Brexit: Causes and the Future of Britain

Brexit Causes and the Future of BritainAbstractA referendum was held on June twenty-third 2016, to define whether the coupled Kingdom (UK) should surrender or anticipate as a bulge out of the atomic number 63an Union (EU). This progeny is popularly referred to as Brexit merging words Britain and Exit. The 4 nations of the UK (England, Wales, Scotland and Northern Ireland) voted to bring the EU. This paper explores the reasons for the Brexit, its global implications, the current situation and what lies ahead.Keywords Referendum, United Kingdom, Brexit, EuropeanUnion.On June 23rd 2016, a referendum was held to decide whether the UK should leave or confront as a detonate of the EU, as well as known as Brexit. The 4 nations of the UK (England, Wales, Scotland and Northern Ireland) participated in the referendum with leave winning by 51.9% to 48.1%, with almost 30 cardinal people voting (Hunt A. & Wheeler B., 2017). To understand the reasons for the referendum and why the UK voted to leave the EU, a brief history of the relationship between the UK with the EU is studied. The reasons to vote for and a piddlest Brexit as likewise analyzed, along with its global consequences. Fin eachy, the current situation and how much of the Brexit has been implemented is discussed.European Union and its History with the United KingdomAfter the endof the Second earthly concern War, the European nations wanted to end the frequent andcostly wars between neighbors. In 1957, Belgium, France, West Ger galore(postnominal), Italy, Luxembourgand the Netherlands signed the Treaty of Rome, establishing the EuropeanEconomic Community (EEC), or Common Market. (European Union, n. d., para 2).EEC was formed with the goal of economic cooperation between the Europeannations. The 1960s improved the thrift of the EEC members as they startedbusiness without charging custom duties when they traded with each sore(prenominal). OnJanuary 1 1973, Denmark, Ireland and the United Kingdom j oined the EEC. Greecebecame the 10th nation in 1981, followed by Spain and Portugal five days later. In 1986, whiz European Act was signed, with the intent ofallowing free flow of trade across EU borders, creating the Single Market. (EuropeanUnion, n. d., para 5). The Maastricht Treaty in 1993 established the EuropeanUnion (EU), of which the EEC was a main comp starnt. The EU was formed with thegoal of unifying Europes nations under one united foreign policy, commoncitizenship rights, trade rights and a single currency, called euro. (PruittS., 2016).Although theUK became a part of the EU in 1973, the relationship between the UK and the EUhas been a turbulent one. The UK employ first applied for EEC membership in1963. except Frances President Charles de Gaulle vetoed its application, on theworry that English would re situate French as the main language of the community.But in 1973, UK was finally allowed into EEC under Conservative eyeshade rectorEdward Heath. (The Telegraph, 20 16). But within two years, UK was on the vergeon leaving the EEC. In 1975, UK voted on the referendum to whether stay orleave the EEC. 67 percent voted to remain in the EEC. Tension again began in1984, when UK Prime Minister Margaret Thatcher wanted to put down Britishpayments to the EEC budget. At that time, the UK was the third poorest countryof the EEC, exclusively was paying a lot to a greater extent to the budget due to its lack of nurtures.At that time, farm subsidies do up 70 percent of total expenditure. The UK,due to its relatively few farms, got a very small share of the farm subsidies.Margaret Thatcher with her tough talks managed to reduce Britains contributionto the EEC from more than 20 percent to about 12 percent. The UK also hadissues with the EU regarding Frances ban of British bitch during mad cowdisease outbreak in the late 90s, to the decisiveness to allow British chocolatesto be sold to rest of Europe in 2000, after a 27-year long dispute. Decision to vot e for BrexitIn 2011, DavidCameron became the first UK prime minister to veto a EU treaty. This was doneto protect cap of the United Kingdoms monetary sector and stop a levy on banks. In 2013, he madea speech where he outlined the challenges set about by EU and committed torenegotiate UKs membership with the EU. At the same time, a