No sooner than the election dust settled, political commentators turned their attention to what could make or break the Prime Minister’s second term and potentially result in the break-up of the UK itself – the in/out referendum on EU membership.
Many are horrified at the idea of quitting Europe while others are rubbing their hands together at the thought of Britain ruling its own waves again. To paraphrase Mick Jones and Joe Strummer for the Clash aficionados amongst you, if we go there will be trouble and if we stay it will be double…
We know the question will be “Should the UK remain a member of the EU?” and one leading think tank has already coined a phrase to describe a win for the no vote – Brexit.
While the issue of migration might grab the headlines, I’m sure the economic argument (as it was in the last election) will prove strongest and will be the basis of most thinking people’s decision when it comes to casting their vote.
I doubt there are many British businesses that believe they will benefit from leaving the EU. The think tank behind the ‘Brexit’ phrase has recently releases a comprehensive report in which it states UK GDP could be 2.2% lower in 2030 if Britain leaves the EU and fails to strike a trade deal with its neighbours. In a best case scenario, it states Britain could be better off by 1.6% of GDP if it does enter into liberal trade arrangements with the EU and opens up to almost fully trade with the rest of the world. It then plots a more realistic range between 0.8% permanent loss to GDP and a 0.6% permanent gain.
So much for the macro economics – what would the impact of Brexit be on the UK property market? What would it mean for intermediaries?
It’s difficult to say at this stage but I’m guessing that certain areas of European law would depart these shores. We’re currently facing the introduction of yet more rules originating from the EU as the Mortgage Credit Directive has to be implemented in the UK by 21st March 2016. With the referendum not due to take place until some point in 2017, it looks like the industry will have no choice but to navigate its way through yet more changes. This will impact second charge mortgage lending and some areas of the buy-to-let market as well as imposing several new disclosure requirements.
I’m sure that many of you would raise a glass to Brexit if it meant a reduction in not just the regulatory burden but the constant changes imposed on you. If we left the EU then we would not be under EU regulators such as the European Banking Authority, however if we wanted to maintain trade links then wouldn’t we have to sign up to most of the regulations without having the ability to assert any level of control over them?
Would Brexit fundamentally impact transactions in the residential property market? I would imagine that we would enter a period of instability as the stock markets and foreign exchange markets reacted to the decision but it’s really impossible to say right now what this would do to the current level of buoyancy we’re experiencing. If we were to be able to assert greater control over our own border, would it ease the housing crisis? Arguably to achieve economic success if we choose to go it alone, we’ll need wider trade agreements which could mean attracting new people to our shores. Would we simply replace one freedom of movement with another?
The only thing that is certain right now is that we should prepare ourselves for two years of claim and counter-claim on Europe, immigration and the role Britain plays in the world today. Just like the last election, it’s going to be a close call.
Kevin Paterson is managing director of Source Insurance
