Battle in Britain: The Impact of Brexit
Battle in Britain: The Impact of Brexit
On Thursday June 23rd 2016 the British public was given an historic vote to remain a member of the European Union (EU) or leave and gain independence from it. As with any big political decision involving a nation’s trade, economy and movement of people, there were pros and cons. The aim of this article is to get to the bottom of what they were and what the outcomes will come about from Brexit, if any.
Leading the Remain campaign was Prime Minister, David Cameron (Conservative) with the mayor of London, Sadiq Khan (Labour), Chancellor of the Exchequer, George Osborne (Conservative), Nicola Sturgeon, leader of the Scottish Nationalist Party (SNP), and supported by businessman Richard Branson and the head of the Bank of England, Mark Carney.
Representing the Leave campaign was former mayor of London, Boris Johnson (Conservative), lord chancellor and secretary of state for justice, Michael Gove (Conservative), Nigel Farage, leader of the UK Independence Party (UKIP), and backed by entrepreneur and philanthropist, John Caudwell and president of Hiscox Insurance, Robert Hiscox.
There were no clear political divisions, with members of all the main political parties backing both sides. The leader of the opposition, Jeremy Corbyn (Labour), has been widely criticised for not throwing his weight behind either campaign: He only half-heartedly vocalised his support for the Remain campaign. But this is a whole other story that has yet to be resolved.
Neither the Leave nor Remain camps had any real answers to questions such as “What will happen if we leave?” Much in the same way that Donald Trump’s campaign for president hasn’t, thus far, revealed any discernible policies or manifesto, so the fight for Britain remaining or leaving the EU was fought with rhetoric and spurious claims that could not possibly be backed up.
One of the biggest problems facing the public was that the vast majority of the public had no idea what the EU actually is and, more importantly, what it does.
The EU was set up in the wake of World War II in a pact that involved the free movement of people across borders, a single market where goods could be traded with no international tariffs, and a set of laws – the European Convention of Human Rights (ECHR) – that dictated how citizens of the EU should be treated and protected as if the whole of Europe was one big country. Since its inception in 1945 no two European countries have gone to war with each other: The longest era of sustained peace in the history of the continent of Europe.
One contentious issue, debated by UK citizens and other countries in the EU, is the red tape and power the European Government and ECHR has over British courts. Leaving the EU would not have an effect on any this, as the ECHR was brought into being by the Council of Europe, comprised of 47 members including non-EU-member states such as Russia and Ukraine and the UK government could implement similar ‘red tape’ style laws if it wanted to.
Another issue is the amount of money Britain pays to be a member of the EU. The UK is one of 10 member states who pay more into the EU budget than they get out, only France and Germany contribute more. In 2014/15, Poland was the largest beneficiary, followed by Hungary and Greece. Why the gap? The UK is a rich country and the EU points out that although it spends less in the UK than the national contribution, the British economy gains much more from access to European markets and contracts.
The UK also gets an annual rebate that was negotiated by Margaret Thatcher as well as money back in the form of regional development grants and payments to farmers, which added up to £4.6bn in 2014/15. According to the latest Treasury figures, the UK's net contribution for 2014/15 was £8.8bn - nearly double what it was in 2009/10.
Using a different formula, which takes into account EU money paid directly to private sector companies and universities to fund research and measured over the EU's financial year, The National Audit Office says the UK's net contribution in 2014 was £5.7bn.
Leading up to the referendum, both the Leave and Remain campaigners toured the country, the same as if it were a General Election, giving speeches, trying to gain the votes of the citizens they met as well as answer any questions that the public had of them. But, as previously stated, neither side had any real answers to these questions, because a decision like this had never been considered before.
Since 1945 the EU had grown in size from five countries to 28, the UK is the first country to have held a public referendum giving the public the decision to leave or remain. The Remain campaign promoted the status quo, while the Leave campaign had no data to back up the opposing claims of a better future outside the EU - away from the bureaucracy and red tape implemented by the European Council and the ECHR. But at the very least, they promised a different system.