lot of supportbegan among British people for the UK Independence troupe (UKIP), which held a backbreakingstance with the EU. An ongoingmigrant crisis and an economic unrest in the Eurozone increased anti-Europesentiments. With the increasing support for the UKIP, David Cameron made apledge in 2013 that if the Conservatives were in power after the 2015 election,there go forth be an in/out referendum. (Wright O. & Cooper C., 2016) . Aftercoming to power after the election, Cameron promised the vote by end of 2017.He continued his renegotiation with the EU and had managed to groom new dealsfor Britain, which he tell was a strong basis to back a wait vote. To subscribe tothe EU vote from holding headlines in the political agenda, David Cameron setan early referendum date of 23rd June, 2016.Reasons for and against BrexitAfter the decision for the referendum datewas buckn, a lot of polarizing took place for both sides of the vote-leave orremain. Campaigns for both leave and remain had contrasting opinions of theissues at large. Views for both leave and remain melt down regarding theimportant issues are discussed below.Main issues of Brexit A lot of arguments for the leavecampaign was based on the fact of economic immunity of the UK from the EU,control of UK border from the migrant crisis and trade deals. Arguments ofremain was that the vision of the leave campaign lacked convincing detail.(Buttonwood, 2016).Economic IssuesThe leave campaign had the muckle that theUKs links with the EU meant that it eject non make individual trade links withemerging markets standardised China or India. Leaving the EU would allow UK todiversi fy its trade deals. However, the remain campaign pointed the fact the 44percent of UKs export goes to the other EU countries. Leaving the free-tradeagreement of the EU would hurt UKs economy and leaving EU would becounterproductive. Remain also argued that leaving the EU forget hurt the banking persistence in UK as trading advantages of being inside the EU helps the banksmake profit. The leave campaign rubbished those fears and believed that capital of the United Kingdomwould remain a financial capital outside of EU, and banks would still want tobe based in UK due to low tax rates.Immigration and JobsPeople for the leave campaign had the viewthat the UK cannot control their border as long they remained a part of EU. EUgives freedom of movement to other EU citizens and an automatic right to livein the UK. (Smith-Riley B., 2016). The immigration crisis also triggered verypolarized views. EU had the belief that aiding the refugees was a moralobligation. (Mauldin J., 2016). But people who wanted UK to leave EU had theviewpoint that immigration was a national issue and each country should havetheir own say on whom they want to enter their country. Remain campaign were ofthe view that leaving would not solve the migration crisis, but simply shiftborder control from France to the UK. Regarding jobs, nearly 2.5 million peopleare employed in UK due to EU trade, which gives freedom of movement for EUcitizens. The remain campaign held the view that closing the borders would resultin sledding of some of those jobs, raising unemployment in the country. Also,businesses may invest little in the UK as they may have to pay high taxes forimport and export, outside of free trade. The leave campaign was of the viewthat the job loss claims were exaggerated. In fact, jobs may flourish in the UKif they can provide better incentives to new businesses like low corporationtax. Defense and S overeignty IssuesPeople for the leave campaign had thebelief that the UK may have to contribu te to a EU army to fight againstterrorism and other threats. Such a contribution would take away funds andindependence from UKs own military. Remain campaign argued that countriesworking together would give the best chance to the EU to counter terrorismthreats from ISIS and other countries which wants to undermine the EU.Many people who supported the notion ofleaving the EU believed that multinational organizations take away control fromthe individual nations. There was ontogenesis mistrust between the countries,coupled with a simultaneous rise in nationalism. There were calls for furthereconomic integration after the euro crisis, which was opposed by the eurosceptics. Remain campaign