British Pound
  • Facebook
  • Twitter
  • Google+
  • Pinterest
  • LinkedIn
The campaign for the future of Britain’s involvement in the EU, kicked off officially on Thursday April 14th. Speculators have already flooded the markets with bets. They are primarily betting against the British Pound, which should bear the brunt of the turmoil. It seems that traders are quite confident that Britain will leave the EU. Although this might seem like a sound assessment, given the anti-immigration sentiment in Europe in general, there is reason to believe that logic will prevail. British voters are more likely to reject Brexit than to embrace it.

This is due to the many economic advantages that they derive from continued membership in one of the biggest and most important trade blocks in the world. The EU is Britain’s number 1 trading partner, accounting for about 45% of British exports according to Bloomberg. Apart from that, agreements on investment, the free movement of capital and people, have largely benefited the UK and many other European countries.

Ironically, this very freedom of movement, is now threatening UK’s stance as a member of the EU. The anti-EU sentiment stems mainly from the attitude that British citizens have regarding immigrants. Many of them find their way into Britain once they have reached continental Europe, because there are no intra-EU restrictions on the movement of people and goods within the EU. Others come from Eastern European member countries in the EU, and are entitled to work in the UK. Although this might seem like a good enough reason to pull out, the economic advantages derived from the association with the EU outweigh immigration considerations. Thus, the British public will vote with their pockets in mind, knowing that blocking themselves out of Europe can only result in economic hardship.

Brexit may also trigger a renewed Scottish effort for independence, an avenue that the current government successfully averted by winning the Scottish independence referendum last year. Britons will have to keep that in mind as well when they vote. After all, Scotland is a crucial part of Britain, economically and socially, as well as politically.

However, economic logic can often be a tool that encourages people to find the upside of what looks like a blunder on the surface. If we take the side of the speculators and Brexit does occur, a softer British Pound could, as a result, spring board economic growth in Britain. A weaker Pound will make British exports cheaper for buyers elsewhere, making British production more competitive. In many instances, this could mean that post EU membership tariffs for British exports to the union, might be overcome by the ensuing weaknesses of the British Pound.

This means that at least some of the economic downside to Brexit could be overcome, and Britain would effectively be able to seal its border to undesirable immigration. But scenarios in which Britain can have its cake and eat it, depend on too many variables that no one can control. Speculators will probably have to take some losses on their bearish British pound bets. The people in Britain are not likely to put everything on the line for an experiment that could go awfully wrong.

Pin It on Pinterest