BREXIT -What Next?
September 13, 2019 | Expert Insights
Background
For decades, the UK has had an ambivalent and sometimes contentious relationship with the EU. While London was able to successfully negotiate opt-outs like the Euro and the border-free Schengen Area, the internal debate on its EU membership never ceased.
In fact, the first EU referendum was held in1975, just three years after the UK joined the European Economic Community. In 2016, Prime Minister David Cameron held a referendum to fulfil a pre-poll promise, expecting to comfortably win a pro-EU vote. However, the 52% vote in favour of an exit from EU came as a surprise. This was largely caused by the angst over the refugee crisis in Europe and its consequences for the UK. Thereafter, Prime Minister Theresa May spent years trying to negotiate a new agreement with the EU to ensure a smooth transition from EU.
Article 50 of the 2009 Lisbon Treaty (which amends the two earlier backbone treaties that give constitutional basis to the EU), permitted the UK a two-year window to negotiate the terms of its withdrawal, setting the UK on course to an exit in March 2019, with or without a deal. The EU eventually granted a six-month extension until Oct 2019.
The current Prime Minister, Boris Johnson, has made it clear that Britain will leave the EU by 31st October, with or without a deal. In September, he lost an important vote in the UK where his plans to dissolve the Parliament were scuttled. The Parliament is now rushing through legislation designed to keep Johnson from breaking away from EU without a negotiated agreement. It seeks to compel Johnson to seek a three-month extension from Brussels if he cannot get an agreement on a “divorce” deal at the EU summit in mid-October.
Analysis
If the UK under Prime Minister Boris Johnson, walks out from the European Union (EU) on 31st October 2019 without a definitive plan in place, it would entail serious repercussions for the country’s economy and security.
The vote for leaving the EU was driven by several factors- reclaiming sovereignty from a suffocating EU bureaucracy, tripling of EU migrants into the UK, thereby reducing job prospects for UK citizens and other security concerns. The spurt in terror attacks in Europe involving EU citizens raised fears that open borders made the UK vulnerable. The former head of UK intelligence, Richard Dearlove, also supported the view that hard borders would be the primary security benefit.
However, the EU is not playing ball with UK’s plans for a “soft Brexit” as it feels that it cannot match the expectations of UK. Johnson's government is also not working on how to arrive at a consensus. While resigning from the cabinet, Amber Rudd, a lawmaker, accused the PM of having no "formal negotiations" with the EU about a new deal, but instead having only "conversations". She said that “80-90% of Brexit work was spent preparing for an "inferior" no-deal option”.
A no-deal Brexit is likely to create some challenges for the British economy. It will result in a drop in exports to the largest export market (EU) and loss of jobs as industry majors like Airbus are contemplating shifting production out of the UK. There are concerns that unless resolved, food and medicine supplies that largely come from Europe, may drop and lead to shortages.
Northern Ireland border, UK’s only land border with EU is another contentious issue. Former Prime Minister May wanted to prevent the setting up of checkpoints at the border in compliance with the Good Friday Agreement of 1998. This agreement had ended decades of violence in Northern Ireland. Until UK parliament takes a firm decision on the future of the Irish border, Brexit talks are likely to remain at a standstill.
Assessment
- If the current recalcitrance by Boris Johnson continues, it would allude to a no-Brexit deal. Brexit will be the undoing 46 years of economic integration; the process is only going to get messier no matter which exit plan is chosen.
- The world economy is currently under stress and there are uncertainties in global financial markets and banking. Departing from the EU during such uncertain times would jeopardise London’s pre-eminence as an attractive financial centre. This would be to the benefit of other financial centres in EU like Dublin, Luxembourg and Paris and emerging global centres like Shanghai and Dubai.
- A no-deal exit will mean an immediate absence of UK from the common market. This will have a significant impact on trade. Shifting of investments from UK to other countries that are part of the EU is already happening. Capital invested in the other twenty-seven members has grown by 43 per cent since 2016, while the UK has seen a 30 per cent drop.
- The economic risks are considerable and are the main reason for the stiff opposition against a hard Brexit, even within the Tory Part. The resignation of Johnson’s own brother is a clear barometer of prevalent sentiments.
- As for the UK’s security, hard borders will definitely reduce the threat from terrorists taking advantage of their EU citizenship to enter UK undetected. But there are genuine concerns that the UK would no longer have unrestricted access to the EU’s extensive anti-crime database. This will have an adverse impact on UK’s intelligence-gathering capability.
- It is expected that the UK would be setting up of checkpoints along the Northern Ireland border to separate it from Ireland, a fellow EU member. This will be a regressive step and in contravention to the Northern Ireland peace agreement. It could disturb the uneasy status-quo that exists between Irish Catholics and Protestants and portends renewed disturbances.
- Scotland is an integral part of the Brexit narrative that is not very frequently discussed. Even though Scotland does not share a land border with any EU member state, the question of its independence may reverberate louder as Scotland strongly supports continuation with the EU. A hard exit will only further strengthen the hands of those who wish to seek independence from UK.
- Last but not least, is the issue of the status of 3.2 million EU citizens living legally in the UK, as well as that of the 1.3 million British citizens in other EU countries. Well settled families on both sides of the UK/ EU border will have to take a call on the future course of their lives and livelihood.
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