International

Brexit – The Enigma

Brexit, the withdrawal of the United Kingdom (UK) from the European Union (EU), was derived by an analogy from Grexit, when Greek exited from Europe. For the readers who are new to the topic, it is a combination of Britain and Exit.  Now that Brexit is for real, let us look at the factors leading to it and what the future holds for British.

Economic Co-operation in Europe after the Second World War

Initially, the UK was not a signatory to the Treaty of Rome which established the European Economic Community (EEC). It applied for the membership twice, in 1963 and 1967, but ended up being unsuccessful both the time. It happened so because the President of France, Charles de Gaulle, vetoed the applications ? apparently, according to him, Britain was incompatible with Europe. Once de Gaulle had relinquished the French presidency, UK made a third application for membership, which was successful.

The European Union is an economic and political partnership involving 28 European countries. It began after the Second World War to foster economic co-operation, with the idea that countries which trade together are more likely to avoid going on war with each other. EU developed a single market system and legislations that applies to all the member states, as if they were one country. Its policy aims to ensure free movement of people, goods, services, funds and capital within the internal market, enact legislation in justice and home affairs, and maintain common policies on trade and regional development. EU has its own currency, the euro, its own parliament and it now sets rules in a wide range of areas – including on the environment, transport, consumer rights and even things such as mobile phone charges.

Brexit Referendum

On 23 June 2016, Brexit referendum, also known as EU referendum, took place in the UK to assay support for its continued membership in the European Union. ?Leave? won by 52% to 48% on a national turnout of 72% making it the highest turnout for any polling ever since the UK General Elections of 1992. The breakdown of the referendum among the constituent countries showed England and Wales strongly favouring Brexit, while both Scotland and Northern Ireland backed staying in the EU. For UK to leave the EU, the British government will have to invoke Article 50 of the Treaty on European Union. Once Article 50 has been triggered, the UK will have two years to negotiate its withdrawal. Moreover, a vote to leave the EU would be the start and not the end of a process. It could lead to up to a decade or more of uncertainty.

Immediately following the result, Prime Minister David Cameron announced his resignation, for having campaigned unsuccessfully as a “remain” voter. He said, “The British people have made a very clear decision. I think the country requires fresh leadership…. I don’t think it would be right for me to try and be the captain.” He further added, “The British people have made a choice that not only needs to be respected but those on the losing side – myself included – should help to make it work.” He was immediately succeeded by Theresa May in mid-July following the referendum. Mrs. May too supported the campaign for Britain to stay in the EU initially but on becoming the prime minister, she affirmed she will respect the will of the people and declared – “Brexit means Brexit and we’re going to make a success of it.”

With the UK referendum campaign now underway, there seem to be varied opinions arousing all over Europe. Some feel that the stay vote was ostensibly a fear vote. Fear of leaving rather than a true desire to stay. Also ‘EU is simply a way of bureaucrats making a living and then interfering in everybody?s lives’ whereas others feel the population is ageing, so there is serious need for immigrants as the indigenous population is not growing fast enough to cover all the jobs need doing in the future. A few claim UK to be stronger and more capable within EU than outside it.

Perceptions or Misperceptions?

The perception among the remain voters is that some of the businesses will move out of the UK to EU, which means loss of jobs for the people that work at those businesses. Moreover, if the Pound Sterling loses value especially to US Dollar, the currency could shift because investors want to invest in the EU. And more importantly, these first two factors will affect a lot of other things which will drag the British economy down. Prices will rise, interest rates could rise sharply, job losses could shrink the size of economy, tax receipts will go down, and house prices will also drop.

52% of the voting population went with ‘leave the EU’ option. The main reasons put forward by the ?Leave? campaign seemed to resonate around sovereignty and immigration reaching breaking point – any EU citizen can come to the UK to live and work leading to massive competition for jobs and housing. In addition, the Leave campaign thought swamping of cultures with other regions of Europe made the British feel as if they lost their identity in the crowd. Many British voters were frustrated on security issues, where the EU?s leaders have for decades now displayed a toxic combination of hunger for power and incompetence at wielding it. They feel that the trading pact offered by the EU at the cost of their freedom, is a price too high to pay and seem unhappy about having two layers of politicians – UK and Brussels. The nation makes a substantial contribution to the EU budget and even then has no effective control over its borders. It is because of all these nationalistic sentiments that Brexit happened.

Future Uncertain for British

The British have been through much worse situations and survived if not prospered. Such a situation has never occurred to them before so they can?t be sure about what and how they will be affected. That in itself is a bad thing as markets don’t like uncertainty. The ?Leave? campaign said Brexit would be boon for the British economy whereas the ?Remain? campaign said Brexit would be bane for the British economy. However, neither side is certain about their predictions. It could be much worse or much better which is why David Cameron believes it to be ?A leap in the Dark?. How it’ll influence everyday life for British with long terms effects, time will only tell.

– Contributed by Riddhi, a Student of Bachelor of Commerce (Hons)

Picture Credits: bbc.com



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