Running head: BREXIT

An Analysis of the Brexit

Meredith Weaver
Cedar Crest College

BREXIT

Brexit is the term used to signify a British exit from the European Union. There are many
different reasons for the desired leave, and the consideration of what will happen to Britain
whether they choose to stay or leave the European Union will help to see the benefits and
downfalls of either choice. A brief history of the EU, Britain, and their relationships through the
years will help to better understand the reasons for the proposed split. The analysis of the reasons
and alternatives which Britain faces depending on their choice seems to be necessary when
evaluating the need for a Brexit.
The European Union, otherwise known as the EU, is a group of 28 European countries.
These countries are part of a free trade, travel, and capital partnership that allows goods,
services, and people to move freely within the countries. The idea behind the formation of the
European Union was that countries who trade with one another become economically
interdependent and so more likely to avoid conflict. (The EU in Brief, 2016) Countries in the
EU have a single currency, a single market, and a single set of trade guidelines. (The EU in
Brief, 2016)
Britain, the larger country in the United Kingdom, is one of the members of the EU. They
joined in 1973, fifteen years after the formation of the European Union. In 1951, Britain received
an invitation to join the European Economic Community (now known as the EU), and they
declined it. Their economy was doing well at this time, and they felt as if they did not need to
join to European Union. (Wilson, 2014) However, in 1961, Britain seemed to have changed its
mind. From observing how France and Germanys economies were doing, and seeing their rising
standard of living, Britain decided to put in an application to join the EU, only to have it vetoed
by France. In 1975, Britain was finally accepted into the EU, with a large percentage of the vote
leaning towards it. Their economy, however, did not see an abrupt change, and they still

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experienced a number of economic difficulties. (Wilson, 2014) England is also one of the one
EU member countries that does not use the euro. There are several different reasons for this. The
first was established by the United Kingdoms Prime Minister, Tony Blair. He revealed five
economic tests that he believed should be met before the Great Britain would accept the euro.
They are as follows:
1. Business cycles and economic structures must be compatible enough that the United
Kingdom could live with Eurozone interest rates.
2. The system must have sufficient flexibility to deal with both local and aggregate
economic problems.
3. Adopting the euro must create conditions conducive to firms and individuals investing
in the United Kingdom.
4. The euro would enable the nation's financial services industry to remain in a
competitive position internationally
5. Adopting the euro must promote higher growth, stability and a long-term increase in
jobs.
(Why doesnt England use the Euro, N.D.)
A large number of people believe that these tests are unattainable, and that it would be
impossible for any economy or organization to meet all five of these requirements.
There are several other reasons why people believe are the cause of Britain not wanting
to adopt the euro. The first is the different cycles which Britains economy and the rest of
Europes economy are going through. Britains economy, in general, was moving faster than the
rest of Europes economy, so if they adopted the euro, and the interest rates which are set by the
ECB, they could see very large amounts of inflation which would hurt the economy greatly.

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(Pettinger, 2008) With increased and added inflation, prices would rise much faster than wages
would, so people would not be able to afford to maintain their current standards of living. People
would buy less, which would hurt domestic businesses, and any savings which they did possess
would quickly be spent trying to live their lives. Another reason Britain has not implemented the
euro into its monetary system is because of foreign investment. Currently, people know how to
do exchange rates from pounds to US dollars, or pounds to euros, and if they switched, these
firms would be forced to change to a euro to exchange rate. (Why doesnt England use the
Euro, N.D.)
Britain has had issues with the EU since before it became a member. As stated previously, its
first application to join was vetoed by France. This made it very clear that their presence was not
necessarily welcome within the EU. Another occurrence of unfair treatment towards Britain was
battled by Margaret Thatcher in 1984. She was arguing against what seemed to be a
discrimination against Britain because of the agricultural subsidies it had received from the EU.
They were a large percentage smaller than the agricultural subsidies that other EU member
countries had received, and she was not pleased with that. (Wilson, 2014)
Throughout the 1980s, Britain grew less fond of the EU capitol in Brussels, when the
new head of the European Commission (EU), who had taken a socialist political stance, was
trying to veer the EU towards a more federal Europe and a single currency. (Wilson, 2014) She
stated that she rejected a European super-state exercising a new dominance from Brussels.
(Wilson, 2014)
In more recent years, British citizens are starting to doubt the necessity of being a
member of the European Union. For those who want out, there are several reasons which seem to
be at the front of their decision.

