All You Need to Know About Brexit
On June 23, 2016, Britain voted in a referendum to leave the European Union – a “single market” consisting of 28 European countries that emerged after World War Two. Of the 30 million who voted in the referendum, 51.9% voted for Brexit. By regions, England and Wales backed the decision to leave the EU, while Scotland and Northern Ireland voted to stay.
Much water has flown under the bridge since the stunning leave verdict, and much of the knee-jerk fears have abated too. Yet, very little of the roadmap ahead is clear. Even the timeline set out, with 29 March 2019 as a possible deadline, is not set in stone.
We lay out some of the big issues surrounding the complicated exit triggered by Britain’s landmark decision after joining the EU in 1973.
What the law says. Even though the national referendum, ordered by Conservative Prime Minister David Cameron, reflected the voice of the people, it has no legal sanction by itself. The onus to implement the people’s verdict lies with the government and parliament.
Cameron stepped down after the surprising Leave vote in the referendum. His successor, Theresa May, has pledged to carry out the wishes of the people. On March 29, 2017, she signalled the first step in what is expected to be a long and arduous process of exiting the EU by invoking Article 50 of the Lisbon Treaty. The step also means Britain will exit the process within two years.
Still, the final approval for Brexit will have to come from the House of Lords and Commons, both of which have the right to reject the proposal.
Politics of the exit. The referendum on Brexit arose from a promise by Cameron ahead of the 2015 general elections. Politics remains at the centre of things as Britain plans to negotiate the exit from EU.
May is committed to carrying out Brexit, as is Labour’s Jeremy Corbyn. But they already differ in how exactly they will negotiate the exit. Conservatives strike a hard line on immigration and applicability of EU laws. Corbyn seeks to drive a hard bargain on trade and other issues. The Liberal Democrats say they oppose a “hard Brexit” and have threatened to call for a second referendum on the terms of the deal.
The Scottish National Party is pushing for a second independence reform because Scotland voted against Brexit. While that may not be likely, Nicola Sturgeon pushes for special status for Scotland after Brexit, including ways of retaining access to the single market – a position May does not seek notably because of immigration concession Britain would have to make under freedom of movement rules. Instead, she would pursue a new customs union deal to allow tariff-free exchange of goods with the EU nations.
May has, surprisingly, called for an early election – on June 8, 2017 – saying a clear mandate would help negotiations with the EU. The decision also comes because her party holds a slender majority in the Commons and could be vulnerable to shifts in the contentious positions around Brexit.
Immigration challenges. Political lines are strictly drawn here. Conservatives believe a key aspect of the Leave vote was the desire of the British people to restrict immigration, preserve British culture and save jobs. So it wants to restrict entry of EU nationals as much as immigrants from other countries. It has not said what it would do to EU nationals living in the UK for less than five years, apparently because it wants to negotiate a deal for UK nationals living in other EU countries. The Tories also back a work permit system for EU citizens, similar to the one in place for other nationals. EU nationals who have lived in the UK for five years are eligible for permanent residence.
On the other hand, Labour wants to keep borders open. It also has pledged to grant staying rights to EU citizens living in the UK.
The first numbers since the Brexit vote show net migration to the UK dropped below 300,000 for the first time in two years. Roughly half the 273,000 that came into the UK in the year to September 2016 came from the EU.
Economy and markets. The day the Brexit vote broke, the British pound plunged by 11.1% and the FTSE by 9%. For the sterling, it marked a three-decade low.
Nearly a year later, the pound remains depressed at $1.30, over 10% lower than pre-Brexit levels. But equities and other markets have bounced back. The FTSE 100, for example, is up 16%. The UK economy grew 1.8% in 2016, registering the second-highest growth rate among the G7 industrialised nations. Unemployment has fallen to a 11-year-low of 4.8%.
Also, even though home prices in Central London have fallen, probably because of stratospheric valuations, property prices elsewhere remain robust, their values growing at a slightly lower annual rate of 7.4%.
Still, concerns remain, perhaps justifiably so. Many global companies, notably banks, consider moving out of London. This raises questions, notably about jobs.