United States

Stay or leave? A "Brexit" update

INSIGHT ARTICLE  | 

The United Kingdom (UK) referendum on European Union (EU) membership, commonly referred to as the British exit or “Brexit," will be held June 23. Voters will decide whether Britain should stay in the EU or exit the bloc of nations. At this time, British voters appear to be split between the “remain in the EU” and “leave the EU” campaigns. However, opinion polls show nearly one in five voters remain undecided.

The EU is an economic and political union of 28 member states headquartered in Brussels, Belgium, with its own currency that is used by 19 of its member states. Proponents of remaining in the EU argue membership offers greater economic and national security. Meanwhile, those in favor of leaving argue it would liberate the UK from the hold of EU red tape and political interference and allow businesses to trade more competitively with the rest of the world. The British also want to take back control of the country’s borders. One of the key principles of EU membership is free movement, which allows citizens to work and reside in member countries without a visa.

As it currently stands, UK Prime Minister David Cameron secured a deal in February with fellow EU leaders that redefines the UK’s terms of membership within the bloc. The following reforms were secured in an effort to gain voter support to remain in the EU:

  • Competition and regulation: Reduction of bureaucratic red tape and regulatory burdens to improve competitiveness.
  • Welfare benefits for migrants: Limits on government paid employee benefits to EU migrants during their first four years in the UK following the imposition of an “emergency brake” that can be applied when the UK’s welfare system is “exceptionally” strained from immigration. The deal also allows the UK to reduce child benefit payments to migrant workers.
  • Sovereignty: The Prime Minister’s secured deal would exempt the UK from an “ever closer union of the peoples of Europe.” Thus, giving the UK special status within the EU by ensuring it would never become part of a European super-state or “United States of Europe.”
  • Economic governance: Safeguards protecting non-Euro member states by securing an explicit recognition that the Euro is not the only currency of the EU. The UK could keep the British pound and continue its business trade with the bloc without fear of discrimination for being domiciled in a country that doesn't use the common currency.

As the vote nears, UK markets and the British pound are likely to be volatile and sensitive to news flow. However, it is difficult to estimate the potential impact on the British markets and economy, which is the world’s fifth largest, in the event a Brexit vote is reached. The greatest uncertainty with leaving the EU is that no country has ever done so before, making predicting the potential consequences difficult. 


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Information in this document was prepared by DiMeo Schneider & Associates, L.L.C. and although information in this document has been obtained from sources believed to be reliable, RSM US Wealth Management LLC, DiMeo Schneider & Associates, L.L.C. and their respective affiliates do not guarantee its accuracy, completeness or reliability and are not responsible or liable for any direct, indirect or consequential losses from its use. Any such information may be incomplete or condensed and is subject to change without notice. The Frontier EngineerTM is a registered trademark of DiMeo Schneider & Associates, L.L.C.

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