Everyone seems to know what Brexit is, but many people outside of Europe may not be following it closely. Below is my synopsis of where we are, how we got here, and what the future may hold.
The people of the United Kingdom voted to leave the European Union. This referendum set off a long series of events, which are intended to lead to the UK applying its own regulations for trade, immigration, and law. The European Union’s impact on the UK will be significantly decreased upon the completion of Brexit.
The British Parliament gave approval to trigger Article 50, which is the legal provision within the EU that allows countries to leave. The Article essentially created a 2-year long countdown for the UK and EU negotiators to finalize future trade and exchange agreements. The Treaty of the European Union permits this 2-year period to be cut off early, extended, or revoked entirely, dependent upon the negotiators’ progress in coming to agreeable terms of withdrawal.
The EU Withdrawal Act was passed by Parliament, and rendered all laws issued by the EU as ineffective in the UK. Though many EU laws were transferred into the UK by the government, the ones which were not transferred no longer had an effect on UK citizens. However, Article 50 required that the trade negotiations between the EU and departing members continue after the Withdraw Act gets passed.
The terms of withdrawal are agreed upon between the EU and UK government, pushing the Draft Withdrawal Deal onto the floor of Parliament for a final vote. In order to be passed, the terms would have to win the majority of Parliament in order to complete the terms of Article 50.
The original date of withdrawal per the agreed upon terms was 2 years from the approval of Article 50. However, March of 2019 saw the first extension of the Brexit deal granted to UK Prime Minister Theresa May. The withdrawal agreement was denied on its third vote since November 2018, giving the UK until April 12 to modify their exit plan.
For the second time, Theresa May requested an extension from the European Council as the plan was still not finalized. The granted extension saved a potential economic downfall that could come from a “no-deal exit,” where the terms of withdrawal are dropped, leading to overnight changes to trade, border patrol, and immigration without a transition plan.
The European Council granted the extension with the contingency that the UK hold European Parliament elections in May 2019. If the UK fails to hold election, a no-deal Brexit will occur in June.
If the European Parliament elections are held as agreed upon, the UK will have until November 2019 to draw up a final draft to avoid major economic collapse.
How did we get to this point?
European Council president Jean-Claude Juncker has shown frustration with the UK for not coming up with a draft accepted by both sides.
One of the main concerns with the latest draft terms of withdrawal was the Irish backstop. Since the UK’s geographic neighbor Northern Ireland will remain a part of the EU when (or possibly if) Article 50 passes, there is much debate as to what will happen on this newly created border.
If there is a “soft” or no-deal Brexit, the current agreement is that the border will be largely open for trade. Members of Parliament (MP’s) worry that the open trade border would limit the UK economy’s potential for independence from the EU economy.
What could have happened?
Many MP’s are relieved that May’s request for one more extension was granted. Had the request been denied, the no-deal exit could bring devastating hits to the UK and international economies.
If a no-deal Brexit occurs in June, restaurants will be left to scramble to find the means to import food, as foreign suppliers could take advantage of the UK’s overnight changes and increase their prices.
Some small businesses would simply not be able to afford imports without a smooth transition, which could lead to lost jobs and damage the economy as a whole.
The Global Economy
For many big businesses across the globe, Brexit has already happened. A completed Brexit will essentially nullify Britain’s status as a middleman for trade throughout Europe.
For example, most of the banks around the world have already set up shop in other nations along the English Channel in order to maintain much of their European business.
Many car producers have also set their production quotas within their factories in Great Britain. The result of these nations moving their investment out of the UK may cost many British jobs, but a smooth transition can ease the loss significantly.
Whether it’s a no-deal Brexit or terms are agreed upon for a smooth ‘Transition Period,” the British economy may shrink in size. Investment in the country may decline, as their economy will no longer be fully backed by the EU.
Despite the potentially forthcoming decrease in exchange value of the British pound, MP’s hope a smooth Brexit will lead to London organically becoming an international center of financial investment that could allow for Britain’s economy to grow without dependence on the EU.