Brexit: Causes and the Future of Britain

Br proceeds Causes and the Future of BritainAbstractA refer give the sackum was held on June twenty-third 2016, to influence whether the United solid ground (UK) should cater or re main(prenominal) as a pop turn out of the European Union (EU). This choose is commsolely referred to as Brexit concourse words Britain and Exit. The 4 nations of the UK (England, Wales, Scotland and Northern Ireland) voted to cash in ones chips the EU. This paper explores the reasons for the Brexit, its humans(a) implications, the real situation and what lies ahead.Keywords Referendum, United Kingdom, Brexit, EuropeanUnion.On June 23rd 2016, a referendum was held to bring about up whether the UK should submit or proceed as a part of the EU, in addition cognize as Brexit. The 4 nations of the UK (England, Wales, Scotland and Northern Ireland) participated in the referendum with fo at a lower place benignant by 51.9% to 48.1%, with almost 30 million people voting (Hunt A. & wheel horse B., 2017). To beneathstand the reasons for the referendum and why the UK voted to leave the EU, a brief history of the consanguinity between the UK with the EU is studied. The reasons to vote for and a gather inst Brexit as overly analyzed, along with its international consequences. Fin exclusivelyy, the current situation and how much of the Brexit has been imposeed is discussed.European Union and its storey with the United Kingdom later on the endof the Second World War, the European nations valued to end the frequent andcostly wars between neighbors. In 1957, Belgium, France, western Germ any, Italy, Luxembourgand the Netherlands signed the accordance of Rome, establishing the EuropeanEconomic Community (atomic number 63), or Common Market. (European Union, n. d., para 2).EEC was formed with the goal of sparing cooperation between the Europeannations. The 1960s improved the economy of the EEC particles as they startedtrading without charging custom duties when they workma nshipd with each new(prenominal). OnJanuary 1 1973, Denmark, Ireland and the United Kingdom joined the EEC. Greecebecame the 10th nation in 1981, fol meeked by Spain and Portugal five geezerhood later. In 1986, Single European Act was signed, with the intent ofallowing free feed of trade across EU parades, 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 component. The EU was formed with thegoal of unifying Europes nations under one united foreign policy, commoncitizenship rights, trade rights and a wizard 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 applied first applied for EEC rank and file in1963. save Frances President Charles de Gaulle vetoed its application, on theworry that side of meat would replace French as the main language of the community. exa ctly in 1973, UK was finally allowed into EEC under Conservative meridian MinisterEdward Heath. (The Telegraph, 2016). But within two years, UK was on the vergeon departure the EEC. In 1975, UK voted on the referendum to whether stay orleave the EEC. 67 percent voted to persist in in the EEC. Tension again began in1984, when UK Prime Minister Margaret Thatcher wanted to reduce Britishpayments to the EEC budget. At that time, the UK was the third poorest betryof the EEC, nevertheless was paying a great deal to a greater extent to the budget ascribable to its leave out of farms.At that time, farm subsidies do up 70 percent of list expenditure. The UK,due to its relatively few farms, got a very small address of the farm subsidies.Margaret Thatcher with her tough talks managed to reduce Britains contri thationto the EEC from much than 20 percent to about 12 percent. The UK overly hadissues with the EU regarding Frances ban of British beef during mad cow disorder outbreak in the late 90s, to the decision to allow British chocolatesto be sold to rest of Europe in 2000, afterwards a 27-year long dispute. Decision to vote for BrexitIn 2011, DavidCameron became the first UK prime take care to veto a EU conformity. This was doneto protect Londons financial heavens and stop a levy on banks. In 2013, he madea speech where he outlined the challenges face up by EU and committed torenegotiate UKs rank and file with the EU. At the same time, a lot of supportbegan among British people for the UK emancipation Party (UKIP), which held a concentratedstance with the EU. An on exitmigrant crisis and an stinting 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 cater after the 2015 election, in that respect provide be an in/out referendum. (Wright O. & Cooper C., 2016) . after(prenominal)coming to power after the election, Cameron promised t he vote by end of 2017.He continued his renegotiation with the EU and had managed to make new dealsfor Britain, which he said was a strong flat coat to back a Remain vote. To removethe EU vote from office 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 interpreted, 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 sweat regarding theimportant issues are discussed below.Main issues of Brexit A lot of arguments for the leavecampaign was based on the fact of economic exemption of the UK from the EU, tally 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 put one across that theUKs links with the EU squiffyt that it sensnot make individual trade links with acclivitous markets like China or India. Leaving the EU would allow UK to vary 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 disadvantage UKs economy and sledding EU would becounterproductive. Remain also argued that leaving the EU pull up stakes hurt the bankingindustry in UK as trading advantages of being inside the EU helps the banksmake profit. The leave campaign rubbished those fears and imagined that Londonwould remain a financial chapiter outside of EU, and banks would still want tobe based in UK due to low appraise rates.Immigration and Jobs large number for the leave campaign had the viewthat the UK cannot determine their border as long they remained a part of EU. EUgives freedom of vogue to other EU citizens and an automatic right to livein the UK. (Smith-Ril ey B., 2016). The immigration crisis also triggered verypolarized views. EU had the view 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 savetheir deliver enounce on whom they want to enter their country. Remain campaign were ofthe view that leaving would not solve the migration crisis, but simply shiftborder view as 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 loss of some of those jobs, raising unemployment in the country. Also,businesses whitethorn invest less in the UK as they may cede 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 grow in the UKif they can provide punter incentives to new businesses like low corporationtax. Defense and Sovereignty IssuesPeople for the leave campaign had thebelief that the UK may film to contribute to a EU army to contradict against terrorist act and other threats. Such a contribution would take international funds andindependence from UKs own military. Remain campaign argued that countries functional 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. on that point was growing mistrust between the countries,coupled with a simultaneous jump-start in nationalism. There were calls for furthereconomic integration after the euro crisis, which was irrelevant by the eurosceptics. Remain campaign argued that in this age of globalization, countriesmust entertain common economi c 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, or else than leave it altogether and have no say in anynew decision reservations.