MYTH 2 - Trade & Industry - The UK's trade balance will collapse if we withdraw from the EU.
The UK runs a deficit in goods and a surplus in services with the EU. We believe the idea that the UK's trade balance would collapse if the country leaves the EU is an exaggeration. The UK may even be able to retain access to the single market, which takes almost half its exports. Yet it might have to accept most EU rules and even pay money to Brussels in return, like Norway and Switzerland.
Even without an agreement, the UK would remain protected from any unfavourable treatment by global trade rules. However, EU trade tariffs do present some risk. There are nearly 20,000 of them and a vote to leave would threaten some economic activities and industries more than others, notably motor vehicles, chemicals and clothing. Yet the business models of most UK exporters are not based on providing the lowest cost goods. Quality assurance, ease of doing business and transparent supply chains are among the many reasons why overseas companies choose to import products from the UK.
The longer term impact of a Brexit on trade depends on how well Europe progresses by reducing the remaining trade barriers between its members. Further European harmonisation without the UK would increase the risk that EU imports from the UK could be replaced by internal trade.
If you would like to receive a copy of the white paper, 'If you leave me now', which explores the implications of Brexit for the UK economy and markets, and/or a copy of "Breaking up is hard to do" which explores the implications for investments and currency for investors, please contact us on +351 289 392484 or email us at info@privatefund.management.
Private Fund Management would like to thank Rathbone Investment Management of Mayfair London for their kind permission in allowing the reproduction of this "Brexit" article. In the following weeks, we will be publishing the "Five Myths" relating to the "Brexit" debate, leading up to the referendum.
Private Fund Management
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