Over last 20 days Great Britain has been progressing towards one of the greatest events it might have seen in last 5 decades. The run up to the EU referendum has been 'interesting' with both sides trying to put forward renewed logic to gain mind share of the voters. The challenge though has been their inability to approach this event any different from the general elections and this has somewhat left the leaders on both sides handicapped as they are not able to utilize their favorite tools effectively that helped them in a 1-1 mud slinging debate.
While David Cameroon himself brought this battle to his door; he has not been able to live up to the expectations of remain camp. He has not been able to utilize the propaganda machinery, money and budgets available to him while being unprepared to give a right punchy response to the questions thrown at him. Leave campaign has also not done well. Their main argument has been driven by symbolism - Democracy, Sovereignty, Culture etc which does not mean much when you are sitting across the table to your boss who is about to advise you on looking out as your employer wants to move office to Dublin or Frankfurt and you have to pay your gas/electricity bills with your elder daughter preparing to get into oxford.
I find it interesting that both camps have tried to make this a complex event and over thought their propositions to voters. The voter on the other hand has been provided truckloads of data which she can not understand, identify, appreciate or reject. The choices are simple and the approach to selecting one over other should be simple too. I am putting down three scenario below which can be a layman's guide to making the right decision tomorrow. Hope the undecided 11-12% voter find this useful.
After the #BBCDebate yesterday, I lost my appetite for dinner and slept only to wake up at 2:00 am looking for food. I opened my refrigerator and saw some bread, tomato and cucumber. The tomato from Tesco caught my eye, grown in and imported from Spain. I started to look for labels on other items in my refrigerator and found out that more than 75 percent of stuff that I consume daily (I am a vegetarian) is produced in continental Europe, Brazil and Africa. Food forms a big component of my
expenses and here are the scenario related to it.
1. Britain Leaves - Gains a favorable deal with EU; starts a 5-10 year re-negotiation with other economies
Most obvious impact will be on the GBP, it is expected to lose value and stabilize at 18-20% lower than present post the initial shock. In simple words, I pay 25% more to get the same amount of tomatoes for my food. Present 89p pack of tomato will cost GBP 1.08. An average grocery bill with 75% consumables from outside UK will cost GBP 750-900 more annually.
2. Britain Leaves - Gets outsider treatment on trade, legislation and tariffs; waits for other markets to open up
In this scenario the impact is magnified as along with GBP losing value, EU and other trade blocks maintain higher tariff on exports, leading to Britain also responding with tariff on imports. So a pack of tomatoes with present cos 89p will also have a EU surcharge 4-5% moving its price up to GBP 1.15p. The overall impact on the grocery from outside UK will be have a 5% surcharge increasing expense compared to today by GBO 780-945 more annually.
The cost impact does not limit to tomatoes but works across the spectrum irrespective of where the goods originate from. leading to high inflation and resulting higher interest rates by central bank and in turn leading to higher cost of doing business impacting industries in reverse order of size from small, medium to large. The ripple effect impacts salaries, jobs, expenditure on education, healthcare and overall standard of living.
3. Britain does not leave - Status Quo
David Cameron becomes the biggest gambler in referendum circles, Boris re-affirms his candidature for next PM, Britain grows, so does EU, we watch game of thrones finale and wait for the next one. The core through is that it is better to build on status quo and improve rather than re-invent the wheel.
And, finally I get to eat tomato cucumber, cheese sandwich and go back to sleep. without burning a hole in my pocket.
The argument is not about democracy, sovereignty, or lack of legislation and human rights. If someone tells us that we are not doing well on those, visit Indian sub-continent and get a reality check.The argument is simple:
- Do you want to look forward and use the present platform to or go back to days of King Arthur building walls?
Disclaimer: The writer is an immigrant in to UK, non-EU citizen, with moderate to good understanding of economics.
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