The result of the referendum was that, nationwide, the UK voted to leave the EU in a majority of 51.9-48.1%. 30 million people - 72.2% of the electorate - turned out to vote, larger than any of the last four general elections (over a span of 24 years). These numbers seem to support the viewpoint that this is the biggest and most polarising national vote ever held in the UK. It also indicates that the British public saw it as a more powerful and meaningful choice than which party represents them in the House of Commons. Over the individual countries that make up the UK, England and Wales voted to leave and Northern Ireland and Scotland voted to remain.
In the direct aftermath, Scottish politicians began talking about a new referendum for independence from the UK so it could stay within the EU. The last independence referendum was held in 2014 with a majority of 55.3% of the record 84.6% turnout voting ‘No’. There was talk from Khan that London could also request independence, as the City was one of the only areas of England that voted overwhelmingly to remain, although this seems more than a little implausible. There was also an argument for a second referendum to be held due to the fact that referendums are not legally binding, just a figure for politicians to base their decisions upon. This came about because of widely reported remorse from a large number of people who had voted to leave as a protest vote after thinking their opinion wouldn’t actually matter.
Almost immediately after the result was announced, the value of the pound dropped to a 31-year low. It has since stabilised, but hasn’t recovered due, in large part, to uncertainty about how Britain will do business with the EU going forward and vice versa. One of the hopes of the business world is that the UK will be able to do more deals with the rest of the world that, until now have been subject to tariffs imposed by the EU.
Britain also lost its AAA credit rating, meaning the cost of government borrowing will be higher. But share prices have recovered from a slump in value, with both the FTSE 100 and the FTSE 250 index, which includes more British-based businesses, trading higher than before the referendum.
However, a lot of manufacturing businesses are reporting healthy numbers from both abroad and at home. It seems that the decrease in value of the pound has made products produced in Britain more appealing to an international consumer-base. On the flip side, UK businesses are finding it too expensive to import from abroad and so are looking to firms within the UK to source their components and products. In reality, it will be a long time until we see real stability in any market sector.
The Bank of England is hoping its decision to cut interest rates from 0.5% to 0.25% - a record low and the first cut since 2009 - will stave off recession and stimulate investment.
Despite the attempts of Conservative politicians from both sides of the divide to keep Cameron in office, he stepped down as Prime Minister. This triggered a rush of Conservative MPs to announce their bids for leadership. It seemed Johnson was the obvious choice to replace Cameron, but Gove threw his hat in the ring claiming the he didn’t think Johnson was the man for the job after he appeared to U-turn on some of the claims he had made during the campaign. It is worth noting that Gove had, until this point, had constantly claimed he had no interest in becoming Prime Minister and that he would support Johnson. The mud-slinging that followed prompted both to stand down leaving home secretary, Teresa May to win easily over the remaining candidates.
Since then May, a representative of the Remain campaign, has become the incumbent Prime Minister and has set up a new cabinet of mostly Remain supporters. A new government department has been set up, headed by veteran Conservative MP and Leave campaigner David Davis, to take responsibility for Brexit. Former defence secretary, Liam Fox, who also campaigned to leave the EU, has been given the job of international trade secretary and Johnson is foreign secretary.
These men - dubbed the Three Brexiteers - will play a central role in negotiations with the EU and in seeking out new international agreements, although it will be May, as Prime Minister, who will have the final say. The government didn’t establish any emergency plans for Brexit ahead of the referendum - and it is now rushing to hire a team of skilled negotiators to manage the complex business of navigating withdrawal and ensuring Britain gets the best possible deal.
She has also said that she will not be signing Article 50 of the Lisbon Treaty - which would trigger the withdrawal of the UK from the EU - anytime soon and has been touring Europe and the world to attempt to draft new trade deals with EU countries as well as with the USA and China. Even if she were to sign the deal tomorrow the process of Britain extricating itself from the EU would take two years. But again, having never been used, no one knows how long Article 50 will actually take to invoke. The former foreign secretary Philip Hammond, now chancellor and a Remain voter, has suggested it could take up to six years for the UK to complete exit negotiations as the terms of Britain's exit will have to be agreed by 27 national parliaments.
