If the British people vote for Brexit, there will be all sorts of complications: never before has a country left the EU. It is really much easier said than done. The UK would need to enter into negotiations (probably very lengthy ones) on a new agreement that would regulate relations between it and the EU. One wonders how tough the stance adopted by the negotiators on the EU side would be. So the prospect of a Brexit could have political implications that would be more serious than the economic ones.

However, there needs to be a serious analysis of the economic impact on both our country and the EU as a whole if the UK were to leave the EU – and if the UK were to stay in the EU under the new conditions. Given that one is speaking about hypothetical situations, such an assessment is always difficult. Moreover, it is easier to identify the costs of either decision but far more difficult to identify benefits.

If Britain were to leave the EU, one would need to understand what would happen to the millions of persons from the other EU member states working in the UK. Technically they would need employment permits. What sort of employment permits would the UK government be willing to grant? Can the UK economy do without such workers?

The aspiration has always been to create a union of people and it must remain so

On the other hand, one can also imagine the impact on the economy of the countries these workers come from, if they were forced to leave the UK. Today these workers send remittances to their country of origin. If they were forced to return, they would become a very heavy burden on their country’s finances.

If they choose to relocate to another member state, which country/ies would they go to? Could other member states absorb these workers? And what if they ended up living on social benefits, as they have done in the UK? If we take our country as an example, I believe that given our size and given the significant number of non-Maltese persons already working in Malta, our absorptive capacity has reached its limit. These are the questions that arise from just one aspect – employment.

Another aspect would be the funding of the EU. The UK had renegotiated its contribution to the EU budget during the premiership of Margaret Thatcher, but remained a net contributor to the EU. If the British decide to leave the UK, how would that impact the EU budget?

Will the European Social Fund, the European Regional Development Fund and similar funds have to reduce their transfers to the other member states? In other words, would there be less money flowing from the EU to the member states? How would the additional financial burden for the EU member states be shared? How would Malta be affected in such a situation?

If the British people were to vote to leave the EU, would there be increased pressure to change the taxation rules in the EU? Will there be a stronger drive to achieve tax harmonisation, that is, having the same taxation rules across the EU? If so, then the impact on Malta may be a very negative one. We would need to introduce VAT on food items, which so far are tax exempt thanks to a derogation we had obtained on entry into the EU. Our financial services sector would lose a great deal of its attraction.

There are other issues to consider such as the impact on exports and imports and the impact on the tourism sector. A British exit from the EU would impact these as well.

And the list is not exhaustive. I have also not mentioned anything about the impact of the UK staying in under the new conditions.

One hopes that while the British mull their country’s way forward, there are studies being undertaken on the impact of both a Brexit decision and a “stay in” decision. Either way, the EU governments need to keep in mind that the aspiration has always been to create a union of people, and it must remain so.