What are the pros and cons of leaving the European Union and why is this important for traders?
English
Pros and cons of being in the EU
Why trade financial events with IG?
-
Trade on the market reaction
Access over 17,000 global markets
-
Go short or long
Think a bear market’s on the horizon? Take a short position
-
Risk management tools
Use guaranteed stops to manage your positions
Benefits of being in the EU: the debate
With speculation playing a part in almost every claim for or against the EU, it’s a big ask to distinguish between legitimate risk and routine doom-mongering. As long as there are as many ‘what ifs’ at play as there are, either camp could ultimately be proved right or wrong. We'll look in more detail at the winners and losers this could potentially create shortly.
While clarity may not be easy to come by, understanding the key arguments involved could nonetheless give clues as to how markets may react if one camp gains ground over its rival. Each has created a manifesto on the central issues at hand, and we have laid out their positions in simpler terms below.
Stay - campaign group
The driving force behind the campaign to stay in the EU is Britain Stronger in Europe. Spearheaded by former M&S CEO Stuart Rose, it includes Caroline Lucas, Peter Mandelson and Danny Alexander, as well as a number of other high-profile figures.
Its arguments tend towards the benefits of being part of a wider union – and the security and favourable treatment that come with it.
Leave - campaign group
With the leave camp proving more fragmented than the opposition (a fact many think could damage its chances of victory), it came down to the Electoral Commission to resolve the question of who would officially lead their campaign.
The campaign group Vote Leave ultimately came out on top. Chaired by Labour MP Gisela Stewart, its committee consists of a variety of members of different parties – including Michael Gove and Douglas Carswell – and boasts the backing of a number of prevalent entrepreneurs.
Their arguments for leaving are straightforward: more sovereignty, less red tape
Key advocates for stay
- David Cameron, Prime Minister
- George Osborne, Chancellor
- Theresa May, Home Secretary
- Jeremy Corbyn, Labour leader
- Sadiq Khan, Labour candidate for Mayor of London
- Carolyn McCall, Easyjet CEO
- Vittorio Colao, Vodafone CEO
- Stuart Gulliver, HSBC CEO
Key advocates for leave
- Boris Johnson, Mayor of London
- Michael Gove, Secretary of State for Justice
- Nigel Farage, UKIP leader
- Theresa Villiers, Secretary of State for Northern Ireland
- Zac Goldsmith, Conservative candidate for Mayor of London
- John Caudwell, Phones 4u co-founder
- Tim Martin, Wetherspoons chairman
- Michael Geoghegan, former HSBC CEO
Key arguments for stay
-
Foreign affairs:
As part of a 500 million-strong economy, Britain has greater influence over international matters.
-
Sovereignty:
Britain has proved that it can opt out of EU policies it considers counterintuitive, such as the euro, the Schengen Agreement and enforced migrant quotas.
-
Security:
A union better equips Britain to tackle threats to security, including terrorism and cross-border crime.
-
Money:
Europe provides Britain with billions of pounds’ worth of investment each year.
-
Trade:
Membership in the EU gives us the strength to negotiate favourable trade agreements with countries around the world.
-
Business:
Free trade within the EU reduces barriers and enables UK companies – particularly small ones – to grow.
-
Jobs:
Millions of jobs linked to Britain’s membership would be put at risk.
-
Consumer goods:
The average person in Britain saves hundreds each year thanks to lower prices of goods and services facilitated by the EU.
Key arguments for leave
-
Foreign affairs:
EU membership limits Britain’s international influence, ruling out an independent seat at the World Trade Organisation.
-
Sovereignty:
Britain would have more control of its laws and regulations, without risk of having counterintuitive policies forcefully imposed.
-
Security:
Britain’s domestic security would benefit more from greater border control than political union.
-
Money:
Britain contributes billions of pounds in membership fees to the EU every year.
-
Trade:
Membership in the EU keeps Britain from fully capitalising on trade with major worldwide economies like Japan, India and the UAE.
-
Business:
The EU subjects Britain to slow and inflexible bureaucracy, making it more prohibitive for smaller, more innovative companies.
-
Jobs:
Improved global trade agreements and more selective immigration would have a positive effect on the British job market.
-
Consumer goods:
The average person in Britain lose hundreds each year owing to policies regarding VAT contributions and agricultural subsidies.
Brexit: winners and losers
With so many questions yet to be answered about post-Brexit trade and regulation, it’s impossible to predict the full impact it would have on British businesses.
The prospect, however, looks to be as promising for some as it does problematic for others. Below we take a closer look at those that stand to gain, and those that stand to lose, if Britain were to rescind its membership.
The winners
If the announcement of the referendum was enough to send sterling to a seven-year low, a vote to leave could have far more profound repercussions.
But some companies stand to benefit from a weaker pound. Take travel and leisure companies with exposure to the UK – Thomas Cook, for example, or Ryanair. Favourable exchange rates are likely to encourage more in-bound tourism as travellers get more for their money, and this could represent a major boost for these firms’ bottom lines.
There’s good news, too, for energy-intensive manufacturers. Independence could mean Britain breaks free from the high costs for power imposed across the EU. As their expenses drop dramatically, key UK manufacturing firms could surge ahead of their European rivals.
Speculation that London and Edinburgh could become centres for the super-wealthy – a Geneva of sorts – has also led many hedge funds to come out in support of Brexit. Minor disruption to the markets and to the City, they argue, will be temporary, but doing away with Brussels’ regulation of the sector will prove valuable in the long run.
The losers
Bear in mind that within the finance sector, there is also large opposition to this view. For many, the risks of being outside the EU far outweigh the costs, and the potential of a successful European capital markets union could give the financial industry a much-needed shot in the arm.
Where most members of the FTSE 100 have the global focus to avoid major disruption from a vote to leave, the same can’t be said of FTSE 250 firms. With much greater dependence on neighbouring markets in the EU, current expectations are that it will underperform a much more international index. Prepare for some trepidation as the date draws closer.
Bigger companies aren’t without their own concerns, however. Retail group Kingfisher and telecommunications giant Vodafone derive 51% and 40% of their revenues from the EU respectively. Brexit would mean significantly restructuring the way they do business, as trade terms need renegotiating, new regulations demand new procedures, and long-term contracts are hobbled by clauses and disclaimers.
Looking particularly vulnerable are property companies and housebuilders. In part owing to a potential fall in sterling, in part owing to the curb on EU migrant workers, they are set to face an uphill battle in the event of a leave vote. Keep an eye in particular on companies such as Bovis Homes, Intu Properties and Barratt Developments.
Open an account now
Fast execution on a huge range of markets
Enjoy flexible access to more than 17,000 global markets, with reliable execution
Fast execution on a huge range of markets
Enjoy flexible access to more than 17,000 global markets, with reliable execution
Trade seamlessly, wherever you are
Trade on the move with our natively designed, award-winning trading app1
Trade seamlessly, wherever you are
Trade on the move with our natively designed, award-winning trading app1
Feel secure with a trusted provider
With 51 years of experience, we’re proud to offer a truly market-leading service
Feel secure with a trusted provider
With 51 years of experience, we’re proud to offer a truly market-leading service
