Brexit: All you need to know

In 2016, the UK held a referendum to decide whether it would remain part of the European Nations, and consequently – Britain chose to exit or Brexit. 70  million citizens voted in the referendum: Brexit voted in favor, 51.2 to 48 percent.

Theresa May was elected as Prime Minister to oversee the Brexit negotiations. She officially triggered the Brexit process on March 29, 2017, giving her a full 2 years to negotiate trade with the EU.

May and the UK negotiated an exit deal, but it has been rejected several times by the House of Commons. She went as far as proposing her exit as Prime Minister in exchange for the deal and that was also turned down.  Unable to come to an agreement with the UK parliament and EU have delayed Brexit.

If there isn’t some sort of agreement soon the UK grows closer to a hard Brexit decision that could lead to catastrophic effects for the UK’s economy.

The European Commission announced that it will no longer negotiate with the UK after a hard Brexit unless it fixes the issues with a backstop and divorce bill.

What happened?

Well, there are several reasons why Brexit happened. Here are the main three.

Economic woes

The opponents of the EU argued that staying meant economic disaster and that the British needed an independent Britain due to a declining EU not being able to solve their problems.

Proponents of Brexit claimed that EU economy became a ticking time bomb after the 2008 recession. After the downturn, there was a vast economic difference between countries like Germany and southern Europe.

Some of the worst cases in southern Europe included Greece with 19 percent unemployment and Spain with almost 15 percent.  Germany still enjoys less than 5 percent unemployment today.

But Germany and Europe don’t want England to leave. Britain is Germany’s third biggest trade partner in the region, and it does not want a trade war.

Nationalism

There has been a rise in nationalism around the world and the UK is not different. A lot of the supporters of Brexit distrust the institutions established after ww2 like the EU, IMF and even NATO.

Supporters think that these outdated institutions strip national individuality and no longer serve a purpose, as opposed to those who fear to leave the EU and see that its flaws are in dire need of a tweak.

What sparked these nationalistic fears was the vast of middle eastern immigrants that crossed the borders to get away from various civil war conflicts in the region. While the EU argued that it was a moral obligation to include these refugees into society, Brexiters saw it as a reason enough to leave the union.

Party Elitism

Many British citizens felt disillusioned with the current parties and EU decision making during and after 2008. The Brexit referendum voters were drawn from both the conservative as well as the Labour party, even as these political entities loudly announced their support for the EU.

The Brexit vote was essentially a protest vote against the elite who had controlled the political system at the time. The supporters believed that the politicians, businessmen and even the wealthy had no right or say in further British affairs.

 

What you can expect?

There are three things that can happen, Hard Brexit, and extension to the two-year negotiation period or a parliament accepts the current agreement.

Since Theresa May has said time and time again that under her watch there will be no second referendum, what is most likely to happen is for the EU to call for an extension to the exit trade negotiations. But the negotiations up until this point have failed so even an extension past April 14 is unlikely.

A hard Brexit would mean:

  • A rejection of the current agreement with the EU.
  • no single market or customs union, which means the UK breaking away from the EU and being susceptible to trade tariffs, penalties, and regulations.
  • It would give the UK more control over its own borders and immigration.
  • Could mean a loss in billions in the economy due to tariffs and trade restrictions.

 

The current deal:

Negotiations with the EU were finalized late in 2018 and after May presented the exit agreement to parliament she suffered a terrible defeat with 230 parliament members voting against her. The parliament members pushed her to negotiate for a better deal, even after May had insisted that there was no better alternative.

The current deal would provide 39 billion euros out of the 100 billion the EU originally wanted for a Brexit “divorce bill”.

The British will also benefit from having the EU dictate the policies regarding their national borders. So, Britain will get the independence they wanted from the EU.

The biggest thorn in the current negotiations is the border surrounding Northern Ireland, which is known to be an extremely volatile region.  For over 30 years, violence has plagued the Northern Irish “EU unionist” and Irish catholic “nationalists” over the political future of the island and its borders.

The violence was finally put to rest with the Good Friday Agreement of 1998, but many argue that with the renewal of talks over a hard border could resurface old grievances and thwart the very fragile peace.

The Irish border proposal, most commonly known as the backstop, would be the only land border between the UK and the EU.

House of Commons has rejected the current deal because its vague on the outcome of the Northern Ireland border region and the fears renewed violence.

Parliament has until April 14th, 2019 to accept the agreement or there will be a hard Brexit.

Industry Outcomes.

Things aren’t looking good for the UK in either outcome, but one option is projecting better economic gains for the nation.

The British government released a report on how much Britain will lose in economic gains in a 15-year span. The report highlighted that if the EU and the UK agree on an exit deal then Britain economy will be 3.4 % smaller in 15 years. If a hard Brexit is finalized, then Britain’s economy is projected to be 9.4 % smaller 15 years from now.

There are already several industries looking for ways out of the country after Brexit. Japanese auto manufacturing giant, Honda, is shutting down their manufacturing plants and will be out of the UK by 2021. One of the Honda plant scheduled to shutter down is in London and it employs almost 3,500 workers.

Several German automakers have come forward to express their uneasiness with the current situation in Britain and urged for lawmakers to move towards a tariff-free exit. Several BMW spokesmen called the possibility of a no-deal Brexit “fatal”.  Britain is one of the German Automaker’s largest exporting countries, in 2016 companies like BMW and Volkswagen sold over 800,000 cars.

Dyson, the Iconic vacuum cleaning company, is also moving its headquarters to Singapore. CEO James Dyson has commented that the move has nothing to do with Brexit but rather “future-proofing” the company.

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