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The first reason why Britain wants out of the European Union, unsurprisingly, has to do
with money. Each year, every EU member country has to make a certain contribution to the
European Union. This contribution is based off of the overall wealth of the country, and the
money is redistributed to help all of the EU member countries, but mainly to help the poorer
countries in economic distress. Because the UKs economy is growing, so is the amount which
they must contribute to the EU. To see this is monetary terms, in 2008, the UK had contributed
around 2.7 billion, but, in 2013 they had to contribute 11.3 billion. (Boyle, 2015)
Another money related issue which is causing Britain to want to leave the EU is related to
the adoption of the euro. Because they are so set in using the pound as their currency, they are
worried that they will eventually be forced to take the euro as their currency, despite the
catastrophic effects it may have on their economy. (TestTube News, 2016) According to some, all
EU member countries are expected to adopt the euro by the year 2020. (Lilico, 2014) This is
approaching rapidly, and if Britain cannot get out of the EU fast enough, they may be forced to
adopt the euro. While this will have horrible economic effects for them when it is put into place,
if Britain leaves the EU after the euro has been the established currency, it will cause a horrible
economic crash altogether. Aside from this, the euro is seen as the less stable of the two
currencies, and Britain is worried that the euro can be heavily influenced by unstable member
countries, such as Greece. (Boyle, 2015)
Yet another issue which Britain has regarding the EU is migration. This may be
considered to be the most prominent issue for some. In general, the EU is very relaxed when it
comes to migration, and very open to letting in migrants and refugees, because one of their
purposes is to try and increase the general living standard for people. This attitude, however, is
not carried over in Britain. Britain believes that the overwhelming number of migrants are

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cutting into British welfare, and that many jobs and housing opportunities are being lost to
migrants. (EU Referendum, 2016)
An additional problem which the EU poses for Britain is its ability to overpower the laws
set into place by British parliament. Britain feels as if their sovereignty has been completely
overtaken by the EU, as has been seen on several different occasions concerning migration laws.
If Britain puts a law into place, it does not matter until the EU approves it. Because Britain is, in
general, opposed to migration and the benefits which migrants can receive, they are not in favor
of the EUs laws and rulings which help migrants and give them access to benefits which the
British believe should only be taken advantage of by them. (TestTube News, 2016)
After looking at the different reasons that the British have for wanting to leave the EU, a
consideration of the different economic and social consequences in regards to leaving or
remaining in the EU should be done as well. The major differences are usually considered to be
trade, the EU budget, immigration, law regulation, investment, and influence. A further
breakdown of these items will help provide a look into whether or not a Brexit would be
beneficial for Britain.
The first major issue is trade. Within the EU, trade is free and member countries do not
have to pay any sort of tariffs or trade fees. This is a very good thing for Britain, because most of
their trade is done within the EU. In fact, around 50% of Britains trade is done within EU
countries. (EU Referendum, 2016) If Britain leaves the EU, they will no longer be part of the
free trade zone, and would most likely have to pay have exporting fees in order to get the same
amount of products out of the country, but at a lesser profit, or if they raise the prices they will
not be able to move as much capital. However, if they leave the EU, they will be able to change

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their terms of trade. Exiting the EU will also give Britain an opportunity to secure other trade
deals with large countries such as China, India, and America. (The Data Team, 2016)
The European Union budget, as previously stated, is a big point of contention for many
British citizens. The British believe that they pay more to the EU than the benefits which they
receive from being a member. The British, as well as France and Germany, are the only three
countries which put in more money than they receive back from the EU. However, if they were
out of the EU, this money could be spent on things such a research and development, the
strengthening of infrastructure, or new industries (The Data Team, 2016).
Immigration is the next major issue that can be looked at in terms of leaving or remaining
in the EU. Although many think that leaving the EU will dramatically drop immigration, this is
not entirely true. Countries outside of the EU have even higher immigration rates than some EU
countries, including Britain (The Data Team, 2016). However, if they do stay, they will have to
put up with the immigration rates that they are currently experiencing. If they do leave,
conversely, they will have the chance to change they systems that the EU has put into place. This
will allow Britain to stop EU immigrants that the EU is letting in with their open-door trade
policies, and allow non EU immigrations to come in, because they could help to contribute to the
UK GDP and other production. (EU Referendum, 2016)
Law regulation is another thing which Britain is seeking to change through leaving the
EU. Currently, the EU has last say in the laws which are passed. Britain would like to see some
of their nation sovereignty come back into the country. If they leave the EU, Britain will receive
all of their nation sovereignty back, which may help them improve their employment laws,
health and safety regulations, and businesses. (The Data Team, 2016), (TestTube News, 2016)