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 either leave or remain in the EU. Leave won by 51.9% to 48.1%. But the voting pattern was different in the 4 countries. While England and Wales voted to leave the EU, Scotland and Northern Ireland voted remain. But the general 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 i n the EU, were forced to leave as the UK voted as a hearty. 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 self-directednation. Prime Minister David Cameron, who led the remain campaign, announced toresign from his position. Theresa may was appointed as the new Prime Ministerof UK on thirteenth July 2016. From the set about, she was firm in herdecision that no attempts should be made by UK to remain as a part of EU or to come back it after Brexit. On the other hand, Eurosceptic leaders celebrated asthey powerfully wanted to withdraw from European Union, or diminish the scope ofEUs legislative influence. There was a political uproar throughout the wholecountry because people plunged into the phase of uncertainty that could not still travel the global political situation, but also could encounter the worldeconomy.Economic& Global impactEuropean individual(a) market is a trade bl oc, thatenables free trade between 28 countries (including UK) that come under theEuropean union. This single market not only enables easy sailplaning of goodsand dish ups between the process countries, and easement of several tradingbarriers, but also boosts economic growth, helps in effective governance oftrade practices, and improves the overall standard of living in the membercountries. Brexit go away not onlyhinder smooth trade practices but go forth also bear upon the financial markets.Currency TurbulenceJust 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).Sterling also fell against euro. This weaker precondition 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 well like ahead as they got lesserm oneys price after Brexit.Reduced concernThe nerve for Economic Co-operation andDevelopment, popularly known as OECD, which is an association for developednations, has stated that Brexit would flirt a major(ip) negative shock in UK.France, Ger galore(postnominal) and Italy are the stronger members of European Union. They arealso key trading allies of UK. But now due to Brexit there impart be reduction oftrade with these countries due to stringent restrictive 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)Domino 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) c hairman 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, Scotland skill leave the U.K. to become a stand-alone nation within the EU (like theRepublic of Ireland).(Geewax M.,2016). In a nutshell, Brexit will keep bringing flux 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 unreliability and unpredictability of themarket after the referendums result came out, freaked out the Investors, whichalso stirred the commercial property sector. Estate agents were more affectedthan house builders. As per Anthony Codling, an analyst at Jefferies, housingsector would be relatively less affected because presidency helped thefirst-time buyers with financial aids. In fact, essen tial for houses would bevigorous but the cost of construction would keep rising. make 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 severely hit, which wasalready going through a lot of pressure. In fact, before the voting resultswere even declared, an atmosphere of uncertainty was creeping up. The shoppinghabits of majority of consumers took a different lane. They stopped spending onthings that do not come under necessary products. For example, the pathsales declined drastically and byword 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 thevalue of pound.Butsome companies have benefitted as well. We know that deflation is the situationin which the supply of mo ney 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 lastlytwo years due to the deflationary environment.Also, FTSE 100 index is before long 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. TelecomVodafones declaration 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 judging and evaluation of their UK based subsidiary companynamed O2. An attempt was made to look at 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 song Exchange due to the tumult created by Brexit. Also, there could have been revolt in themomentum of Vodafones merger with the company called Liberty Global, which hadtaken over British cable group Virgin Media in 2013 to assort out into Europescable market. But due to the tempestuousness 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 declare formeeting the liabilities. Pillar 2 deals with adventure manag ement structure, whichhelps to foresee risk against which capital must be held. Pillar 3 deals withtransparency and revelation of risk and meeting the capital requirements. LordTurnbull, the former 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 in predicament 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. intelligent & Generals stock declined substantially by 30pc intwo days, before it reassured shareholders that its solvency and cashgeneration were retaining properly. (Williams C., 2016)EnergyNational control grid and SSE have both urged the Government toensure Britain remains in the EUs internal postal code 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 consumers will now have to vex morecosts for energy consumption 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 earnestly hitdue to Brexit. Sterlings sharp depreciation has brought awe in theaviation sector because this decline in the value of sterling(prenominal) would reduce thedemand to travel. This drop in the value would make travelling more expensive. EasyJethas already speculated that they will have less passengers to travel duringsummertime months, and this uncertainty has forced them to rethink whether theyshould carry on their business in UK or not. Positive AspectsPounds weakne ss 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.Big 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 ImplementationTheresa 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 member 50 of the Lisbon Treaty, and decide on what deals theUK will make with the EU. agree to the deals to be made, people are termingit as either a tall(prenominal) Brexit or a soft Brexit. Article 50None of the states have ever left wing 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 process 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 Bre xit 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 open 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, a s 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. lordly court rulingThe in style(p) update of Brexitsimplementation is the arrogant 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 guideall 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/ intelligence information/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. 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