Brexit: Will the UK Leave the EU?

 

Britain joined a precursor of the European Union—a 28-nation economic and political partnership—in the 1970s. Although it doesn’t use the EU’s common currency, the euro, Britain must follow rules made by the EU parliament.

On June 23, British citizens will vote on whether to stay in the EU or to leave it. This hypothetical departure has been dubbed the Brexit.

Those who want Britain to leave believe that EU regulations harm U.K. businesses and that Britain should take back control of its borders to reduce the number of incoming migrants looking for work.

Others believe Britain benefits from the ease of selling goods and services to the huge EU market, that young migrant workers help offset Britain’s aging demographics, and that membership is good for national security.

In February, Britain negotiated changes to its EU membership—including additional immigration controls, safeguards against new regulations, and exclusion from Eurozone financial bailouts. These would take effect if Britain’s voters approve staying in the EU.

Membership in the EU has helped Britain become a financial hub for Europe and a major global financial services provider, a position that could be eroded if it leaves. EU membership also benefits British exports and helps preserve the current balance of military power within Europe.

Global markets were volatile in the months leading up to the referendum on Scottish independence from the United Kingdom in September 2014. Volatility is likely to be elevated ahead of the June 23 referendum as well.

British voters have tended to be pragmatic and favor the core economic interests of their country. The British may resent bailed-out banks and bureaucrats in Brussels, but we believe economic considerations will tilt the vote toward staying in the EU.

Schwab recommends that investors take a long-term approach and not overreact to market volatility or headlines about a potential Brexit. Call 800-355-2162 to discuss long-term planning and risk management, or find a Schwab Financial Consultant near you.

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The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

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