Japan's biggest bank Nomura has issued an 11-page study evaluating the likelihood that the UK will leave the European Union entirely or partly.
Events could accelerate as soon as this autumn if eurozone woes force the Government to commit to a firm date for a BRIXIT referendum.
"The effect a looser relationship with the EU would have on the UK economy in general and on the financial services sector in the UK in particular is not clear at this time, even though British eurosceptics argue that being freed from EU regulation would be a booster. However, the prospect is, in our view, bound to raise concerns – indeed, is doing so already in the City."
The core point is that the eurozone may have to take drastic steps in integration (fiscal union, etc) to save the euro, making it nigh impossible for a fully sovereign state to remain part of the Project.
In other words, it is not so much Britain leaving the EU as the EU leaving the treaty-based club of sovereign states it was supposed to be.
The report is part of the bank's "Issues which keep me awake at night" series.
It does not take sides.
Here are a few extracts, written by Alastair Newton (an ex-British diplomat, former head to Tony Blair's G7 team, and intelligence co-ordinator in the first Gulf War). Unfortunately, we cannot post the whole report online because of Nomura's compliance rules. The bank emphasises that this is his personal opinion.
A deepening of the eurozone crisis in the immediate future remains a real possibility despite the recent efforts of the ECB in particular to calm markets. This, in turn, could spur acceleration in integration in order to try to prevent the collapse of the eurozone, thereby advancing projects which are likely to prove difficult for the British government.
One thing which is clear is that (assuming the eurozone does not collapse completely) it is only a matter of time, in our view, before crisis-related steps are agreed which necessitate treaty changes. In those circumstances, the British government will almost certainly demand ‘treaty change for treaty change’ in an effort to repatriate powers, ie be looking to win repatriation of powers to London for every concession on treaty reform sought by the eurozone on a one-for-one basis. However, in so doing the UK would likely be looking to repatriate powers which EU partners may be unwilling to concede within he context of the single market.
Third, and finally, we do not rule out the possibility of a serious schism between the EU nd the UK developing over non-crisis-related issues, with the 2014-20 EU budget an obvious potential bone of contention.
In the event of either the second or the third of these scenarios occurring, Mr Cameron could find himself in a very difficult position indeed, ie, under even more intense pressure from within the ranks of his own party to call an immediate referendum but knowing that, if he were to agree, this could be a bridge too far for the pro-EU LibDems who would try to force an early election rather than support the legislation necessary to hold a referendum. Thus, if there is to be a referendum in the UK on EU membership, it does indeed look likely to be after the next election, rather than before; but this could be at the price of the election being brought forward.
There is, in our view, a non-negligible probability that eurozone crisis-related events will encourage Conservative Party eurosceptics to exert still more pressure on Mr Cameron – and that, although we sense that eurozone leaders would prefer to avoid another row with the UK, such events could occur in the very near-term.
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