UK election: The pros and cons of a 'Brexit'

'Brexit' at the center of UK election debate

Back in 1988, Margaret Thatcher was keen to make the U.K. central to Europe's nascent union. But the prime minister was just as eager to remind Britain's neighbors her nation had other options too

"Britain does not dream of some cosy, isolated existence on the fringes of the European Community. Our destiny is in Europe, as part of the Community," she said in one of her most famous speeches. However, she cautioned: "That is not to say that our future lies only in Europe."

A quarter of a century - and five general elections - later, the European Union has become central to the fight to form the next government, with two of the main parties staking their political future on Britain's appetite for a referendum on membership of the bloc.

But what are the pros and cons?

Are we really aware of the legal hurdles to overcome and, above all, who will bear the cost of a so-called British exit -- or Brexit? Conservative leader David Cameron has pledged to give the electorate an "in or out" vote by 2017 if he wins.

Related: UK to businesses: Pay your workers more!

The UK Independence Party, as its name would indicate, wants autonomy even sooner.

The rationale often cited for walking away is that the U.K. is sick of being bullied by Brussels -- the seat of EU power -- and of watching its sovereignty gradually eroded by faceless bureaucrats, preventing the state from setting its own policy on hot topics like immigration and banking regulation.

Skeptics also point to the fact that by choosing not to join the euro currency, the U.K. is often crowded out of the decision making process on key issues that affect the whole of the EU -- and not just the eurozone.

When it comes to economics, there are signs the U.K. could afford to strike out on its own, as long as it is willing to suffer the immediate financial implications.

True, the U.K. enjoys a significant trading relationship with its fellow Europeans, though those ties have been dwindling for some time as Asia and America grab a bigger slice of the country's wares.

Taking in around $220 billion of its goods and services each year, the EU remains the U.K.'s single biggest regional partner for trade. But it now accounts for just half of U.K. exports, five percent less than in 2008.

On the other hand, being part of the EU gives the U.K. significant advantages, helping it avoid tariffs it would otherwise face.

Related: U.K. election: A scary prospect for business

The International Monetary Fund reckons that as part of the club, Britain's trade with the EU is 55% higher than it would otherwise be.

While the numbers can be used to support both sides of the story, what is sure, is that certain parts of the British economy would be hit harder than others.

The Open Europe think tank estimates some 35% of Britain's EU-bound goods could be subject to levies of 4% or more upon exit, with makers of cars, chemicals and food among the industries worst affected.

The financial services sector -- a key contributor to British GDP -- would also suffer disruption with investors potentially put off by the uncertainty a vote on EU membership would create, potentially curbing the hefty flows of foreign direct investment the U.K. has enjoyed for years.

If the U.K. decides it does want to go it alone, figuring out how to do so will be the other significant hurdle to overcome.

The country has several options, none of them particularly appealing.

It could follow the example of Norway and join the European Economic Area (EEA) and the European Free Trade Association (EFTA), but that would mean turning its back on the powerhouses of Germany and France to jump into bed with diminutive states like Iceland and Liechtenstein.

What's more, the U.K. would still have to pay into the EU budget. Norway, for example, contributes 100 euros per person compared with the U.K.'s 180 euros today, according to Open Europe.

Switzerland's model is also a possibility. However, considering it has taken years to strike 100 trade deals with individual EU and EFTA states, that hardly seems practical.

Related: Why Europe matters to Britain

And forming a customs union -- such as Turkey's EU treaty -- would only protect a portion of business with Europe, and wouldn't allow London to provide financial services on equal terms with Frankfurt and Paris.

Perhaps the most simple -- if risky -- strategy could be to shun all of the above and fall back on Britain's membership of the World Trade Organisation as a basis for favorable terms. Doing that would see the country automatically forfeit about 50 EU trade deals at a stroke, surrendering large amounts of bargaining power.

Relationships with crucial allies, like the United States, could also be jeopardized by Britain no longer being part of the Brussels machinery at a time when both sides of the Atlantic are negotiating an ambitious free trade deal.

On May 7, Britons will get a say on whether they want to have a say later on the subject. It may be that they never do.

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