Why a British Exit From the EU Should Worry Israel

A Britain outside the EU means Israel will lose an important insider voice and critical traction in the shifting and sometimes hostile EU debates about what policies to adopt toward Israel.

Britain's Prime Minister David Cameron greets Israel's Prime Minister Benjamin Netanyahu as he arrives at Number 10 Downing Street, London, Britain, September 10, 2015.
Reuters

It will, of course, be an internal, domestic decision for the United Kingdom’s voters on June 23 when they vote either to stay in the European Union, or whether the UK should revert to previous eras of isolation, in an attempt to relive those glorious days when the sun never set on the British pound sterling and London was the commercial capital of the world.

On whether or not to stay in Europe, there's no automatic sectarian divide. British Jews are just as divided as British Catholics or British Muslims, and the “Remain” and “Leave” campaigns are free of ethnic or religious prejudice. The leader of the pro-EU campaign, Lord Stewart Rose, and one of the most prominent Brexit campaigners, former Tory leader, Lord Michael Howard are both Jewish.  Current opinion polls show a 50-50 split between Remainers and Leavers with older voters keener on Brexit than younger citizens.

Nevertheless, there is one aspect of the debate that should cause UK friends of Israel to take stock: Israel itself will be greatly impacted if Britain leaves Europe. Israeli policy, economic and security actors should start paying attention to what a Brexit will mean for Israel.

At its most simple level, Israel would lose an important ally within the EU against the many opponents the country faces. All recent British prime ministers have been both philo-Semites and strongly pro-Israel, notably Tony Blair, Gordon Brown and Margaret Thatcher. 

An isolated UK cannot by itself stop any EU policy, whether that is recognizing the Palestinian state or labeling goods made in the West Bank and other BDS campaigns. But British officials in Brussels, British MEPs and British ministers sitting on EU councils do make common cause with German, sometimes French and other pro-Israel governments.

A Britain outside the EU means Israel loses that voice and that traction in the shifting EU debates on what policies to adopt toward Israel.

If the politics are bad for Israel, the economics are probably even worse. There are currently 16 Israeli technology companies listed on the London Stock Exchange worth £3.7 billion, as well as the Israeli Bank Hapoalim. Being inside the EU allows Israeli firms the EU “single passport” which allows them to do business anywhere in Europe. 

London also performs 40 percent of global foreign exchange (Forex) trading, and nearly half of the world’s interest rate swaps. In addition, a third of European equity trading takes place in the U.K. A City of London outside the EU would lose its attractiveness.  According to Christian Noyer, the former governor of the Banque de France,  “It is already very difficult for euro members to accept that our currency is largely traded outside the currency area, beyond the control of the European Central Bank and of euro area institutions such as market regulators. That can be acceptable only if, and as long as, the U.K. is a member of the EU, and accepts the involvement of, and cooperation with, the European regulatory agencies,” he wrote in an article for central bank think tank OMFIF.

A Brexit would make it all but impossible for Switzerland, with its close financial and trading links with Israel, to find a solution to its problems with Brussels, following the vote two years ago to limit freedom of access for EU citizens. Brussels has threatened to deny Swiss firms single market access unless the Swiss revisit that decision. A Brexit would harden positions in Paris and Berlin, as well as Brussels, as post Brexit EU member states would insist that EU rules have to be obeyed if countries want the advantages of open borders for business.  

Finally, there is the broader security aspect. Outside the EU, Britain will have no influence on the direction of EU security policy toward Israel. Britain’s status in Brussels as a leading EU global security policy maker broadly supportive of Israel will vanish.

Until now, the question of Israel has not figured in the U.K.’s Brexit debate. President Obama comes to London this month and will appeal to Brits to back Prime Minister Cameron and all the main British party leaders to vote to stay in Europe. Leaders of Australia and Canada as well as Germany’s Chancellor Merkel and France’s President Hollande have all urged a rejection of Brexit on the 23rd June. 

At a minimum, every Israeli firm operating in Britain, as well as policy makers in Israel itself, should be examining what Brexit might mean, and make preparations just in case it happens. And friends of Israel in the UK should weigh carefully whether a Britain no longer setting policy or helping make the rules decided by the European Union is as much use to Israel as a UK that has a voice and vote whenever the EU takes decisions that impact on Israel’s future. 

Jacques Lafitte is founder and CEO of Avisa Partners, a Brussels consultancy.

Denis MacShane is the former Minister of Europe in Tony Blair’s government and is a senior adviser to Avisa. He is the author of “Globalising Hatred: The New Antisemitism” (Weidenfeld & Nicolson, 2008).