia – the A8 countries). However, the UK did restrict

access to state benefits. On 1st January 2007, Bulgaria and Romania joined the European Union;

workers from these two countries were given much less open access to the UK labor market than

those from the A8.

We refer to the group of ten Eastern European countries as the A10. A10 nationals are

allowed access to the UK labor market under the Worker Registration Scheme (WRS). Those

who wish to work as employees in the UK for a period of at least a month are required to register

with the WRS. Workers who are self-employed do not need to register. Applicants must register

more than once if they are employed by more than one employer. They must also re-register if

they change employer. An individual who has registered to work and who leaves employment is

not required to deregister, so some of those counted will have left the employment for which

they registered. Indeed, some are likely to have left the UK. Employed and (in contrast to the

WRS) self-employed workers from A10 countries are legally required to register for a National

Insurance number (NINO) in order to work in the UK. A number of questions arise regarding the

arrival of A10 workers in the UK:

1. The number of workers arrived and returned?

2. What are their characteristics?

3. Why did they come?

4. What impact have they had on the UK labor market?

5. Will the flow continue in the future?

Hence the mix of nationalities of foreign workers may change in the future. A large number of
workers have come to the UK from Poland, and relatively small numbers of workers have come
from the Czech Republic and Hungary. Given the poor health of the economies of Hungary,
Bulgaria, Romania and the Baltic states, workers in these countries may have a bigger incentive
to come to the UK. On top if this, UK wages are still relatively higher than wages in A10
countries. Hence even workers from better faring economies such as the Czech Republic and
Slovakia may still find the UK a relatively more attractive place to live and work. The fact the
UK opened its borders to a flow of highly skilled, motivated, educated, low cost and mobile
workforce upon enlargement of the EU was a stroke of genius, for which the UK government
should be given credit. Indeed, the post-EU enlargement arrivals to the UK from the A10
countries have a higher probability of being in work than migrants from non-A10 countries who
arrived in the UK both before and after EU enlargement. Contrary to the fears of some, the post-
EU enlargement arrivals to the UK from the A10 countries appear to have had no difficulty
assimilating into the native population, and have been welcomed with open arms. By the time
countries such as Germany and Austria began to consider opening their borders it was too late.
Networks had developed and large numbers of Poles, Slovakians, Lithuanians and Latvians were
already living and working in the UK.
There has been some deterioration in the availability of jobs in the UK as the economy moves
into recession. However, the UK is an attractive place to live and work for Eastern European
workers. This is aided by highly developed networks. The factor of whether the dissipate, flows
of Eastern European workers to the UK could remain strong well into the future appears to be of
high significance. The enlargement of the European Union has benefited the UK enormously.

2.6 Impact on the Economy

The second factor is of the impact on economy is that 10 per cent of UK economy depends on

the EU. Exports of goods and services only account for 21 per cent of ‘final demand’. If 2

exports of goods and services to the EU account for 48 per cent of total exports, then ten per cent

of GDP is currently the result of exports of goods and services to other EU members. In other
words, about 79 per cent of UK economy is the result of domestic activity, involving buying

from and selling to each other, and exports of goods and services to the rest of the world account

for another 11 per cent.

2.7 Impact on the Job Market

Another strong factor needs to be consider is the impact of the job market whether the jobs

currently resulting from trade with the EU would be lost if UK left. However, a number of

authoritative studies have found that leaving the EU would have little impact on jobs, including a

report by the National Institute for Economic and Social Research, and a report for the US

Congress by the US International Trade Commission.

Chapter 3: Conclusion

In view of the facts and figures discussed in the literature review it can be stated that if the UK

were to leave the EU, there would be no net loss of jobs or trade. However, to draw any such

conclusion involves complex calculations, and it is widely accepted that assumptions have to be

made that can influence the final figure. The net costs of EU membership are appraised in five

areas: EU regulation, the common agricultural policy, net payments to EU institutions, the single

market, and inward investment.

3.1 EU Regulation

In accordance with the Government’s own regulatory impact assessments (RIAs), the total cost

of regulation between 1999 and 2004 (one-off costs spread over the period plus recurring costs),

according to the British Chambers of Commerce, was £7.91 billion per year. An official study of

the overall impact of EU regulation in the Netherlands has put the figure at two per cent of GDP.

If also true of the UK, the net cost would be £20 billion.

3.2 Payments to EU Institutions:

Over the last decade, the UK has paid a similar net average amount each year, paying out an

average of £11 billion per annum and receiving back £7 billion in ‘aid’. A study by the European

Commission in 1996 and an academic study published in 1998 are often quoted in support of the

claim that the single market raised total EU output by between one and 1.5 per cent. More

recently, the European Commission has claimed that the internal market increased EU GDP in
2002 by 1.8% compared with a year earlier. However, a number of independent studies have

found no hard evidence of net benefits. For example, the Bundesbank could find no evidence that

it has helped German trade. The UK economy is unlikely to be any different. The Institute of

Directors reviewed studies from the Commission, the OECD and others and noted the absence of

persuasive evidence of the benefits of the single market. In 2003 an Institute of Directors’ survey

of members found that trading in the EU 14 was on balance unattractive and more costly, with

more paperwork than before the single market. The overall conclusion is that the balance of costs

and benefits for the UK economy is zero, that it could be negative, and that the UK would not

suffer economically by being outside the single market.

3.3 Inward Investment

The UK is one of the world’s leading overseas investors, but also a recipient of significant

inward foreign direct investment (FDI). UK Trade and Investment, part of the DTI, monitors

investment flows and its annual review for 2002/03 lists the main reasons why the UK attracts

investment. Access to the single market is one among several other advantages, including the

skilled and English speaking labor force, the flexible labor market, good communications, the

strong science and technology base in universities, low corporation tax, ease of market entry and

tax allowances for start-ups. These other advantages would remain and, if the UK left the EU,

the impact on inward investment is likely to be neutral. Some studies, including one by the

NIESR, claim that FDI would fall if the UK left the EU.
3.4 Conclusion

If the UK were to leave the EU, there would be no net loss of jobs or trade. In addition,

UK would be between £17 billion and £40 billion per year better off, possibly more. These are

the findings of A Cost Too Far? published by Civitas. But as the EU is a treaty organisation, all

sides accept that a deal would also have to be done on how the UK withdraws from its EU

commitments, and what kind of new relationship with Europe is established.

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