Legal Business Blogs

Comment: A slightly updated view from 2015 – ‘Unless you hear trumpets, Brexit doesn’t stack up’

Ahead of the 2015 general election, Legal Business assessed the policy pledges of the main parties, including the prospects for an EU referendum.

Since then, of course, we’ve had a bruising referendum campaign, of which I’ll largely leave without comment. With one exception: it was odd that the Remain camp did a poor job of putting the numbers on EU contributions into the context of public finances. The £8.5bn net going to the EU a year is a rounding error in the context of a £1.7trn economy spending in the region of £750bn a year, including £108bn annually on pensions for the older generation that appears to be the bedrock of the Brexit vote.

For the City and legal audience, there was one point of context that the Remain camp were particularly remiss not to highlight. The London area – the apparent bastion of support for remaining in the EU – generates vast amounts of taxes, sizeable chunks of which are redistributed to the UK regions that often consume more in public services than they contribute in taxes. Here is one report, produced separately from the EU debate, giving a flavour, noting that the Greater London area generated £126bn in ‘economy taxes’ (such as income tax and VAT) in 2013/14.

That so little perspective on how we pay for this nation of ours made it into the referendum debate led to the curious absence of the words ‘golden’, ‘goose’ and ‘kill’ from this discussion. Anyway, for context this is what Legal Business (or at least I) said in April 2015:

‘The referendum pledge strikes me as a bizarre policy. You can make a decent case that the UK never should have gone in but it did and has been building its economy around the EU for 40 years. Having sat out the single currency and with some sizeable other policy carve-outs – it looks a pretty good deal.

You can imagine a scenario where the UK does fine outside the EU, the sky doesn’t fall, extra flexibility counters the draw-backs and the economy adapts – but I can’t see a huge upside, just the absence of disaster. On the other hand, you most definitely can see a lot of hard-to-predict things going very, very wrong in an EU exit, particularly given London’s position as Europe’s dominant finance and professional services hub and half our exports going to the region. Unless you hear trumpets when you think about an EU exit, the risk/reward doesn’t stack up and the Scots referendum hardly put that issue to bed.

This is particularly resonant for City law firms. The EU contributed to the global rise of the UK profession, forcing through mutual recognition of qualifications, bolstering London and triggering a wave of region-wide consolidation. It’s true that City firms are materially less Euro-centric than 15 years ago as their investments have increasingly focused on emerging economies and they have struggled to operate profitably in the Continent, but the legal industry has been one example of how British business can get a lot out of Brussels. Still, at least top UK firms have an exit hedge now – they certainly paid enough getting it.

But then such lurching policy-making could become a lot more common as multi-party politics kicks in. We may all live in an anti-political age. We may ultimately come to regret it.’

You can click here, or here and here to see our two-part Insight special on Brexit.