The Risks of a Brexit

Many people say they would like the facts about the EU rather than a lot of arguments from the two sides.  I can sympathise to a large extent, but unfortunately I do not think they are going to get what they want, for two reasons.

  • Neither side is going to give totally opinion-free information.
  • In any case we are dealing with risks, largely unquantifiable.

I call my business JHM Risk Management Services because I aim to help people and organisations manage their risks.  I do not offer guarantees of outcomes.  If I could do that, I would call my business JHM Certainty Management  Services.

So regarding the EU, the best way I can help you, I think, is to set out the issues to be addressed in the event of a Brexit and to ask you to consider the likelihood of a best- or worst-case scenario and of something in between.

If the UK left the EU there would have to be negotiations to establish the framework for a new relationship.  The only alternative would be to cease all contact with the EU and all the member states, which is so unlikely as to be disregarded.  I set out below what I imagine would be the things the Out Campaign(s) would want to see.  This is what I expect would be the Best Case Scenario from their point of view.

  1. An end to our contribution to the EU budget. This is not a forgone conclusion.  The EU might demand some contribution in return for agreeing to certain of our other demands.
  2. The British Government to determine the rules for migration to the UK from the EU.
  3. The EU to continue to permit British citizens to travel, trade and work anywhere in the EU without restriction.
  4. Free trade in goods and services in both directions.
  5. The UK to determine its own version of Human Rights.
  6. The UK to determine its own version of the Social Chapter, so that companies who fail to meet EU standards regarding Health & Safety or Employment Rights would not be prevented from trading in the EU.
  7. Continued and increasing cooperation in fighting crime and terrorism.
  8. Continued and increasing cooperation in intelligence operations against countries outside the EU posing a threat to the UK or any member state.
  9. Continued and increasing cooperation in dealing with immigration, illegal and legal, from outside the EU including the refugee issue.
  10. Permission to fish in EU waters.
  11. The right to ban or restrict fishing in British waters by people from EU countries.
  12. Exemption from EU regulations regarding climate change and the environment including recycling and waste management.
  13. The elimination of “red tape”.
  • It must be acknowledged that many of the above are in the interests of the EU as much as of the UK. For many, however, there would presumably be a need to compromise.
  • An optimistic view would be that most of these things could be achieved within a year or two with good will on both sides.
  • The pessimistic view is that a Brexit would destroy good will and lead to obstruction and pettiness even where such attitudes were contrary to the interest of the EU or its member states.
  • It is hard to see how “red tape” could be eliminated for businesses trading with the EU even if the UK was not a member. There would presumably be a desire for accountability and evidence of compliance with such regulations as applied, even if some could be waived.

So I conclude with these three pieces of advice from a Risk Management perspective:

  1. Ultimately each of us will have to take a view on the likeliness of the UK obtaining all, most, some or none of these things in a post-exit negotiation.
  2. Even if you assume the ultimate outcome would prove satisfactory, you need to think about the time it would take to achieve it and the effects the uncertainty and any temporary disruption would have on our economy or other aspects of life.
  3. We also need to accept that staying in is not a risk free option. The future of the EU itself is uncertain as is the likelihood of further immigration, integration or undesirable interference in our lives by EU institutions, regardless(?) of the Prime Minister’s recently negotiated improvements.