EU law still stands in the UK until it ceases being a member. The UK will continue to abide by EU treaties and laws, but not take part in any decision-making. This flies in the face of the Leave campaigners’ messages to the populace that Britain was going to gain autonomy, not that a timeframe was given, but the average voter may not have taken that in to account when casting their vote. This may also explain the number of people showing voters' remorse in the days and weeks that passed after the result.
A sad fact is that racially motivated crimes spiked around the referendum as the jingoistic rhetoric used by the Leave campaign appeared to ‘validate’ the thinking of certain right-wing factions of UK society. These same people, some of whom truly believed that a vote to leave the EU meant a vote to rid the UK of foreigners and immigrants (whether illegal or not), are now shocked that they may not be allowed to travel through Europe as they had in the past and that there is a difference between an illegal immigrant, an economic immigrant and a refugee.
May has said one of the main messages she has taken from the Leave vote is that the British people want to see a reduction in immigration. She has said this will be a focus of Brexit negotiations. The key issue is whether other EU nations will grant the UK access to the single market, if that is what it wants, while at the same time being allowed to restrict the rights of EU citizens to live and work in the UK.
She has said she remains committed to getting net migration - the difference between the numbers entering and leaving the country - down to a "sustainable" level, which she defines as being below 100,000 a year. It is currently running at 330,000 a year, of which 184,000 are EU citizens, and 188,000 are from outside the EU - the figures include a 39,000 outflow of UK citizens.
In simplified terms, the EU will only allow the UK to be part of the European single market (which allows tariff-free trade) if it continues to allow EU nationals the unchecked right to live and work in the UK. The UK says it wants controls "on the numbers of people who come to Britain from Europe". Both sides want trade to continue after Brexit with the UK seeking a positive outcome for those who wish to trade goods and services" - such as those in the City of London. The UK's Brexit talks will certainly need to balance immigration concerns while getting the best possible trade arrangements with the EU.
Some Brexiteers say that as the UK does not want freedom of movement and the EU says that without it there is no single market membership, the UK should seek to end uncertainty by pushing ahead with Brexit and not waste time trying to negotiate a special deal.
The government has declined to give a firm guarantee about the status of EU nationals currently living in the UK, saying this is not possible without a reciprocal pledge from other EU members about the millions of British nationals living on the continent. The Home Office has said that EU nationals who have lived in the UK for five years and more will retain the right to permanent residence. The rights of other EU nationals would be subject to negotiations on Brexit and the "will of Parliament," it added.
If the UK remains within the single market, it would almost certainly retain free movement rights, allowing UK citizens to work in the EU and vice versa. If the government opted to impose work permit restrictions, then other countries could reciprocate, meaning Britons would have to apply for visas to work.
For EU nationals who want to work in the UK it will depend on whether the UK government decides to introduce a work permit system of the kind that currently applies to non-EU citizens, limiting entry to skilled workers in professions where there are shortages.
Davis has suggested EU migrants who come to the UK as Brexit nears may not be given the right to stay. He has said there might have to be a cut-off point should there be a "surge" in new arrivals.
Could the necessary legislation pass the Commons, given that a lot of MPs - all SNP and Liberal Democrats, nearly all Labour and many Conservatives - were in favour of staying? As stated earlier. The referendum result is not legally binding - Parliament still has to pass the laws that will get Britain out of the EU, starting with the repeal of the 1972 European Communities Act.
The withdrawal agreement also has to be ratified by Parliament - the House of Lords and/or the Commons could vote against ratification. Conservative MPs who voted to remain in the EU could be whipped to vote with the government. Any who defied the whip would have to face the wrath of voters at the next general election.
One scenario that could see the referendum result overturned is if MPs forced a general electionand a party campaigning to keep Britain in the EU got elected. It’s election mandate would then top the referendum result. For this to happen, two-thirds of MPs would have to vote for a general election to be held before the next scheduled one in 2020.
Even this many months after the result of the referendum (October 2016), it seems that we are none the wiser about what will happen in the UK, Europe, the EU and the wider world. And it also appears that, until Article 50 is signed by whoever is Prime Minister at the time, no one can really predict it accurately either.
In the end, a decision of this magnitude should not have been left to an equally divided and poorly informed public to decide. After all, don’t we vote in politicians to represent us in making decisions of this magnitude?