Budget rows, referendum pledges, Ukip on the rise … is Britain heading for an EU exit? It would certainly be a messy divorce after 44 years. But what would it mean for our politics, prosperity and cultural life?

Politics: How would Europe regard Britain’s retreat? With disappointment and anger



In a rare uncalculating moment, Boris Johnson wrote last year that, if Britain finally ended its “sterile debate” over Europe by leaving the EU, it would quickly discover “that most of our problems are not caused by Brussels, but by chronic British short-termism, inadequate management, sloth, low skills and a culture of easy gratification and under-investment”.

How true, but that discovery would not be the end of the matter if David Cameron’s promised in/out referendum in 2017 resulted in a Brexit majority. The euphoria that half the population of Scotland came close to feeling in their own independence referendum last September would rapidly dissipate as familiar problems resurfaced and new ones popped up.

The country would be divided – literally so if Scotland took its cue to do a Scexit and stay in the EU, generating tensions in Northern Ireland, though probably not in Wales. The defeated minority would be frightened and sullen, assorted dreamers and zealots would rush to start creating their vision of a restored Merrie England. Or of an offshore free enterprise hub, the Hong Kong of the Atlantic, as much a fantasy as the socialist and green republic that would be sought by others.

Everyone would claim copyright on Blake’s Jerusalem and political parties would scramble to adjust to the new realities. After 44 years of half-hearted membership, there would be no going back, but a lot of time-consuming unbundling would need urgent attention, with new treaties negotiated to project essential national interests, much as the famously independent Swiss and Norwegians spend time negotiating in Brussels.

If the Scottish parallel is any guide, Ukip would enjoy an SNP-style surge of popularity, claiming the credit for forcing the Tories – would Cameron still be leader, or would Mayor Johnson move in for the kill? – to make good their pledges. Whether they recommended yes or no in 2017, the Tories would be seen to have messed things up: neither Cameron nor George Osborne actually want to leave.

It is hard to see such a vote doing Labour, the pro-EU party since its mid-80s U-turn, much good. Ukip’s new recruits are becoming more sophisticated, but Nigel (“Mine’s a pint”) Farage is not likely to be up to the task: the technocrats in Whitehall and perhaps the City would have to sort out the messy, bitter divorce as best they could.

Will there be any more cosy sofa moments for Angela Merkel and David Cameron? Photograph: Getty Images

None of this would be happening in a vacuum. For 400 years, Europe dominated world affairs, but that phase is over. China will soon be as uninterested as it was when European merchants tried to sell it things it didn’t want in the 16th century. The US, busy with China, will turn away from its enfeebled allies, even Britain, no longer its door to Europe. Only Russia will retain an urgent geopolitical interest and, on current trends, it will not be benign.

In time, Britain and its component nations will settle down, probably to a lower standard of living, at least for a while. It depends whether London’s huge financial services sector decides to stay put or decamp to Frankfurt, Dublin or Zurich. That depends on how unstable Brexit Britain’s politics become – and what its tax regime is. Insular and xenophobic, or outward-looking and confident? Fingers will be tightly crossed.

And how will Europe regard “Perfidious Albion’s” latest double-cross, its retreat from cooperation and integration to the offshore island? With disappointment and anger, most likely. British critics of the way the EU runs – its courts, its imperfect single market and bureaucracy, its recession-dogged single currency – make some excellent points as well as some self-deluded ones. Will the Brussels elite say, “Gosh, you’re right” after a Brexit vote? Or pull up their own drawbridge and drive hard economic bargains with the quitters in London? The latter option is surely more likely.

Whatever they say, a British departure will be deeply damaging to the EU’s reputation and self-esteem, unbalancing the north/south, left/right, statist/free enterprise scales. “Don’t leave us alone with the French,” some German politicians whisper as Paris again ducks structural economic reform so long as its bond market commands enough confidence to borrow more.

The EU was constructed, mainly by Frenchmen, to hide German strength and French weakness. It is not hard to imagine the project starting to break up under the pressures generated by a British departure… nationalist and Eurosceptic parties of both left and right – even ultra-respectable Germany has them now – will assert more selfish short-term interest.

