One of the prime arguments from Eurosceptics is that a Brexit — Britain leaving the European Union — will save the UK billions of pounds in payments to the 28 nation bloc.
Sure, it would save the UK an estimated £10 billion a year if Britain left the EU right now, but as Simon Wells and his team at HSBC highlighted in a note on Monday — this is just a drop in the ocean.
And even if there was a Brexit, it doesn’t necessarily mean that Britain will stop contributing to the EU altogether.
Firstly, HSBC analysts point out that the amount Britain contributes to the EU in isolation may look a lot to Eurosceptics, but when you compare it to everything else the UK spends money on — it’s really not very much (emphasis ours):
Some might argue that this impact could be offset by the savings the UK would make from its contribution to the EU budget.
We would disagree.
Table 6 shows the UK’s financial transactions with the EU: the net contribution is forecast to rise to GBP11bn in the current fiscal year, but then drop back to under GBP10bn a year for the remainder of the forecast period. This may seem an eye watering amount to some, but it compares with total managed expenditure of GBP755bn (in 2015/16), rising to GBP857bn by 2020/21.
So this saving is not a game changer for the UK’s public finances, even without factoring in the benefits it may or may not bring. Some of the spending – on farming subsidies, for example – might end up being allocated anyway, just by the UK rather than the EU.
Here is the chart HSBC cites:
But the killer line from Wells and his team is this:
And if the UK were to leave the EU but strike a deal to maintain access to the single market, it might still have to make a contribution, as Norway does.
In other words, even if Eurosceptics won the vote and Britain had to negotiate with the EU on how it is breaking away, it may still mean that the UK will still pay some cash towards the bloc if it wants to have access to the EU’s market.