Brexit And ‘Swexit’: How Sweden’s EU Membership Might Turn On Britain’s Referendum

First Brexit, then Swexit. How many will dash for the European exit?

It sounds like a tongue twister, a nursery rhyme or even a line from Dr. Seuss. But it’s not. It’s a taste of what word might next enter the lexicon if Britain leaves the European Union, and prompts Sweden to ponder the same course.

It’s less absurd than one might think because the Swedes have a strikingly nuanced understanding of how the EU works. Sweden is a free-trading, open economy that appreciates having the like-minded British inside the tent. Without them, Swedes reason that they could end up on the defensive within the EU, and perhaps would be better off outside it.

“When you ask people about remaining in the current European Union you get a different answer than if you ask about remaining in an EU without the U.K.,” said Linda Berg, a senior lecturer at the University of Gothenburg. “Brexit would change the dynamic.”

Most Swedes want to remain in the EU, according to recent polling. But if Britain leaves, there may be a majority that wants Sweden to follow suit, according to the Swedish survey firm Sipo Research International.

An April poll found that 44 percent of Swedish voters want to remain in the EU, with 32 percent ready to Swexit for a new future. If Britain were to vote to leave on June 23, the date of its referendum, 36 percent would be ready to go.

That survey, said Andreas Hatzigeorgiou, chief economist at the Stockholm Chamber of Commerce, is in effect a referendum on Swedes’ views of Brexit: They don’t want it to happen.

“They are answering the question, ‘Would the EU be stronger without the U.K. or with it?’ ” Hatzigeorgiou said. “That standpoint is the result of the fact that Britain is a strong ally of Sweden in the EU.”

On some level, the matter could be personal. About 40,000 Swedes live in London, a number larger than the populations of some modest-sized Swedish towns. With Britain in the EU, they enjoy the freedom to work there without additional authorization, and many have built their careers in the British capital.

“Quite a few Swedes move to the United Kingdom to work, so that in itself is one benefit of membership,” Berg said. “So a British departure would really matter.”

Swedish attitudes toward Brexit reflect keen understanding of how the country of 9.6 million benefits from political alliances within the EU.

VoteWatch Europe, a group that tracks how European politicians vote on matters related to the union, substantiated the Swedish public’s views by the numbers in an April report. The group deciphered voting patterns in the European Council, the assemblage of the EU’s 28 national governments that, despite 60 years of integration, still have the final say on many matters.

“Sweden, the Netherlands and Denmark are the U.K.’s closest allies in the EU Council and would lose an important partner if Brexit occurred,” VoteWatch concluded in the report.

The Swedish government tends to agree with the British government on matters of free trade — a point of contention the two countries have with France and, more recently, Poland. Swedes, like the British, are also skeptical about the merits of “deepening,” which is Euro-lingo for subsuming more national functions like border control or criminal justice under the aegis of Brussels, said Berg.

That said, Swedes are not shy about discussing how they might benefit from a British decision to leave the EU.

For example, Sweden is something of a regional financial center for Scandinavia and the Baltic republics. London is Europe’s financial center, and would still do plenty of business in the event of Brexit. But “on the margin” there could be investments that could go to London or Stockholm, which for example already has a booming “fintech” — financial technology — sector.

“We need to find a way that we can become stronger on the other side of this referendum,” Hatzigeorgiou said. “And banking is an area where we’d be a greater competitor if the U.K. decides to leave. We’ll try to lure investments away from London if the British vote to leave the EU.”

For now, Sweden’s banks and other financial institutions are bracing for the initial shock of Brexit, even if they’re hungry for London’s business. Swedish regulators are keeping an eye on them as well.

“We are in close contact with banks and with other regulated companies that are essential for the smooth functioning of the Swedish infrastructure, and we are making sure they have contingency plans for both outcomes and that they are adequately capitalized and have sufficient liquidity ahead of the mid-summer vote,” Uldis Cerps, head of banking at the Swedish Financial Supervisory Authority, told Bloomberg News.