Now that Prime Minster, David Cameron has concluded his negotiations with Europe and announced 23 June as the date of the Referendum as to whether Britain should stay in or leave, it’s perhaps time to sit back and reflect a little.
In this modern age, we have already been bombarded with more pages of copy, in whatever format you choose, on this issue – and there is only one thing for sure – as both the ‘Yes’ and the ‘No’ campaigners kick into gear we are going to hear more and more about it – in fact I think by the time June 24 arrives we will all be glad it’s all over – whatever the result!
There is no doubt that this vote will determine the future of our country for many years to come, but in the short term what effect does it have for you, our readers? Well, the immediate effect is that it will cause uncertainty in the financial markets – and there is nothing more certain than the fact that the financial markets hate uncertainty! So, if you have investments in the stock market prepare to sit tight – there will be peaks and troughs along the way – but those of you who are seasoned investors will probably know that anyway. Once the uncertainty is out of the way then financial markets are very good at getting back to doing what they do best.
In actual fact, a number of commentators predict that an exit from Europe will actually be good for the UK economy in the medium to long term. Believe it or not the UK economy is actually in much better health than a many of its European counterparts – we have exited recession earlier than some other countries and our economy is growing – a European exit could see an economic boost because there will be less EU regulation to comply with, a greater ability to make trade deals and undoubtedly cost savings for the UK Government. These could be spent elsewhere within the economy to help it grow.
However, in the short term, should the country vote for an exit then there will be even more uncertainty. This could lead to a short term drop in economic confidence and performance – and could even push the economy back towards recession. The likelihood is than an exit will see the pound weaken further – it has already fallen quite dramatically on the making of the announcement – meaning it is more expensive to travel abroad and to import goods potentially making things more expensive in the shops – although it does mean our exports will be cheaper and therefore more competitive which gives a boost to overseas trade.
With the vast majority of pensioners’ wealth held in property, an exit could see volatility return to the housing market and therefore see falls in property prices over time, although any such falls could be mitigated, to a degree, by the fact that we have a housing shortage in this country and are simply not building enough new homes to meet demand.
But of course the opposite also applies – should we stay in Europe we are likely to see a surge in confidence in the UK economy. This could help increase inward investment, it could also encourage those businesses that undertake a large amount of their business with EU countries to invest in new facilities – investment creates growth which in turn creates employment and increased prosperity.
Staying within the EU is likely to see the pound strengthen as confidence in the economy is maintained and could also provide a further boost to house prices.
But what about my pension?
The short answer to this questions is – well what about it? The fact is that if you are already drawing your State Pension and/or you receive a private pension as well, whether Britain stays within the EU or not will have absolutely no effect on the amount of money you receive.
With the vote not some four months away there will be plenty of time for us all to consider the arguments for and against – there will be plenty written trying to convince us to vote either way – and there will be plenty of opportunity to discuss and debate.
Whatever happens it will have a fundamental effect on the way this country is run in the years ahead, on the performance of our economy and also on the economic prosperity of the country going forward and that affects us all.
By Aidan Sawley