Brexit: unexpected result shocks the world

Brexit: unexpected result shocks the world

British citizens voted to exit the European Union on June 23^rd, 2016. This referendum turned the whole world upside down and caused the fall of the British pound to its lowest level in decades. 52% voted for Leave compared with 48% for Remain and the turnout was quite high (71.8 %).

Who voted Leave?

The majority of English and Welsh voted in favour of Brexit, whereas Scotland and Northern Ireland voted overwhelmingly for Remain.

According to polling data released by YouGov, Leave voters are principally low income families, non-graduates or pensioners living in smaller cities or in rural areas whereas the majority of Remain voters are young graduates living in Scotland and Northern Ireland.

Why?

UK society is deeply divided and is characterized by widening inequalities. The majority of the Leave voters are low-income citizens. Their vote was a protest against the hard EU policies and the UK’s significant contributions to the EU budget. They blame Europe for their negative financial situation and affirm that the UK lost its sovereignty and the control over its borders because of the EU. They saw in Brexit a good chance to reduce the number of immigrants and regain control over the borders.

Consequences for Europeans in the UK and vice versa

About 3.2 million EU citizens live in the UK, which represents 5 % of the whole population. The EU citizens who have obtained the right for permanent residence will not be affected by the referendum, as far as the other EU citizens goes, it will depend on the negotiations between the EU and the UK. The UK refuses to take a clear position until the EU members do not guarantee that UK citizens living in EU countries will not be affected by the referendum. About 1.2 million UK nationals live in EU countries and the same scenario applies to them.

Consequences on the economy

It is still very difficult to know exactly what consequences Brexit will have on the UK economy, on the EU economy as well as on the international economy.

The UK is economically highly dependent on the EU. 50 % of UK trade and investments come from the EU, which is its biggest trade and investment partner. Since the UK is no longer an EU member, tariff barriers and non-tariff barriers could be re-implemented, which will result in increased costs and reduced economic growth.

According to economists Brexit will have very negative consequences on the UK economy. They predict a decrease of 1% to 3 % of British GDP over the next five years and an even bigger loss in the following eight years.

Non-tariff barriers represent a much higher cost than tariff-barriers, since these are already quite low in industrial countries. For example the TTIP is about harmonizing regulations between Europe and the US, because complying with these represents a high cost, especially for small companies.

The EU economy is not exempt from being affected by consequences of Brexit either. Trade with the UK will be more expensive and some countries will be hit more than others, such as Ireland, the Netherlands, Belgium, Malta, Cyprus and Luxembourg. 

When would the UK actually leave?

Brexit will be a long process and it will depend on how fast an agreement will be achieved. The first step it to call the agreement of the Article 50 of the Lisbon treaty: the two parties have two years to agree the terms of split. The new Prime Minister, Theresa May, is against Brexit but stated she wants to accept the will of her people and announced that the agreement will be called by the end of March 2017. That means that the UK would leave the EU by the end of summer 2019. Article 50 has never been used before, so it is hard to say how this will be applied. 

Could there be a Bloxit?

Since Brexit is not a binding referendum there are several possibilities to stop this process. For example the Parliament could reject it, but this option seems quite unlikely since politicians do not want to lose their voters. Another option could be an additional referendum.  As Scotland voted for Remain by 62 %, another independence referendum may be considered - this could change the UK’s position regarding Brexit.

G. Sofia