What is the issue?
Whether or not the UK should remain in the EU is an important contemporary debate, which anyone looking to work in the City must grasp and be able to form an opinion on. If you were to be asked in an interview whether the UK should remain in the EU, it would be expected that you both take a personal stance to the question and illustrate an appreciation of the counter arguments to your standpoint. It is a popular question to ask in City interview, as it encapsulates the modern-day issue of the interplay between international and domestic politics. It is an excellent example of "commercial awareness ", as candidates must not only possess an understanding of business but the environment in which corporations operates. 'Environment' in this sense includes the political environment, meaning the current domestic and international political situation. In addition, following the 2015 election and the Conservatives being afforded their own majority, it has been announced that a referendum will take place asking the British population "Do you think the UK should be a member of the European Union? ". It is thus likely to remain a common interview question over the next 2-3 years.
Why is it important to understand?
If the UK were to leave the EU, this would have wide-ranging effects on the political, commercial and financial landscape of the City. Thus regardless of what career you are pursuing in the City it is crucial to understand the implications a potential Brexit would have on your clients.
The debate: the key arguments split into three important topics
Both the yes- and no side will focus their argumentation in this area around how many jobs will be lost or created by a British exit from the EU. It is important to note that this is a difficult evaluation to make and hence a very controversial part of the debate.
- For: Manufacturers, including Britain's foreign-owned automotive industry, are likely to move their production to other countries. Companies such as Airbus, who currently have a lot of its production in the UK (and thus create British jobs) may move their production to countries such as France and Germany.
- For: The financial services industry employs in excess of 2 million people in the UK, an industry whose success many argue is underpinned by the EU internal market legislation. Many predict that employers in the sector are consequently likely to relocate their main operations to financial centres elsewhere in the European Union such as Frankfurt.
- Against: Companies will no longer be restrained by EU regulations, which could as a result create more jobs. This is because such regulations often create high costs for businesses, and if businesses have higher costs this means they can employ less people. Such regulations could for instance be rules requiring companies to provide certain types of safety wear to their employees.
- Against: Many small and medium enterprises do not trade beyond the UK's borders and thus do not benefit from EU internal market trade anyway, but are still subject to EU red tape.
- Against: The EU policy of free movements of people means citizens of other EU countries can come to the UK and "steal " British jobs.
This side of the debate is centred around the effect of the EU membership on trades done with other countries, i.e. the export and import of goods and services to and from other countries.
- For: The trade with EU nations comprises 52% of the total trade, worth in excess of £400 billion every year. The ease of such trade is facilitated by harmonised regulations underpinning membership of the EU.
- For: An exit from the EU would mean the UK would no longer benefit from the internal market, which means that exports and imports would be subject to tariffs. It would thus cost more to do trade with the EU.
- For: The UK economy by itself is not large enough to have any significant bargaining power over nations such as the US or China, whereas the EU is a robust international player and can negotiate trade agreements with for instance the US as a union. If the UK were to be "by itself ", the cost of trade is thus likely to increase even with non-EU countries.
- Against: Britain could negotiate beneficial trade agreements with the EU, such as those existing between the EU and Norway and the EU and Switzerland. This is because the UK has a significant trade deficit with the rest of the EU, which means that the EU would lose more profits made from export to the UK than vice versa.
- Against: The continuing stagnation of the Eurozone economy means the proportion of trade with the EU is falling.
- Against: Nothing would hinder the UK from negotiating trade agreements through the World Trade Organisation with growing markets such as Russia, Brazil, Indonesia, India and Singapore.
- For: Without any influence in key cities such as Brussels, Berlin and Paris, the strength of the UK's voice on international matters such as security, environment and trade may weaken.
- For: The US has made it clear that they want the UK to stay in the EU. It is thus likely that the US will take the UK much less seriously without its' EU membership, decreasing the nation's influence on a global scale.
- Against: UK still possesses a strong voice internationally due to its membership of NATO and the UN Security Council, as well as being one of the five nuclear nations under the NPT treaty (Treaty on the Non-Proliferation of Nuclear Weapons).
A play on words of "Britain " and "exit " often used by media.
Free movement of people
Part of the Internal Market policy of the European Union, that seeks to guarantee that goods, capital, services and people can move freely across the borders of the member states without obstacles such as tariffs.
The process of creating common standards (of for instance regulations, laws and practices) across the European Union internal market.
Excessive bureaucracy required by an organisation/government to be adhered to when getting things done, creating often unnecessary delays and costs.
A tax payable on imports/exports.
Agreement between two or more countries so that trade can be conducted between the members without hurdles (such as tariffs).