Mr. Fabian Zuleeg:

I thank the joint committee for inviting me. The European Policy Centre, EPC, which I represent is an independent multi-stakeholder think tank which is pro-European Union and supports the European integration process, although it has no particular political affiliation. It will not come as a surprise that my general view on Brexit is that it would be detrimental to the United Kingdom and the rest of the European Union. The costs would be economic and political and the balance of costs would fall much more strongly on the United Kingdom than on the rest of the European Union. While the European Union could survive a Brexit, it would be costly, particularly for the United Kingdom. A Brexit is a significant probability.

The referendum will happen at some point in time. It is a question of timing rather than whether it happens at all. It might not happen after the general election, depending on the outcome, but we already have a commitment on the table from the Labour Party that if there is another significant step in European integration, there would be a referendum in the United Kingdom. The two major parties have committed to a referendum at some point in time and I believe we will see some further steps in European integration in the coming years, including potentially treaty changes.

It is difficult in this kind of session to be very precise about the impact of Brexit because there are a number of uncertainties, not least the question of where Britain would stand after a Brexit, what would be the access to the Single Market, the implications for freedom of movement, etc. We cannot say what those would be at the moment because they would depend on an exit negotiation between the UK and the rest of the European Union.

If a Brexit happens, there is a chance that it will have a contagious effect on other countries but I would think that contagion would be relatively small. I do not see that there are other countries where it is likely that there might be an exit, not least because we are generally talking about smaller countries which would find it very difficult to survive on their own outside the EU. What we would also see in the case of a Brexit is significant pressure within the UK. The question of what would happen to Scotland and Northern Ireland is also relevant at EU level, not least because if Scotland became independent, it would apply immediately to come into the EU. Brexit and the future of the UK, therefore, are directly linked.

On the question of whether there will be more or less support for European integration with a Brexit, there can be two scenarios in that regard. The optimistic scenario is where the EU, without the sometimes awkward partner of the UK, manages to define a common vision, to move forward much more decisively and to be able to make progress on the many construction sites we have at the moment. There is also a more pessimistic scenario that we will go down the route of euro sclerosis, with very little change and progress. This is a personal view but my tendency would be more towards the pessimistic scenario because regardless of whether the UK is within the EU or outside, I do not believe we have a consensus about the way forward in the EU. In the past it has been very easy for member states at times to hide behind the attitude of the EU, be it on a number of different issues such as budget, further market integration or liberalisation. A number of countries have been very happy to have the UK in front but when the UK is no longer part of the EU, it still does not remove the fundamental conflict between different political directions. There would be a number of direct impacts of a Brexit on Ireland, many of which have been mentioned already.

On the EU budget, clearly the UK is still a net payer into the budget so an exit of the UK would immediately mean we would have some form of renegotiation of the budget. This opens up a huge political can of worms because as I said, there is no real agreement on the way forward. A number of countries would see this as an opportunity to reduce the overall size of the budget. A number of countries would believe the money which is then missing from the budget should be compensated by the existing net payers. There would be also a great deal of political conflict within the EU.

The question on what will happen to trade and investment is an interesting one. I generally would agree that we will have a negative impact but there is also a specific question for Ireland. Ireland might well become a more attractive place with an exit of the UK, particularly for foreign direct investment. Having a place in the Single Market which is English speaking and also has the euro could well be attractive for a number of outside investors.

I was also asked about social policy direction. In looking at social policy we must examine the question of the process we would go through to get to the Brexit stage because what we have on the table, at least at the moment, is the expectation that there would be some kind of reform package. That reform package would be heavily weighted in the interest of the UK and my expectation would be that some social policy changes would be in such a reform package, which would be offered to the British people to try to convince them to stay within the EU.

Overall, what we would see is that in some of the traditional areas of the UK interest would lose momentum. They have already been mentioned, namely, trade, the Single Market, the transatlantic trade and investment partnership, TTIP, and such areas. The eurozone would be strengthened but, overall, we are in a position where the EU is not moving forward decisively in any area. I am not saying it would be a significant change to the situation we are in. What we have seen with the eurozone crisis is a situation where most member states only want to do what is absolutely necessary at the European level and are not very interested in driving forward integration in any area, regardless of the countries that might have an interest.

In terms of the decision-making process, it is also important to consider the question of whether the UK is an effective player currently in terms of advancing its interest. What we have seen in recent years is a significant loss of influence of the UK. To put it simply, if a country is no longer willing to make compromises at the European level it is very difficult for it to get its national interest to be heard. A country cannot get its national interest through by putting a gun to the head and asking everyone to jump in the direction it wants to go.

Brexit is seen far too much as a domestic issue, a British issue. For me, Brexit is a European issue. It is something we should be thinking about far more at the European level. We should be making contingency plans for a possible referendum and the kind of reform package we might be wiling to put on the table. Such a reform package should be in the interest of the 28 member states, not in the interest of one member state. We should also do contingency planning for a potential Brexit and decide the kind of deal that would be on the table for a UK outside the European Union and the kind of future of differentiated integration we are envisaging for the whole of the European Union.

We should not forget that we are not only talking about the UK but a number of countries in the neighbourhood, the friends and neighbours we have around us, and where we have a pressing need to redefine our relationship. How far can we have them integrated into the EU, even if they are outside the EU? What does this imply in terms of market access and the free movement provisions for people? We are playing some of these discussions through with Switzerland.

These are the kinds of discussions and considerations we should be looking at to a far greater extent in respect of Brexit. I will stop there because I do not wish to go on for too long but I am happy to return to any of these issues.