New Delhi: Britain is at a crossroads today and it is the country which will decide what path it takes for its future. Pegged as historic and unprecedented, Britain today votes for the historic referendum to decide whether it leaves or remains in the European Union. Once the polling session ends, it will give two totals of ‘Leave’ or ‘Remain’.
If voted in favour, Britain will be the first country to exit the European Union since its inception around six decades ago. Analysts consider this to be the most important global event of this year as the number of voters is expected to be around 46.5 million – more than 46.4 million for the parliamentary general elections in 2015.
The opinion polls are already reflecting a very close contest between the side in favour to 'remain' and those seeking Britain's exit - termed as 'Brexit'.
Why the referendum
The referendum to decide ‘Leave’ or ‘Remain’ follows British Prime Minister David Cameron's promise to organise one if he won the 2015 parliamentary general elections.
This was a result of the growing number of calls from Cameron’s own Conservative MPs and the UK Independence Party (UKIP) to hold a referendum as Britain had not had a say since 1975 – the year when Britain voted to stay in the union in a referendum.
"It is time for the British people to have their say. It is time to settle this European question in British politics," Cameron told BBC.
In 1975, the then Prime Minister Harold Wilson had called for a referendum in which 67 per cent of those voted had preferred to ‘Remain’.
What is European Union?
In 1957, after World War II, Belgium France, Italy, Luxembourg, Netherlands and West Germany signed the Treaty of Rome that led to the formation of the European Economic Committee (EEC) which aimed at bringing economic integration among its member states.
Later, when the European Union was formed in 1993, the EEC was renamed as European Community which in 2009 was merged into the EU’s wider framework.
The European Union, today, is a gigantic transnational economic and political partnership of 28 European countries that was formed to avoid disputes and wars between the European countries which trade together. Based on the idea of a “single market”, the EU allows goods and people to move around freely, treating the member states as one country.
What began as a purely economic union slowly evolved into an organisation spanning policy areas, from climate, environment and health to external relations and security, justice and migration. A name change from the European Economic Community (EEC) to the European Union (EU) in 1993 reflected this.
Though Britain is currently a part of the European Union, it continues to use the Pound as its currency. On the other hand, most EU nations have moved to Euro.
The British exit will impact exports to Europe and also lead to a devaluation of the euro and the pound, experts and analysts have said.
Who wants the UK to 'leave' and why?
The UK Independence Party, which won the last European elections, campaigns for Britain’s exit from the European Union. Also, about half of the Conservative MPs, including five cabinet ministers, several Labour MPs and the DUP also want Britain to leave the EU.
Former London Mayor Boris Johnson, who is from Cameron’s Conservative Party, also supports the ‘Leave’ campaign
They believe that the EU has changed a lot since the time it was formed. They believe the union imposes too many rules on business and charges a hefty amount every year as membership fees giving little in return. Moreover, they want Britain to take full control of its borders and restrict the number of immigrants coming here to live or work.
Who wants the UK to stay with the EU and why?
Prime Minister David Cameron, along with his sixteen cabinet members wants Britain to stay in the EU. Also the Labour Party, Lib Dems, Plaid Cymru and SNP back the UK staying in. US President Barack Obama and other EU members like France and Germany also want Britain to stay in the European Union.
They assert that staying in the EU makes it easier to sell things to other member nations. Moreover, they think that the flow of immigrants boosts the economic growth of the nation. They also believe that leaving the EU will also damage the image of Britain globally.
How will the referendum affect the EU?
Most of the EU’s money comes from its 28 members, UK being the largest contributors among them.
The money is spent for various functions like the administration of the EU in its member countries, social activities like education, culture, preserving and managing natural resources, granting aid to poor European countries and helping small businesses.
A 'Brexit' will shake the European Union by ripping away its second-largest economy, one of its top two military powers and by far its richest financial centre.
Moreover, UK’s exit from the European Union could also give rise to more nations contemplating exit from the Union.
It is important to mention here that Greece had held a referendum last year in which citizens had rejected EU’s bailout norms.
Brexit: ‘Boon’ or ‘Bane’ for India
While India has refrained from commenting on the historic referendum, the result will affect the nation’s economy to a great extent.
Firstly, the UK has always been a premier investment destination as it provides easy access to European market that accounts for more than 500 million people. India's investments in the UK zoomed nearly 65 per cent in 2015, establishing it as the third largest source of foreign direct investment (FDI) into Britain after the US and France.
'India meets Britain 2016: Tracking the UK's top Indian companies', published by Grant Thornton, said the combined turnover of these businesses has increased by 4 billion pounds last year, up from Rs 2 lakh crore in 2014 to Rs 2.7 lakh crore in 2015.
There are 800 Indian companies in the UK – more than the total number of companies in the rest of Europe.
Brexit may affect Indian companies will to invest in the UK as they will no longer have border-free access to the European market. This means that they will have to find an alternative to London as their entry point into Europe to enjoy ease of trade.
Secondly, Britain’s exit from the EU will certainly depreciate the value of euro/pound resulting in a sluggish exports environment. This will result in an increased risk for Indian businesses.
Jaguar Land Rover, the largest subsidiary of Tata Motors which is UK’s largest automotive manufacturing business, has reportedly estimated its annual profit could be cut by Rs 10,000 crore by 2020 in the event of Britain’s exit from the European Union (EU) in tomorrow’s referendum.
The luxury car firm, which has witnessed a major turnaround in its fortunes under the Tata Group’s charge over the last few years, is believed to have conducted an internal analysis of the likely impact of Brexit, The Telegraph said.
The analysis expects the 1 billion pound-hit to come from a 10 per cent levy on vehicles being exported to Europe and 4 per cent on imports of components for the production of vehicles, the newspaper said.
Thirdly, Brexit will also affect the welfare of nearly three million Indian-origin UK citizens and the large population of Indians who visit Britain as tourists, professionals, students, professionals and relatives. Many of them have invested in lands and businesses in UK. Britain’s exit from the EU will lead to depreciation in the value of pound/euro, which in turn will have an adverse effect on their investments.
Fourthly, EU is the largest trade partner of India, comprising 13 per cent of its trade. This is ahead of China (9.6 per cent) and UK (8.5 per cent). This is will go down after a Brexit as Britain is its major financial centre.
On the other hand, analysts believe that if Britain exits the EU, it would not want to lose the capital coming in from India. Therefore, Britain is expected to attract Indian companies to invest there by providing bigger incentives, lesser regulation and other financial incentives.
Moreover, a Brexit will force India to build trade negotiations with countries like Germany, France and Netherlands in order to gain access to the large European markets, which will be fruitful in the long run.
Also, if Britain exits the European Union, it will look for new trading partners along with a steady inflow of talented labour. A major reason why it will approach India is its large English-speaking population.
Britain is also a premier destination for Indian students who want to study abroad. Currently, as per the regulations of the EU, British universities have to offer subsidized rates for citizens of the UK and member European nations. A Brexit will allow those universities to offers scholarships and funds for students from other countries. As a result, more Indian students will have the opportunity to get scholarships for studying in the UK.
All eyes on today's vote
The verdict on whether Britain will take an exit or remain in the European Union will be decided today. World leaders and politicians across the world are waiting with worried about Britian’s possible exit, and India, for which UK is the third largest source of FDI, is no exception. So, the decision will be equally important for Indian economy.
While the government, on its part, has said that the Indian economy and the forex reserves are enough to tide over any outcome, one cant deny that the actual impact of a possible exit will only be clear after the actual decision. While economically, we may have braced for any impact, the affect on Indians, particularly those living in the UK, could be sizable.