argued that in this age of globalization, countriesmust have common economic goals to sustain a healthy economy benefitingeveryone. They argued that it is better to remain a part of EU and help changethe rules from inside, rather than leave it altogether and have no say in anynew decision makings.What happened on June 23rd 2016? How didUK vote?On June 23rd 2016, over 33 million people of the UK countries of England, Wales, Scotland and Northern Ireland cast their vote to each leave or remain in the EU. Leave won by 51.9% to 48.1%. But the voting pattern was incompatible in the 4 countries. While England and Wales voted to leave the EU, Scotland and Northern Ireland voted remain. But the overall vote count had leave have more votes than remain. A breakdown of the vote for leave and remain for the individual countries is given below. Figure 1. Voting pattern for Brexit of the 4 UK countries- in percentages (Hunt A. & Wheeler B., 2017) There was a political falloutas the immediate result to vote for Brexit. Scotland, who had decided to voteto remain in the EU, were obligate to leave as the UK voted as a whole. Scotlandwanted to go for another referendum to vote and decide whether to remain as apart of the UK, or gain independence and apply to the EU as an independentnation. Prim e Minister David Cameron, who led the remain campaign, announced toresign from his position. Theresa May was appointed as the new Prime Ministerof UK on 13th July 2016. From the be observening, she was firm in herdecision that no attempts should be made by UK to remain as a part of EU or torejoin it after Brexit. On the other hand, Eurosceptic leaders celebrated asthey strongly wanted to withdraw from European Union, or strike the scope ofEUs legislative influence. There was a political uproar throughout the wholecountry because people plunged into the phase of uncertainty that could notonly affect the global political situation, but also could impact the worldeconomy.Economic& Global impactEuropean single market is a trade bloc, thatenables free trade between 28 countries (including UK) that come under theEuropean union. This single market not only enables easy navigation of goodsand run between the member countries, and easement of several tradingbarriers, but also boosts econo mic growth, helps in effective governance oftrade practices, and improves the overall standard of biography in the membercountries. Brexit testament not onlyhinder good-tempered trade practices but will also affect the financial markets.Currency convulsionJust a day after Brexit, it had been seenthat pound fell sharply against euro. On June 24th, the pound fellto a 31 year low against the dollar. (Allen K. and Monaghan A., 2016). superior also fell against euro. This weaker status of pound against eurobrought tension among holidaymakers, tourists, and exporters because poundcould then fetch lesser returns and made trading more competitive. Touristsfrom UK couldnt travel Europe as comfortably like before as they got lessermoneys worth after Brexit.Reduced TradeThe Organization for Economic Co-operation andDevelopment, popularly known as OECD, which is an association for developednations, has stated that Brexit would bring a major negative shock in UK.France, Germany and Italy are the stronger members of European Union. They arealso key trading allies of UK. But now due to Brexit there will be reduction oftrade with these countries due to stringent regulatory policies and lesserlabor mobility. UK cannot easily access the European single market. By2020, GDP would be over 3 percent smaller than otherwise in the U.K. (Rafal Kierzenkowski et. al., 2016)half mask EffectUKhas been the first state to withdraw membership from EU. Since no other statehas withdrawn the membership from EU, this could frame a pattern or design thatwill enable the other member states to increase their momentum of membershipwithdrawal from EU. In fact, after Britains exit from EU, Alternative forGermany (AfD) chairman Bjorn Hocke said I know the German people want tobe free of EU slavery. On the other hand, there can be a different outlooktowards exit. For instance, Scotlandmight leave the U.K. to become a stand-alone nation within the EU (like theRepublic of Ireland).