Why Britain should remain European

These are complex issues, but the June 2014 report by the Centre for European Reform (CER) provides a sensible guide on the first two questions. And now the Bank of England (BoE) has weighed in clearly on the third. In economic terms, the facts favor staying in the EU.

Heated and relatively technical debates of this nature require one to decide which experts to trust. The commission that prepared the CER report comprised sensible British and European economic thinkers and former policymakers with no illusions about how the EU really works. Likewise, the BoE’s Financial Policy Committee was designed after the 2008 crisis to speak truth to authority on where systemic risks really lurk – and what to do about them.

The CER report is strongest on the real (nonfinancial) economic issues. The most contentious point here is whether the British economy is held back in some way by red tape imposed by Brussels or by European treaty obligations.

It is very hard to find any such stifling effect in the data. The CER points out that product- and labor-market regulation in the UK are closer to that of the United States than to Western Europe, and the same broad pattern emerges from the OECD’s assessment of barriers to entrepreneurship.

The CER’s assessment is confirmed by the latest available information from the World Bank’s 2016 Doing Business indicators, which have the advantage of covering almost all countries in the world. These indicators are not perfect, but they do get at red-tape-related issues. Britain is ranked sixth in the world – one place above the United States and behind only some very pro-business countries, such as Singapore, Hong Kong, and New Zealand.

...On the issue of trade, the assessment is even more straightforward. At the heart of European integration is the idea that barriers to trade – including tariffs and other impediments – can be and have been reduced. In the CER’s view, EU membership has increased UK trade in goods with other member states by more than 50%.

Some other economic issues that have come up in the Brexit debate are either minor or red herrings. As the CER report shows, immigration from EU member states, for example, benefits the UK economy, because it brings in more young people who pay taxes. And the post-Brexit reduction in UK government spending would most likely be minor.

To read the CER's report please click here.