The incessant scaremongering of the British public by the Britain Stronger In campaign and its Project Fear has been found to be completely baseless and false by Moody’s, the credit agency.
Moody’s acknowledge that there would be no trade barriers or legal change the day after Britain votes to leave the EU. There would not be profound uncertainty, as even the head of the IN campaign has admitted.
Moody’s acknowledges in its report that ‘No tariffs or treaties would change on 24 June, in the event of a vote to leave’.
Moody’s points out that ‘We expect that, over time, the UK and EU would come to an arrangement to preserve most … of the current trading relationships, thereby limiting the impact on UK exporters and supply chains of UK importers.’
The Chairman of the BSE campaign, Lord Rose of Monewden, has admitted: ‘Nothing is going to happen if we come out of Europe … There will be absolutely no change … It’s not going to be a step change or somebody’s going to turn the lights out and we’re all suddenly going to find that we can’t go to France, it’s going to be a gentle process’.
Moody’s make clear that the UK’s credit rating is not at threat.
‘We would expect few, if any, near-term rating changes in light of the timeline for a Brexit to take effect.’
Moody’s acknowledge that it is highly likely that the UK would strike a free trade agreement with the EU.
‘Given the substantial trade links that exist, there would be strong incentives for both the UK and EU to minimise the effect’.
‘Given the interlinkage of their economies, both the EU and the UK government would have a strong incentive to minimise the economic impact of a Brexit. We think that over time the UK would reach some new bilateral trade agreements with the EU’.
‘Companies based in France or Germany that export to the UK could suffer if trade restrictions were put in place either by the UK or the EU; this is a key reason why we expect that negotiations would eventually lead to new agreement(s) to significantly mitigate the potential impact of Brexit’.
Moody’s acknowledge that talk of London ceasing to be a global financial centre is scaremongering.
‘We note that remaining outside the euro area did not significantly damage London’s status as a financial centre, and that factors other than a Brexit would also be key determinants for investment.’
Moody’s also note that ‘HSBC’s decision to maintain its headquarters in London, even without knowing the outcome of the referendum, indicates that large banks appreciate the country’s regulatory framework and legal system and the large pool of highly skilled, international employees.’
Moody’s acknowledge the impact on key sectors would be limited.
Car manufacturers: ‘ we would expect alternative trade agreements to be put in place… However, both the EU and the UK would have an incentive to retain the free flow of trade in the auto sector due to the overall volume of trade… The share of UK motor vehicle exports to EU countries by value has fallen over the past decade to 40% in 2014 from over 70% in 2000.’
Aerospace: ‘the importance that the UK plays in the EU’s aerospace strategy and competitiveness would likely shield the sector from any major repercussions of a Brexit over time’.
Ports: ‘we believe that any negative impact would be mitigated as the UK either adopts alternative trade agreements with the EU or manages to diversify its trade to other regions’.
Oil & gas: ‘the effect of a Brexit on the overall credit profiles of rated UK-based oil and gas companies… would be negligible as they are both global integrated oil and gas companies with substantial crude, natural gas and oil product trade flows outside the EU.’
Energy companies: ‘final impact could be fairly mild… Rated UK electricity and gas networks generate virtually all their sales within the UK and the regulatory framework is almost entirely domestic.’
Telecommunications: ‘In our view, the regulatory framework would be broadly similar, with the same objectives of stimulating investment and ensuring healthy competition.’
Air travel: ‘given the significance of Heathrow airport, and the UK generally, for air travel within and outside the EU, it is highly likely that new agreements would, over time, be put in place, or that the UK would remain party to existing agreements, so as to sustain existing air traffic… we expect the overall impact of a Brexit would be low as the majority of travel would persist, in particular intercontinental travel.’
Patents: ‘However, the EPO [European Patent Organisation] currently includes non-EU countries as members, such that the UK could also become a non-EU member.’
Not all of Moody’s claims are right: the notion that there will be weaker economic growth if we Vote Leave is not even borne out by the IN campaign’s economic analysis.
Moody’s claims that there would be ‘modestly weaker economic growth in the UK over the medium term’. This assumption is not borne out by the evidence.
CBI analysis, conducted by PwC in March, found that economic growth will continue in the short term and that, in the medium term economic growth will be stronger outside the EU compared to remaining inside.
The same study also found that there would be an additional 3 million jobs if we Vote Leave.
Moody’s also state that a vote to leave the EU could lead to ‘a substantial disruption in… capital flows’.
Article 63 of the Treaty on the Functioning of the European Union (which was introduced by the Maastricht Treaty and has been in force since 1994) provides that ‘all restrictions on payments between Member States and third countries shall be prohibited’.