Would the UK be better off outside the EU?

NO - Gina Miller

Those who have wanted the UK out of Europe since we joined in 1973 are feeling rather gleeful as they could scarcely have chosen a better time for the upcoming EU referendum. 

Britain is riding a wave of economic buoyancy in contrast to gloomy clouds over the eurozone. The EU has suffered several crises while immigration and terrorism are increasingly alarming. In these insecure times, the emotional appeal of cutting ties with the EU may seem compelling. 

In the world of investing we are used to uncertainty, emotional over-reaction and herd mentalities. We also have no crystal balls but concentrate on the known unknowns, balancing cost, risk and returns and taking a medium to long-term view. When you apply these principles and are dispassionately passionate about the future of the UK, the benefits of remaining in the EU outweigh the possible risks of leaving – the unknown unknowns. 

Both sides of the debate are guilty of scaremongering and neither admit there are few predictable statistics. What we do know is that a vote to leave will be a game-changer, with no certainty as to how long the inevitable resulting state of instability, which markets abhor, would last. 

Once Article 50 to exit is triggered, what do we know is more than likely to happen? The UK credit rating is likely to be downgraded. Many of the 250 foreign banks and financial institutions with major offices and employees in the UK have already stated that they would seek to move their operations to EU member states. Sterling is likely to be affected, with the Bank of England putting aside billions to shore up sterling and combat any turmoil in the financial system. 

As a highly regulated industry, with much of this regulation emanating from Brussels, Outers argue a post-EU UK would be less constrained by red tape. In reality, regulation is unlikely to lessen in the event of a Brexit and, potentially, it might increase.  

If the UK wants to continue to do business with remaining EU member states following a Brexit, it will almost certainly need to comply with EU regulations in order to do so. Yet if it comes out of the EU, we shall no longer be able to negotiate, influence or challenge those regulations. 

The IMF’s view is that a British departure from the EU threatens to impose “severe” damage on the UK and global economy. As part of the EU, passporting allows free access to sell to 508m consumers. We have access to talented employees from the EU without having to organise work permits and vice versa for UK staff working in EU offices. According to CityUK, 37 per cent of financial services companies say they are very likely or fairly likely to relocate staff if the UK leaves the EU. This would have a huge impact on London. 

In view of these unknowns, there can be little doubt that there will be a negative effect on the City, financial institutions and wealth management at a time of increased global volatility, a fragile economy and political uncertainty across most continents. This is not the time to exit the EU. 

Jim Mellon

Yes - Jim Mellon

My major asset is in German real estate, so it might appear a bit odd that I am pro-Brexit. Well, in fact, there seems to be no finer asset class within the European Union than German property in order to ride out the coming crisis.

And a crisis beyond compare it will be. With or without Brexit, the EU is about – and I mean within three years – to have wrenching change, and possibly, dissolution, forced upon it. This crisis will make the Greek imbroglio look like a retsina party, and in that crisis, Britain is best off in a comfortably appointed lifeboat in the English Channel rather than attached to the sinking vessel of euroland. 

The coming crisis will be the direct result of the attempt by the Federalisers of Brussels to transform a looser union of economies into some sort of supra-national state. The most visible manifestation of this is, of course, the euro, which is now the currency of the majority of states. The problem is that this currency is not fit for purpose; it imposes a one size fits all means of payment on very disparate countries. Countries with huge income variations, different economic cycles, levels of employment, competitiveness levels and cultures. And it just isn’t working. 

The best evidence of this is the appallingly high unemployment in peripheral European states, especially among the young. In addition, there is the anaemic or negative growth levels in countries such as Italy and France, which, due to lack of labour reform, just cannot compete effectively with the German export machine. 

I recently drove from Berlin to Brussels – on both sides of the roads, an endless procession of German and Polish trucks moving German manufactures to Southern Europe and the rest of the world. The result of this incessant, efficient exporting is that Germany runs a remarkable current account surplus, somewhere between 7 and 9 per cent of GNP. 

This surplus is recycled, in large part, in the consumption of the peripheral states, notably Italy, Spain, Portugal and latterly, France, and is represented by ever greater German claims on assets in those countries. This is a poor trade off – normally such surpluses would be used to boost productive investment, but that’s not happening. Germany’s capital stock is ageing very rapidly. 

Put simply, the Germans work hard to make things to send to Southern Europe, not realising that they won’t be paid in full for those goods and letting the buyers get almost unlimited credit. 

That’s fine while it lasts, but the day of reckoning is coming. France and Italy are in classic debt traps; they cannot grow their nominal GDPs fast enough to stop the growth of their already large government debts, and their debts are of shorter and shorter maturities, and held increasingly by foreigners. 

Sooner or later there is going to be a huge debt crisis involving Italian and /or French debt. In those circumstances, if Britain remains in, we will have to participate and a depression will ensue.

It’s not too late to get out. We will be able to re-join a looser, more suitable union soon enough. Let the dust settle first. 

Oh, and German property? With the demise of the single currency, the new DM or whatever it is called, will rise by at least 50 per cent, and German real estate will be the go to safe haven.