QUO VADIS ,UK?

KOMUNIDAD
June 24, 2016

QUO VADIS ,UK?

By Arturo P. Garcia

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Goodbye EU, BREXIT or Leave EU won by 52% to 48%.

The referendum turnout was 71.8%, with more than 30 million people voting. It was the highest turnout in a UK-wide vote since the 1992 general election. England voted strongly for Brexit, by 53.4% to 46.6%, as did Wales, with Leave getting 52.5% of the vote and Remain 47.5%.

Scotland and Northern Ireland both backed staying in the EU. Scotland backed Remain by 62% to 38%, while 55.8% in Northern Ireland voted Remain and 44.2% Leave.

What is the beef between UK and the he European Union – often known as the EU? For those who don’t know, EU is an economic and political partnership involving 28 European countries It began after World War Two to foster economic co-operation, with the idea that countries which trade together are more likely to avoid going to war with each other.

It has since grown to become a “single market” allowing goods and people to move around, basically as if the member states were one country. It has its own currency, the euro, which is used by 19 of the member countries, its own parliament and it now sets rules in a wide range of areas – including on the environment, transport, consumer rights and even things such as mobile phone charges.

But a word of caution and not so fast for those are overjoyed with the BREXIT. EU law still stands in the UK until it ceases being a member – and that process could take some time.The UK will continue to abide by EU treaties and laws, but not take part in any decision-making, as it negotiates a withdrawal agreement and the terms of its relationship with the now 27 nation bloc.

A lot depends on the kind of deal the UK agrees with the EU after exit. If it remains within the single market, it would almost certainly retain free movement rights, allowing UK citizens to work in the EU and vice versa.

UK is one of 10 member states who pay more into the EU budget than they get out, only France and Germany contribute more. In 2014/15, Poland was the largest beneficiary, followed by Hungary and Greece.

The UK also gets an annual rebate that was negotiated by Margaret Thatcher and money back, in the form of regional development grants and payments to farmers, which added up to £4.6bn in 2014/15. According to the latest Treasury figures, the UK’s net contribution for 2014/15 was £8.8bn – nearly double what it was in 2009/10.

HM Revenue and Customs have suggested about 20,000 EU nationals receive child benefit payments in respect of 34,000 children in their country of origin at an estimated cost of about £30m.

The anti-immigrant bias in the UK contributed to the win of BREXIT. Many Britons are alarmed with the more than 300,ooo immigrants a year flooding the USK from the other 28 EU members.

If the government opted to impose work permit restrictions, as UKIP wants, then other countries could reciprocate, meaning Britons would have to apply for visas to work.

Again, it depends on whether the UK government decides to introduce a work permit system of the kind that currently applies to non-EU citizens, limiting entry to skilled workers in professions where there are shortages.

The single market is seen by its advocates as the EU’s biggest achievement and one of the main reasons it was set up in the first place.

Britain was a member of a free trade area in Europe before it joined what was then known as the common market. In a free trade area countries can trade with each other without paying tariffs – but it is not a single market because the member states do not have to merge their economies together.

The European Union single market, which was completed in 1992, allows the free movement of goods, services, money and people within the European Union, as if it was a single country.

It is possible to set up a business or take a job anywhere within it. The idea was to boost trade, create jobs and lower prices. But it requires common law-making to ensure products are made to the same technical standards and imposes other rules to ensure a “level playing field”.

Critics say it generates too many petty regulations and robs members of control over their own affairs. Mass migration from poorer to richer countries has also raised questions about the free movement rule.

During the referendum campaign, the prime minister said the so-called “triple lock” for state pensions would be threatened by a UK exit. This is the agreement by which pensions increase by at least the level of earnings, inflation or 2.5% every year – whichever is the highest.

If economic performance deteriorates, the Bank of England could decide on a further programme of quantitative easing, as an alternative to cutting interest rates, which would lower bond yields and with them annuity rates. So anyone taking out a pension annuity could get less income for their money.

The Bank of England may consider raising interest rates to combat extra pressure on inflation. That would make mortgages and loans more expensive to repay but would be good news for savers.

The Treasury previously forecast a rise of between 0.7% and 1.1% in mortgage borrowing costs, with the prime minister claiming the average cost of a mortgage could increase by up to £1,000 a year.

The Treasury argued during the referendum campaign that UK shares would become less attractive to foreign investors in the event of Brexit and would therefore decline in value, but in the longer term shares typically rise with company profits.

Big exporters might benefit from the weaker pound, so the value of their shares might well rise, while importers might see profits squeezed.

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