Where are you heading at, Britannia?

Where are you heading at, Britannia?

The European and British elites still could not recover after the announcement of the results of the British referendum on membership in the EU.

Andrezj Arendarski
Co-Founder and President of the Polish Chamber of Commerce

Brexit proved to be a shock both for British and European elites. Until now it is still not known under what rule the United Kingdom will leave the European Union and what the related actual economic and social consequences will be. It is beyond any doubt that the referendum experiment of Prime Minister Cameron got out of control leaving everyone with a paramount problem.

The European and British elites still could not recover after the announcement of the results of the British referendum on membership in the EU. The referendum, which most likely was intended as a mere safety valve to enable a release of negative emotions rising within the British society, proved to be a real earthquake. Brexit became a fact despite a quite good economic outlook; it was not also an outcome of a scandal or unpopular decision of the European Commission. It was a manifestation of anger of a society which views the functioning of the EU from a slightly different perspective than those in the rule. The British were fed up with the fact that they, themselves, and their State were governed by non-respected Brussels officials who, instead of acting in the interest of Europe, have been waging their ideological wars. They were fed up with uncontrolled inflows of immigrants, who have been perceived by less affluent Isles’ citizens as a threat for their jobs.

What will the economic consequences of Brexit be for the continent? Certainly the Community’s economic potential will be greatly depleted compared to the USA or China. We will also painfully feel the absence of British contributions to the EU budget. The position of the United Kingdom itself will also suffer if obstacles in access to the European market emerge. Will the Community impose any economic restrictions on the United Kingdom, and – if yes – what will they be? Both parties are aware they are indispensable for each other. Probably an agreement will be concluded modelled on Comprehensive Economic and Trade Agreement (CETA) recently signed with Canada. The British would like to participate in the Common Market free from Brussels directives and masses of immigrants wishing to settle in their country.

It is beyond any doubt that the outcomes of Brexit will be mostly felt by the United Kingdom itself. According to estimates commissioned by TheCityUK, the country is likely to lose as much as 38 billion pounds (around 44 billion euros) on leaving the European structures. Certainly this is one of the most pessimistic scenario. Is the rejection of the Common Market for the benefit of regaining control over immigration really worth such sacrifices? Or perhaps just cheap populism sneaked into the Conservative Party? Today even party colleagues of Ms. Prime Minister Theresa May have increasing doubts about whether so-called hard Brexit makes sense. The same doubts are shared by the High Court, which deemed that the Government is not allowed to trigger Article 50 on its own. Decision on that matter is up to the Parliament, which means that the House of Commons followed by the House of Lords will be voting on Brexit. However, the Government of Theresa May disagrees with such interpretation of legislation by the High Court and declared resolved delivery on the will of the people, i.e. exit from the EU. Nevertheless the entire turmoil may prove beneficial for the British, giving needed time to develop an exit scenario optimal for all concerned parties.

The declining standard of living on the British isles will make employment migrants to start returning to Poland

Regardless of its final shape, Brexit is not just a matter of big politics, but also fears of 850 thousand Poles living on the British Isles. So far the British Prime Minister has declared that changes will not be disadvantageous for the Polish Diaspora living there. However, watching the first “spontaneous” behaviours of the British, one can conclude that long-concealed fears and frustrations are now coming to the fore. The situation is realised through assaults against representatives of other nationalities, particularly Poles. One should expect the authorities of the country to take resolved remedial measures related to that matter, which is already done in practice. A question remains however on joint patrols of the British and Polish police and a supplement in a popular daily suffice?

Guaranteeing physical security is one thing, but, on the other hand, both Poles staying in the United Kingdom and Brits themselves are facing gloomy economic prospects. According to forecasts, inflation in the UK may reach the level of 4%, which accompanied by the pound’s value reduction by even as much as 20% will result in an unavoidable economic crisis, entailing rise in the price of commodities to the level of 15-20%. In response to the crisis, the authorities will freeze welfare benefits and fiscal exemptions.

It is obvious that most harmed will be the poorest people taking advantage of social assistance, hired in the lowest-paid jobs, and frequently those will be imigrants. As a consequence, the level of real wages will go down. Also entrepreneurs envisage mass layouts in response to inflation. Eventually, the living standards will be lowered and social dissatisfaction may turn against imigrants, who presently often occupy the least attractive jobs. When unemployment increases, attractiveness of such jobs may increase has well.

Paradoxically, the British may attain their goal, i.e. reduction of immigrants’ inflow through lowering of the living standards in their country and depleting its attractiveness. But is this really what they wanted?

Returning to Poles now. Polish exporters have particularly suffered owing to the decline in the value of the British pound. The longterm contracts they signed oblige them to perform contracts which become unprofitable from day to day. In October, the exchange rate of the British pound dropped to the level of 4.90 zlotys while just back in June it was 5.70 zlotys. Certainly the entrepreneurs will offset the related losses when signing new contracts but  an unstable pound will continue for a long time to make exports to the United Kingdom a highly risky business. On the other hand, the declining standard of living on the British Isles will make employment migrants to start returning to Poland. This is an unexpected – and the best for Poland – aspect of Brexit, particularly today when Poland – just like a majority of European counties – is struggling against low demographics.

 

This article is part of the “Brexit: One way out?” feature.

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