What has EU membership meant for the UK? Could the UK economy withstand a deterioration in its link to the European economy? Have existing EU policies that some argue disproportionately favor founding EU members - read France, Germany, and Italy - been more harmful than helpful to the UK economy? It's not only the citizens and government of the UK seeking answers to these questions and many more like them but trading partners, business competitors and investors, and others with economic, political, and even military objectives in operating in a world in which the UK's status is partly defined by its EU membership.
The UK today represents 8 percent of total European goods exports and 17 percent of total services exports. Far from inconsequential. The UK also happens to be a large importer of goods from the EU. Underlying these statistics is a UK services economy burgeoning by comparison to any other:
The UK services sector generates about 80 percent of GDP and 83 percent of total employment.
Foreign trade in services is the only factor that currently contributes positively to the current account balance, helping to ease chronic deficits. The 2014 current account balance reached a record -5.5 percent of GDP, the largest deficit since 1960.
So the question remains - and, according to Prime Minister Cameron we only need to wait until yearend 2017 at the latest for an answer - whether the voters of the UK, if given the opportunity, believe that their economy and way of life favors a vote to remain in the EU. The prime minister's negotiations with the EU to improve the terms of his country's membership - expected demands cover topics ranging from advancement of the single market in services, digital media and energy markets, to reductions in EU regulatory powers and benefits revisions for new migrants - will almost certainly dominate the terms and timing of a referendum and the likely outcome. Yet, fans of data and statistics will be assessing whether a vote in favor of remaining in the EU will improve the probability of greater economic stability.
- According to IMF baseline projections, if current conditions persist, the UK will be able to reduce deficit of current account to 3.3 percent GDP by 2020. Any deterioration in services trade could undermine the UK's financial system stability, particularly in regard to the sustainability of the country's government debt.
- The UK's strong financial sector allows it to maintain government debt at average interest rates as low as about 2 percent.
- A EU exit could erode London's status as a leading Eureopan financial center as Eurozone transactions migrate to financial centers in Frankfurt and Luxembourg.
Sources: World Development Indicators (WDI), August 2015, IMF World Economic Outlook (WEO), April 2015, OECD - Quarterly National Accounts, May 2015, Annual Macro-Economic Database, July 2015, WTO statistical data sets, 1948-2014, OECD National Accounts at a Glance, 2015, The Global Financial Centres Index, March 2015 (GFCI 17), Services Trade Restrictiveness Index, Sustainable Governance Indicators, 2014
Services & Trade Financial Sector Strength "Brexit" vs. "Grexit"