Europe referendum explained

An Englishman, an Irishman and a Welshman walk into a bar…

Robby P.

Many pub jokes start off this way and the punchline that usually follows ends with the joke being on some other non-British citizen of the European Union.

Today (June 23) British, Irish and Commonwealth citizens over 18 who are resident in the UK, along with pre-registered UK nationals living abroad, will be voting to either stay or leave the European Union.

But this is no joke.

Dubbed “BREXIT” in financial markets, the implications of a potential British exit from the EU has caused havoc in global markets, including ours.

But what exactly are they voting for?

The “stay” camp

Prime Minister David Cameron wants Britain to stay in the EU.

A total of 16 members of his cabinet also want to remain.

The Labour Party, SNP, Plaid Cymru and the Lib Dems are all in favour of staying.

They argue that Britain benefits from its EU membership in the sense that it makes trade with other EU members simpler.

They believe that Britain’s exit would hamper trade and have a negative impact on the economy.

They are also pro-immigration, in the sense that they believe that most immigrants are “young” and their inclusion in the work force helps boost growth and helps to pay for public services.

Europe wants the UK to stay.

The “leave” camp

The “leave” campaign is led by the UK Independence Party.

About half of Conservative MPs, including five cabinet ministers, several Labour MPs and the DUP are also in favour of leaving.

They want Britain to regain control of its borders.

One of the main principles of EU membership is “free movement”, which means you don’t need a visa to go and live in another EU country.

They would like to reduce the number going to live and work in the UK.

From an economic stand point, they argue that membership of the EU is a hindrance, in that the “rules” of doing business in the EU are too restrictive and that the billions of Pounds it costs in “membership fees” is just not worth the return.

Initial polls suggest that it’s going to be close, as the British public seem pretty evenly split.

What happens if Britain exits the EU?

Well, this answer is not as simple as you might think.

If the UK left the Union, they would have to strike up a trade deal with the rest of Europe all over again.

In a best case scenario, let’s assume they aggressively deregulate their economy and relax trade regulations almost completely with the rest of the world, UK GDP could be 1.6 per cent better off than if they stayed.

In a worst case scenario, they fail to strike a trade deal with the EU and do not pursue free trade agreements, UK GDP could be 2.2 per cent worse off than if they had stayed.

The currency would depreciate making citizens “poorer”, but to what extent would be determined by the impact on the economy.

There is a high risk of the UK slipping into a recession while they resume rowing their own economic boat.

While this event may not be catastrophic in the bigger picture, consider the strong possibility that your UK investments (including cash) will be impacted by the stalling economy.

I expect little to no growth and significant weakening of the Pound.