(Geewax M.,2016). I n a nutshell, Brexit will keep rescue rippling effect that will notonly bring disruption in political front or obstruction in the flow of labor,capital and commerce but will also increase Euroscepticism among the presentmember states of EU. Brexits influence on various industriesHousing and commercial propertyThe undependableness and unpredictability of themarket after the referendums result came out, freaked out the Investors, whichalso affected the commercial property sector. Estate agents were more affectedthan house builders. As per Anthony Codling, an analyst at Jefferies, housingsector would be comparatively less affected because government helped thefirst-time buyers with financial aids. In fact, demand for houses would bevigorous but the cost of construction would keep rising. Building shares keptdeclining and the most affected housebuilders were Taylor Wimpy, Barkley andBaratt. In FTSE 100, they lost more than 4% in addition to their landsecurities. (Inman P. and Farrell S., 2016)retailRetail sector was badly hit, which wasalready going through a lot of pressure. In fact, before the voting resultswere even declared, an atmosphere of uncertainty was weirdy up. The shoppinghabits of majority of consumers took a different path. They stopped spending onthings that do not come under necessary products. For example, the fashionsales declined drastically and saw the biggest drop in their sales for sevenyears. As most of the fashion retailers purchase their raw materials from Asiaand pay them in dollars, they have been affected more due to the drop in the appraise of pound.Butsome companies have benefitted as well. We know that deflation is the situationin which the supply of money in an economy gets diminished. During this timethe purchasing power of money is greater. So, Brexit would help to bring reliefto Britains supermarkets, which couldnt earn their desired revenues in lasttwo years due to the deflationary environment.Also, FTSE 100 index is currentl y at7343.08 compared to 6338.10 on the day of referendum. This index basicallydepicted many companies which earned in dollars and not in pounds in UK. Hence,when there was a decline in the value of the pound compared to dollar, theirreturns multiplied. TelecomVodafonesannouncement that it couldmove its headquarters out of the UKbrought one of the most strikingimpacts of the referendum on corporate Britain.(Rhiannon B. et. al.,2016). Since EU has a pivotal role in regulatingthe telecom sector, Brexit has already put forward many questions againstBritains own telecom industry. A Spanish telecom company called Telefonicaalso began their assessment and e valuation of their UK based subsidiary companynamed O2. An attempt was made to sell O2 to Hong Kongs CK Hutchison, but thatunfortunately got hindered due to concern over competition. Later in October2016, Telefonica has also renounced their plan of listing O2 in the London bank line Exchange due to the tumult created by Brexit. Also, th ere could have been rise in themomentum of Vodafones merger with the company called Liberty Global, which hadtaken over British cable group Virgin Media in 2013 to branch out into Europescable market. But due to the turmoil created by Brexit, the valuation of VirginMedia had significantly dropped.InsuranceInsurance companies had to mandatorilycomply with Solvency II directive of European Union Law. This rule aims inharmonizing EU insurance regulation. Solvency II consists of three pillars,viz., pillar 1, pillar 2 and pillar 3. Pillar 1 states the quantitativerequirements and resources that insurance companies need to maintain formeeting the liabilities. Pillar 2 deals with lay on the line management structure, whichhelps to foresee risk against which capital must be held. Pillar 3 deals withtransparency and disclosure of risk and meeting the capital requirements. LordTurnbull, the motive civil service head who served as a board member ofPrudential, believed that Brexit would help the global companies who wanted todisassociate themselves from the complex directive of Solvency II.Also, after Brexit investors were indilemma because of its harm on balance sheets and regular business operations.Thats why insurers had to struggle to minimize the immediate problem of shareprice fluctuations. licit & Generals stock declined substantially by 30pc intwo days, before it reassured