Leaving the European Union may cause the United Kingdom to lose its attractiveness for major private companies and corporations interested in the European market. While the government has already taken some steps in shoring up that attractiveness, such as the lowering of the corporate tax rate, there is a need to do more than that.
In 2015, the UK trade in goods and services with the European Union was worth over £510 billion pounds.
Such a high volume of imports and exports is possible due to the UK being in the same regulatory environment as the other EU countries. Losing access to the single market will make it much more complicated and thus costly and there is no potential alternative to the EU available in the short term. Negotiating a preferential access to a market as big and as well-developed as the EU’s will take years and many of the biggest enterprises in the UK may not will to risk loses to wait for only possibly beneficial new deals.
The best-case scenario in the short term, therefore, is for the UK to remain in the European Economic Area. By depriving the UK of much of its power in Brussels, it would be harsh enough to be presented as a warning for other potential ‘exiters’, and yet it would allow business to continue more or less as usual.
It would mean that the UK would have to continue to play by the European rules but without being able to influence them. It would be a good deal for the EU but it would be disastrous for any British government that would agree to it – especially as it would prevent any significant immigration controls.
Yet, even accepting that cost and staying in the Single Market will not be enough to convince companies to remain in the UK – why would they, if they are able to move to another country and have a greater influence on the EU regulations that will impact the UK anyway? The UK will have to use a number of comparative advantages to convince the biggest companies and corporations to stay.
The UK is still among the top three economies of the continent. While it may slip to the fourth place, there is and still will be a huge internal market that, even with pound falling sharply, will not disappear overnight. It will remain an attractive and rich market and other European enterprises will want to gain access to it.
The linguistic advantage is clear: English still is the favoured second language in the world and there is no other major English-speaking economy on the continent. Neither Ireland nor Malta can provide the same soft power that the UK can: popularity of its culture and its diversity can all be used as a way of attracting both people and investments.
The existing landscape of British multinationals and private companies is also an advantage. Investment in other European countries to make keeping ties between them and the UK profitable for both sides should be a priority.
Moreover, there are structures of support for the major, knowledge-based branches of the economy in the UK. Yet, they depend on immigrant workers who may not be able to meet the £35,000/year salary requirement for a permanent residency – many of immigrants from the EU, who would face the same requirement after Brexit, wanted to come to work in the UK with the view of staying and building their future here. Coupled with other difficulties, it may render Great Britain less attractive for them which would hike labour costs, harming its attractiveness for businesses. Yet, exceptions from this requirement would break one of the Brexiters’ promises, namely limiting immigration.
With the pound weakening and admission procedure being stricter, specialist workers may find that Germany or the Netherlands offer a more attractive alternative. The solution here is easy – targeted, preferential visas and work permits, based on current market needs. Yet this will mean that in fact most of the promises made by Brexit camp will remain unfulfilled – which, while allowing the UK to stay on as part of the EEA could result in another referendum.
The UK needs access to the European market. The alternatives are extremely uncertain at the moment and membership in the EEA seems like the most likely alternative, despite its political difficulties. Yet an effort will have to be made to keep the current level of attractiveness for businesses and skilled workers – and they have to begin now.