Already Germany’s austere Bundesbank is preventing Mario Draghi, head of the European Central Bank, doing more to ease deflationary pressures and unemployment in ways the Bank of England and the US Federal Reserve have been free to do. Huge sacrifices have been made to keep the EU project going – for reasons that constantly need remembering, even in the centenary year of 1914 – but they have been sustained by hope and optimism for a better future.

If a British departure punctures that fragile belief, Europe could slide back to where it was at the height of its imperial glory: divided, feuding, dominated by a single power, Germany, in breach of four centuries of British foreign policy, but threatened by another – Russia (or anyone else who comes along). Only this time there will be no imperial glory, not much money and less defence. Boris Johnson’s “sterile debate” would be over, but the problems he identified would remain. MW

Economics: Voters may go with their gut – should Britain control its own destiny or be part of a bigger family?



It’s the spring of 2017 and preparations for Britain’s in-out European Union referendum are in full swing. The side campaigning for exit says that Britain will not just survive but thrive once it is unshackled from Brussels. The side campaigning to stay part of the EU says the country will be poorer and jobs will be lost.

When the big day comes, the recent poor performance of the eurozone economies proves crucial. Voters are unimpressed by the argument that it is in Britain’s interests to remain part of an economic bloc that has suffered a decade of stagnation and double-digit joblessness, and vote to leave.

What happens next is already a matter of great contention. The CBI says [pdf] membership of the EU adds between £62bn and £78bn to the UK economy, the equivalent of £3,000 per household. A report for Ukip by the economist Tim Congdon [pdf] says the annual cost to Britain of membership is £165-170bn, around 11% of the economy’s output.

On one thing the two sides agree. The fact that Britain is not a member of the single currency would make exit easier than it would be for, say, the Netherlands or France. There would be no need to switch currencies or to redenominate debts from euros into sterling. The Bank of England would set interest rates, as it does now.

But that does not mean that the divorce would be easy and quick. Britain’s trading relationship with its former EU partners would be central to the negotiations that would follow a yes vote. At present, around 30% of the UK’s gross domestic product is exported in the form of goods and services. Of that, around 45% goes to the EU. As a result, Britain exports roughly 14% of its GDP to the EU.

The size and complexity of Britain’s business links with Europe mean that discussions would take place about what sort of trade access there would be after withdrawal. Optimists say Britain’s hefty trade deficit with the rest of the EU might help these discussions. Germany, for example, exports more to Britain than it imports. The manufacturers of Bavaria and the Ruhr would want an agreement that guaranteed reciprocal market access.

In reality, the argument might be a bit more complicated. The Open Europe thinktank says a UK exit is likely to produce “an emotional response” from other EU countries, in which regret will be mixed with anger. Europe’s willingness to cut Britain a deal on trade in goods may not be matched with the same sort of enthusiasm for a deal on services, where the UK runs a surplus with the rest of Europe. Germany and France have long coveted some of the financial services business that currently goes on in the City, and may adopt a tough approach.

Those who take a more pessimistic view about what life would be like outside the EU say none of the alternative models are attractive.

Norway is not a member of the EU but is a member of the European Economic Area, which means it is part of the European single market. But access comes at a price: Norway has to accept EU laws and regulations without having a say in how they are made.

Switzerland provides an alternative model. It is neither a member of the EU nor the EEA, but has negotiated agreements with Brussels that give it tariff-free access to the single market for its exports of goods. Exports of services, including financial services, are not covered. Both the Swiss and the Norwegians make contributions to the EU budget.

A truly clean break with the EU involves the so-called WTO-only option. The World Trade Organisation forbids member states from discriminatory trade practices, and this would provide Britain with the same access to the EU as, say, China or the US. But the WTO-only option would not cover financial services and would result in a 10% tariff on UK car exports to Europe. Toyota and Nissan, which set up plants in the UK in order to access the world’s biggest market, are worried by this prospect. Inward investment could be threatened, although the impact of being outside the EU would be negated if foreign companies still believed Britain was a good place to do business or if the Bank of England took action to boost growth.