shareholders that its solvency and cashgeneration were retaining properly. (Williams C., 2016)EnergyNational Grid and sou-sou-east have both urged the judicature toensure Britain remains in the EUs internal expertness market (IEM) that willenable them to perform smooth trading of electricity and gas between UK and theEuropean countries. (Williams C., 2016). Since EU laid an easy pathway for UKto make smooth dealing in regards to receive the utilities and benefits ofenergy sector, Brexit would bring disruption in the whole process that ran witha continuous synergy. Therefore, the UK consumer s will now have to incur morecosts for energy usance because UKs exit from EU could lead to 500million pounds rise in the cost of procuring energy as a resource.TransportAirline industry has also been badly hitdue to Brexit. Sterlings sharp depreciation has brought perplexity in theaviation sector because this decline in the value of sterling would reduce thedemand to travel. This drop in the value would make traveling more expensive. EasyJethas already speculated that they will have less passengers to travel during spend months, and this uncertainty has forced them to rethink whether theyshould carry on their business in UK or not. Positive AspectsPounds weakness would increase tourism inUK. People from all around the world can visit and spend comparatively morethan what it used to be before. UKs hospitality industry can flourish more. with child(p) touristy attractions like Madame Tussauds or Legoland can gain more foottraffic. Even the renowned restaurants and pubs can get more customers.Current Scenario of Brexits murderTheresa May, the current Prime Minister ofthe UK has stated that she will trigger Britains exit from the EU by end ofMarch, 2017 and begin the two years of negotiations. To begin the negotiations,she must invoke Article 50 of the Lisbon Treaty, and decide on what deals theUK will make with the EU. According to the deals to be made, people are termingit as either a hard Brexit or a soft Brexit. Article 50None of the states have ever left EuropeanUnion Britain was the first to do so. This has created a lot of turmoil inglobal economy. The rules for withdrawal or exit is mentioned in Article 50 ofthe Treaty of Lisbon. Lisbon Treaty aimed to make EU more transparent andefficient in functioning. It was a treaty that was agreed by the head officialsof EU member countries. But since UK has left the EU, Prime Minister TheresaMay would trigger Article 50 by the end of March 2017. Though the decision of the referendum was taken in a day, the proces s of leaving EU will be time consuming. After Article 50 is triggered, no directives or rules of EU that exercise control over its member states, will be applied to Britain. Britain and EU will then become two individual parties to any contracts or agreements, and will have to take every decision through bargains and negotiations. Many economists believe that creating future trade relationships or agreements on crucial policies like immigration or trade tariffs between UK and EU countries can become more difficult and burdensome. Figure 2. Steps to be taken for UK to leave the European Union (Hunt A. & Wheeler B., 2017) Hard and Soft BrexitA hard Brexit will be an arrangement wherethe UK will surrender its full access to the single market and customs unionalong with the EU. (Sims A., 2016). The trade relationship will be basedinitially on the World Trade Organization (WTO) rules. Going for a hard Brexitwill give the UK full control of its border, and decide on trade deals on itsown . A soft Brexit on the other hand will mirror the current deals the UK haswith the EU as much as possible. It will lose having a seat on the EuropeanCouncil, but may keep access to the undefended trade market of the EU. The leavecampaign members are more inclined towards going for a hard Brexit approach,while the remain campaign wants to take the path of a soft Brexit. However,both approaches come with their own pros and cons.International Trade Secretary, Liam Fox,has said a hard Brexit approach would benefit the UK by making it a globaltrading nation. (Sims A., 2016). However, leaving the open market may subjectthe British goods and services to tariffs, as well as increase bureaucraticchecks on goods. If the UK decides to go for a soft