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'We really need to think hard about the benefits of remaining in the EU'

By Angela McGowan

Published 25/08/2015

An ‘in or out’ vote is on the horizon
An ‘in or out’ vote is on the horizon

Without doubt when things settle down after the UK's Labour Party leadership contest, the Brexit debate will start to ramp up again. With an 'In or Out' referendum looming on the horizon I cannot help but feel that there is a need for a bit more public information on this topic.

A Danske Bank poll carried out at the beginning of this summer found that the majority of people (58%) in Northern Ireland were in favour of remaining in the EU and a small proportion of people wanted to exit (16%). However, a surprisingly high proportion of respondents (26%) simply did not know which way they would vote when this referendum eventually takes place.

The Danske Bank survey of 1,000 people across Northern Ireland found that in particular nearly one third of women opted for the 'don't know' response when asked the EU membership question, relative to only 19% of men.

When broken down by age group the survey found that younger people were much more likely than older people to declare their uncertainty - with a full 36% of people in the 16-24 age group opting for 'don't know' as their answer.

In fairness to women and young people, the EU membership question is not that straightforward. There are both advantages and disadvantages to membership, but without the benefit of age-related wisdom or perhaps regular contact with the business community, the benefits may not be that obvious. The problems of membership have, on the other hand, been much more prominent in recent years with the Greek crisis and migrant crisis still making news headlines.

Economists tend to be a little biased on this issue and the idea of free trade and access to a bigger market will generally appeal to the majority of people from the business community. However, for many people across Northern Ireland 'trade' is not a priority for them, so perhaps it is time to do a quick recap of both the advantages and the disadvantages to help the undecided in their deliberations.

The main benefits are very much in line with the original objectives of the union: political stability in Europe; free trade; access to bigger markets; and free movement of labour. Quite simply, increased trade is correlated with higher levels of economic growth. Indeed, it is estimated that EU membership has increased the UK's GDP per head by around 25% since joining.

Eight studies by Whitehall published in 2014 reported that Britain's EU membership has bolstered trade, created wealth and brought benefits in areas as diverse as legal co-operation and the growth of English football's Premier League. The Financial Times reported last year that a ninth EU report was also produced by the Coalition government which examined specifically the free movement of people within the EU. However, this report was allegedly shelved because it failed to provide sufficient evidence to support Home Secretary Theresa May's case for tighter controls on migration.

Other perceived benefits of membership are related to employees' rights across Northern Ireland. The EU has given protection to workers in the form of the Working Time Directive and under the Social Protocol local workers have been entitled to consultation about major changes in the their place of work and parental leave.

From subsidies to infrastructure, Northern Ireland has done extremely well from EU financial support over the years. Northern Ireland benefited hugely from its 'Objective One' status between 1989 and 2006 and more recent funding programmes have included: the Structural Funds, the NI Rural Development Programme, the European Social Fund, the Regional Competitiveness ERDF programme, the European Fisheries Fund, as well as cross-border programmes such as the INTERREG and Peace programmes. The Common Agricultural Policy is currently worth about £317m a year in Northern Ireland and Structural Funds are worth a further £54m. Border regions in particular in Northern Ireland have enjoyed increased trade over recent years because of EU membership, which perhaps explains why in the Danske Bank survey we found those sub-regions in Northern Ireland that shared a border with the Republic of Ireland were much more supportive of EU membership.

On the downside, over-regulation is regarded as one of the major disadvantages of being an EU member, and smaller companies in particular find the red-tape burden to be particularly onerous. Indeed, while 58% of people in Danske's survey expressed a desire to remain in the EU, 14% of people said they would like see some renegotiation around the terms and conditions of membership.

The great recession did Europe's reputation no favours either. The Greek bailout demonstrated that democratic boundaries can be pushed and highlighted the fact that debtor countries can be left powerless.

Expansion and growing membership is also considered by some to be a disadvantage. Net beneficiaries in the original union typically find themselves becoming net contributors as poorer regions join - although eurosceptics often forget that as the EU expands, so too does access to markets and skills.

Finally, the migrant crisis that has erupted across Europe this year has done the EU no favours. Despite the 33,000 bureaucrats sitting in Brussels, a workable migration policy that is agreeable to all EU members has not yet been found and a humanitarian crisis has emerged, with more than 3,000 lives lost already this year. As the migrant crisis deepens people across the UK may be left with a sour taste in their mouths that influences their decisions when it comes to the EU referendum.

In summary, Northern Ireland has done very well to date from EU membership, probably better than the rest of the UK. Only time will tell how people in Northern Ireland and indeed right across the UK will actually vote on the day. In the meantime, as the referendum approaches, more information and more people participating in the debate should be welcomed.

Angela McGowan is chief economist of the Danske Bank.

In next week's Economy Watch, we hear from PwC's Esmond Birnie

Belfast Telegraph

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