The argument about inward investment highlights three key issues about the in-out debate. Firstly, life would go on in some shape or form. Secondly, things would probably neither be as good nor as bad as the ultras on either side predict. Finally, the issues are so complex that voters may go with their gut instincts – whether Britain should control its own destiny or be part of a family of European nations – rather than rely on a narrow cost-benefit analysis. LE

Identity crisis: Mark Rylance as Johnny ‘Rooster’ Byron in Jez Butterworth’s play Jerusalem. Photograph: Geraint Lewis/Rex Features

Culture: At its worst, our national identity could become parochial and inward-looking



If Britain left the EU, it would necessarily mean that more than 50% of the population had bought into the vision of a rightwing and isolationist government. That would in itself have huge cultural ramifications.

Some of these consequences would be practical. First, British artistic life is to a great degree predicated on its European links. Many of our most treasured artforms are intrinsically international and European: German conductors; Italian singers; Romanian ballerinas; co-productions between opera houses in Spain and London; exhibitions organised jointly between Paris and Edinburgh. The ease of movement of people, objects and projects between the EU and Britain would be entirely dependent on whatever provision this notional rightwing, isolationist government might make. Cultural traffic between Britain and the rump EU might be totally unaffected – or not. According to Alex Beard, chief executive of the Royal Opera House, “Anything that made it more difficult to trade with the EU – trade tariffs, immigration limits and visas and so on – would damage our operation. The majority of our co-production partners are European, as is a significant minority of our workforce at all levels.”

Second, European financial support has an important, if comparatively small, impact on British art. For example, the EU’s Media Programme put funding into films such as The King’s Speech and This is England; in 2011, £5.3m was spent on helping UK films, such as Ken Loach’s The Angel’s Share, gain release in Europe. The EU also gives significant support to literary translation (£2.8m this year). Through other funding streams, projects such as the Royal Opera House’s training and rehearsal centre in Thurrock, Kent – a significant intervention in the local economy and culture – would not have got off the ground.

However, such considerations could well be minor compared with the overarching effects of the kind of severe change in the cultural and political weather that would come with exiting Europe – the EU being, in its bones, an expression of openness (however inchoate and ungraspable) to the Europe beyond our shores.

Identifying ourselves as European means being part of an artery connecting us not just to Shakespeare and Elgar but to Beethoven, Manet, Cervantes and Aeschylus. The big question is what kind of national identity would assert itself if we went it alone. At worst, this would be something unattractively “little British”, parochial and inward-looking. Cultural life would necessarily reflect political culture, as it always does, however subtly. Even though English arts funding operates at arm’s length from government, government policy still sets the direction of travel. If New Labour’s theme for the arts was (in a word) diversity and the coalition’s is philanthropy, who knows what a Ukip/Conservative-flavoured arts policy would consist of, if anything. Arts in the devolved nations would be insulated from any direct results of cultural policy change in Westminster, though they might find themselves negotiating strengthened nationalism in their own polities. On the other hand, minorities such as Welsh and Gaelic speakers might not find such a happy home within solitary Britain than as part of a framework of European linguistic and cultural diversity. An isolationist rightwing government would be extremely unlikely to be pro-BBC – our single largest cultural organisation responsible for sustaining a vast amount of our musical and dramatic culture.

What about artists actually making work? The playwright David Greig, as a campaigner for the yes movement in the Scottish referendum, has spent much time pondering nationhood and unions in recent years. “A bit of me is sceptical that it would mean the world would fall in,” he says. “But it would just feel embarrassing – generally grim and dispiriting culturally. Clearly no one would be forbidding artists from collaborating with, say, a Belgian artist. But it would feel like such a backwards step.”

Who knows what artistic work would be made in such a climate: would British artists from pop musicians to playwrights become a kind of hypercreative internal resistance as they were during the early Thatcher years? There might be all kinds of creative soulsearching about nationhood, and perhaps specifically about English nationhood (one thinks of Jez Butterworth’s 2009 play Jerusalem – “an enormously good play that dared to talk about Englishness”, in Greig’s words; or Jeremy Deller’s English Magic, his pointedly titled exhibition for the British pavilion at the Venice Biennale of 2013).

In short, a withdrawal from Europe would be a bleak move in cultural terms – but, in the end, it would be our artists who would help us understand what had brought us to such a pass. CH