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Foreign investment is a very important factor in any major country, because of the
globalizing world. Without investment from outside countries, a large country will most likely
not be able to keep their higher economic status. If Britain leaves the EU, foreign investment is
most likely going to slow down greatly, or even come to a stop. Those who are leaning towards
Britain remaining in the EU are predicting that if they leave, foreign investors will no longer
want to take the investment risk. This is because Britain will no longer be seen as an opportunity
to get investment and foreign capital into the EU. Those who are anti-EU are saying that if the
split is successful for Britain, they could change their overall economy and market and become a
very successful world economic power. (EU Referendum, 2016) Because Britain is such a big
part of the EU, and their contributions make up a large percentage of the EU membership fees, if
they decide to split from the European Union, this could prove catastrophic for the European
Project. The income that the EU was receiving from Britain will be gone, and other countries
will most likely be more likely to try to leave the EU. This could potentially start a large
Pandoras box, and Britain could be seen as a safe haven of sorts from the EUs economic
distress. (EU Referendum, 2016)
Britains influence in the international economy is the last major thing to look at when
comparing how Britain will be affected in or out of the European Union. If Britain remains in the
EU, they will be able to have a say in large regulation and other foreign affairs. Adversely, if
Britain leaves the EU, they will be able to take part in large, international institutions and be their
own voice there, rather than being represented by the EU as a whole. This can help them increase
their free trade opportunities and international presence. (The Data Team, 2016)

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Analyzing these differences and looking at all the effects they may have has shown a
more complete picture when considering the Brexit. Although some positive effects can be seen
by Britains split with the EU, the negative effects seem to have a greater impact on Britains
economy, standard of living, and future. If Britain decides to ignore these negative impacts and
continue with their split from the EU, the effects could prove detrimental to their economy. The
referendum will take place on June 23rd 2016, and will essentially predict the outcome for the
future of British, European, and even world economies.

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10

References:
Boyle, Catherine. (2015, May 27). Just what is the UKs problem with Europe? Retrieved from
http://www.cnbc.com/2015/05/27/why-would-the-uk-want-to-leave-the-eu.html
The Data Team. (2016, February 24). A Background guide to Brexit from the European Union.
Retrieved from http://www.economist.com/blogs/graphicdetail/2016/02/graphics-britains-referendum-eu-membership
The EU in brief. (2016, February 17). Retrieved from http://europa.eu/about-eu/basicinformation/about/index_en.htm
EU Referendum: The pros and cons of Britain Voting to leave Europe. (2016, April 1). Retrieved
from http://www.theweek.co.uk/eu-referendum
Lilico, Andrew. (2014, July 1). After 2020, all EU Members will have to Adopt the Euro.
Retrieved from http://www.telegraph.co.uk/finance/economics/10935617/After-2020-allEU-members-will-have-to-adopt-the-euro.html
Pettinger, Tejvan. (2008, January 18). Why UK stayed out of Euro. Retrieved from
http://www.economicshelp.org/blog/215/uncategorized/why-uk-stayed-out-of-euro/
TestTube News. (2016, February 9). Why Does the UK Want to Leave the EU? Retrieved from
https://www.youtube.com/watch?v=ZbEZNhFY9TA
United Kingdom. (2016, February 17). Retrieved form http://europa.eu/abouteu/countries/member-countries/unitedkingdom/index_en.htm
Why doesnt England use the euro? (N.D.) Retrieved from
http://www.investopedia.com/ask/answers/100314/why-doesnt-england-use-euro.asp
Wilson, Sam. (2014, April 1). Britain and the EU: A long and rocky relationship. Retrieved from
http://www.bbc.com/news/uk-politics-26515129