Brexit, Londons positionas a financial hub may be kept intact if the UK decides to allow the EU rule offree movement of European nationals to work and settle in the UK. authoritative court rulingThe latest update of Brexitsimplementation is the Sup reme court ruling. Justicesruled that Prime Minister Theresa May cannot use the privilege to triggerArticle 50of the Lisbon Treaty and begin thetwo-year process of negotiating the UKs separation from its EU partners. (TelegraphReporters, 2017). Britains Supreme court has also ruled out that the UKgovernment must hold vote in the Parliament before beginning the process ofannulment. (Greene Allen R. & Dewan A., 2017). Though UK Government wasdissatisfied with this new ruling but they would abide by it. Jeremy Wright,Attorney General of England and Wales, told reporters that they would agree tocourts ruling but would also take every measure to implement Brexit. TheresaMay is playing the key role in enacting Brexit and she looks forward to executeall the plans by the end of March 2017, in association with all who voted for leavingEU.References(1) Hunt, A. & Wheeler,B. (2017) Brexit All you need to know about the UK leaving the EU. Retrieved from http//www.bbc.com/ watchword/uk-politics- 32810887(2) European Union.(n. d.) The history of European Union. Retrieved from https//europa.eu/european-union/about-eu/history_en1945_-_1959(3) Pruitt, S. (2016) The history behind Brexit. Retrieved from http//www.history.com/ intelligence operation/the-history-behind-brexit(4) The Telegraph. (2016) Britains 40-year relationshipwith the EU. Retrieved fromhttp//www.telegraph.co.uk/news/2016/06/16/britains-40-year-relationship-with-the-eu/(5) Wright, O. & Cooper, C. (2016) Brexit What isit and why are we having an EU referendum? Retrieved from http//www.independent.co.uk/news/uk/politics/what-is-brexit-why-is-there-an-eu-referendum-a7042791.html(6) Buttonwood. (2016) Eu Referendum- The arguments forvoting remain. Retrieved from http//www.economist.com/blogs/buttonwood/2016/06/eu-referendum-2(7) Smith-Riley, B. (2016) Leave or remain in the EU?The arguments for and against Brexit. Retrieved from http//www.telegraph.co.uk/news/2016/06/16/leave-or-remain-in-the-eu-the-arguments-for-an d-against-brexit/(8) Mauldin, J. (2016) 3 Reasons Brits voted for Brexit.Retrieved from https//www.forbes.com/sites/johnmauldin/2016/07/05/3-reasons-brits-voted-for-brexit/1c8d5991f9d6(9)Allen, K. & Monaghan, A. (2016) Brexitfallout- the economic impact in six key charts. Retrieved fromhttps//www.theguardian.com/business/2016/jul/08/brexit-fallout-the-economic-impact-in-six-key-charts(10) Kierzenkowski, R., Pain, N., Rusticelli, E. & Zwart, S. (2016) The economicconsequences of Brexit- A taxing decision. Retrieved from http//www.oecd-ilibrary.org/ economics/the-economic-consequences-of-brexit_5jm0lsvdkf6k-en(11) Geewax, M. (2016) Circle June 23. A vote that day in the U.K. could affect your wallet. Retrievedfromhttp//www.npr.org/sections/thetwo-way/2016/06/10/481424109/circle-june-23-a-vote-that-day-in-the-u-k-could-affect-your-wallet(12) Inman,P. and Farrell, S. (2016) Pound hits31-year low after disappointing service sector data. Retrieved fromhttps//www.theguardian.com/business/2 016/jul/05/pound-hits-31-year-low-after-service-sector-data(13) Rhiannon, B.,Dakers, M. & Martin, B. (2016) UKfirms speculate moves in wake of Brexit. Retrieved fromhttp//www.telegraph.co.uk/business/2016/06/29/uk-firms-mull-moves-in-wake-of-poll/(14) Williams, C. (2016) What does Brexit mean for the key parts ofthe UK economy? Retrieved fromhttp//www.telegraph.co.uk/business/2016/07/02/what-does-brexit-mean-for-the-key-parts-of-the-uk-economy/(15) Sims, A. (2016) Whatis the difference between hard and soft Brexit? Everything you need to know.Retrieved from http//www.independent.co.uk/news/uk/politics/brexit-hard-soft-what-is-the-difference-uk-eu-single-market-freedom-movement-theresa-may-a7342591.html(16) Telegraph Reporters. (2017) Brexit ruling The Supreme Court judgement in full. Retrieved from http//www.telegraph.co.uk/news/2017/01/24/brexit-ruling-supreme-court-judgment-full/(17) Greene Allen, R. & Dewan, A. (2017) Brexit ruling UK Supreme Court gives parliament Article 50 vo te. Retrieved from http//www.cnn.com/2017/01/24/europe/brexit-article-50-supreme-court-ruling/