Sunday 25 September 2016

Brexit's day of reckoning draws near

When I put up a Vote Leave poster in March, it caused some surprise in my local village. Many people had assumed that because I am Irish, I would vote to remain in the European Union

Published 12/06/2016 | 02:30

Brexit's day of reckoning draws near
Brexit's day of reckoning draws near
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Leave

I grew up in Carlow town in the 1980s and after graduating from UCD in 1997, I moved to the UK to work in the steel industry. While I have not forgotten my roots, the UK is where I have made my home. I now live in a North Yorkshire village called Hunmanby. The locals have adopted me as one of their own and have even elected this 'Irish lass' to be their local councillor. Villages like Hunmanby remind me of the rural Ireland of my youth. There is great pride in flag and country, a good community spirit and a healthy suspicion of the state.

Like many Irish people, I bought into the unquestioning narrative of successive Irish governments during the various European referendums. Deep down, part of me could never fully reconcile how our venerated sovereignty gained by the 1916 rebels was traded for ever-greater union with Europe.

I accept that the financial support given to Ireland in the 1990s through structural funds helped transform Ireland's infrastructure. But that was the EEC, not the modern-day EU. I don't agree with those who want to give sole credit for Ireland's economic development to the EU.

Indeed, I now believe that being tied to the low growth of the Eurozone is a threat to future growth in pro-business, low-tax economies like the UK and Ireland.

Britain is a trading nation that wants to do business with the world, not just the EU. The small industrial estate in my council ward contains several engineering companies that export to 170 countries around the world. Interestingly, many customers outside the EU ask for a 'Made in the UK' label as a sign of quality - not the mandatory EU label.

Economically, the Eurozone is the sick man of the world, and the economic powerhouses of the globe are leaving the Eurozone economy behind. Membership of the EU and the lack of free trade deals with major economies outside the EU is stifling the ability of exporters in my community to grow their companies.

These businesses also struggle to find skilled employees in the UK to work for them, while freedom of movement is not providing migrants with the right skills to overcome this labour shortage. A controlled, points-based immigration system would allow the UK government to bring in people from around the world with the right skills for our local economy. This is something we cannot do while we remain as members of the EU.

The impact of uncontrolled immigration from the EU should not be underestimated in this EU referendum debate. For years now, the majority of voters I meet on the doorstep have expressed concerns about the number of eastern European migrants who have come to the UK. This is too easily dismissed as xenophobia and racism, but colleagues of mine throughout the North of England are also hearing the same concerns. Voters understand that there is a need for immigration but they want it to be controlled.

The democratic deficit on this issue is causing a groundswell of support among working-class voters on low wages for the UK to leave the EU. They know that the politicians, big business, the rich and the metropolitan elite benefit from keeping their wages down. As a result, they are not feeling the economic growth that the UK is enjoying. They are Britain's equivalent of Enda Kenny's "whingers". I think they may be about to cause a political revolution in the European Union.

I have noted with irony, on the centenary of 1916, the desperate pleas of our Government to Irish voters in the UK. Their arguments amount to desperate scaremongering about the border and the economy. Refuting that argument in detail is not for this article. Of course they would be enthusiastic about the EU. Afterall, this is a government that is ignoring the will of a large majority of the Irish electorate over water charges because the EU says 'No'. Perhaps spending time in Brussels fighting for the democratic will of the Irish people would send a better message to those voters. This is unlikely, of course, as our Taoiseach is no Michael Collins. He has delegated statesmanship to the British voters.

The UK and Ireland are bound by history and geography. We have come so far together and finally see ourselves as friends. So yes, this proud daughter of Ireland has completed her journey and will be taking route Brexit on June 23 by voting for the UK to leave the European Union. For fairness, opportunity and democracy across all of the European Union.

Michelle Donohue-Moncrieff is a Conservative Party councillor and LGBT campaigner

Remain

The referendum campaign in the UK saw a shift in tone last week, beginning with former PM John Major's attack on the "fundamentally dishonest" and "deceitful" Leave campaign. On Tuesday, David Cameron followed up, drawing attention to six "untruths" promoted by the Brexit camp. The economic arguments may overwhelmingly support the case to stay in the European Union (EU), but the clear concern among the Remain camp is that they are not resonating with voters.

The Bank of England, the EC, the Institute for Fiscal Studies, the IMF and many other institutions may be lining up to warn against Brexit, but the consensus among economists has been negated by a maelstrom of claim and counterclaim. Drawing attention to Boris Johnson's inaccurate claims about the costs of EU membership may be tempting - but will it help to win the referendum? The Brexit campaign is akin to Trump-style realpolitik rather than rational debate about the merits of EU membership. It taps into voters' fears, nationalism and prejudices, which can have serious consequences, as the experience of two European-originated world wars demonstrates.

The Bremain side may rue the fact that the campaign has not been sufficiently long to allow voters feel the Brexit-induced slowdown. Companies and households are now clearly putting off spending. Deloitte's recent Chief Financial Officer survey showed that for the first time since 2012 a majority of large companies are planning to cut back on investment spending, with Brexit uncertainties cited as the key impediment. The construction sector is now contracting again, hurt by declining commercial development. The UK housing market has stalled. According to the Royal Institute of Chartered Surveyors, the numbers of new buyers and sellers collapsed in May to its lowest level since the financial crisis, with all parties unwilling to commit to transactions until after the referendum. For the first time since 2012 a majority of estate agents expect house prices to decline.

All of this uncertainty comes at a bad time for the UK. Household finances look vulnerable, with savings at historic lows. House price valuations are back at peak 2007 levels, posing the risk of a correction. The export sector continues to perform poorly, running a substantial trade deficit. And the Chancellor has to narrow the government deficit worth close to 4pc of GDP. The risk here is that Brexit uncertainties could be a catalyst for a correction in these imbalances.

Should the UK vote to leave the EU the negative impact of uncertainty will be even more severe. A sharp depreciation of sterling could leave the Bank of England in the position of facing 'stagflation', weaker growth but stronger inflation. The impact might require tighter monetary policy over the longer-term because the structural capacity of the economy to produce goods and services would have been damaged. Firms will be even less likely to invest with single market access under threat. Even if the UK could quickly conclude trade agreements with the EU, and other countries such as the US, anything less than full access to the EU single market would hurt trade and investment in the long term.

Part of the problem facing the Bremain side is articulating to the public the benefit of international trade. During the 2000s, the integration of China into the global economy contributed to a dramatic decline in the price of clothing, textiles, electronics and other goods, helping real incomes and living standards. The introduction of the EU single market had similar benefits, but these are rarely recognised. Instead, the focus has been on migrants supposedly taking British jobs or firms hurting employment by relocating to low-cost economies. Given the UK unemployment rate is currently 5pc, these fears are hard to credit. In fact, a key strength of the UK's recent economic performance has been resilient jobs growth, more than adequate to absorb inward migration.

Finally, it is often argued that the UK could perform perfectly well outside the EU, as it always did prior to membership. However, a key strength of the UK economy has always been its openness to trade, investment and migration. Erecting trade and labour market barriers now would be a retrograde move. Of course, a likely endgame would still be the UK remaining in the single market, with some fudge on migration to make a deal with the EU palatable. However, this is hardly an argument for Brexit. In this case the UK would probably stay within the single market - but with no influence on the rules.

Conall Mac Coille is Chief Economist at Davy (Views expressed in this article reflect the personal views of the author and not necessarily those of Davy)

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