- Since last year, the term Brexit is being heard more than often every now and then. For a layman's understanding Brexit means the UK (United Kingdom) leaving the EU (European Union) and hence the term Brexit comes by combining "Britain and Exit".
- A referendum (a vote) was held on 23 June 2016 to decide whether the UK should remain in the European Union or leave. The European Union or the EU is a partnership on various socio-economic and political levels involving 28 European countries which was formed after the World War II with the intentions of promoting trade and commerce & avoiding war with each other.
- The referendum resulted in the Leave side winning by 51.9% to 48.1%. England, Wales, Scotland and Northern Ireland were the participants in the referendum as they together constitute the UK.
- England voted for Brexit, by 53.4% to 46.6%. Wales also voted for Brexit, with Leave getting 52.5% of the vote and Remain 47.5%. Scotland and Northern Ireland both backed staying in the EU. Scotland backed Remain by 62% to 38%, while 55.8% in Northern Ireland voted Remain and 44.2% Leave.
Political Impact of The ReferendumBefore the referendum, then British Prime Minister David Cameron campaigned extensively for the UK to remain in the EU as he believed that the UK is stronger by being a part of the EU. But as soon as the referendum came in favour of leaving the EU, David Cameron announced his resignation. This resulted in the former Home Secretary: Theresa May becoming the new Prime Minister of Britain. Mrs. May on 29 March 2017 finally kicked off the two-year long negotiating process of leaving the EU, putting at rest all the doubts about whether Britain will actually take the official step of exiting EU or not by setting out her negotiating goals in a letter to the EU Council President Donald Tusk.
Economic Impact of The ReferendumMany economists predicted an immediate economic crisis in the event of a Brexit, the stock markets remained cautious prior to the event but after the referendum, nothing happened apart from a temporary much-anticipated correction in the global markets which was eventually recovered in the days that followed. However, the Pound did weaken after the result of the referendum and remains significantly lower against the Dollar and the Euro, till date. A weak Pound is adversely affecting the UK's imports as now a weak Pound is not able to get as much as it used to in cross currency trades when it was stronger. The depreciating value of the Pound as discussed above is also adding to the problems of the tourists as well from the UK as now they have to shell out more money because of a weaker Pound.
Article 50Another famous term associated with Brexit is "Article 50". So, what is Article 50? Well, simply put: Article 50 is basically a plan for any country that wishes to exit the EU. It was created as part of the Treaty of Lisbon - an agreement signed up to by all EU states which became law in 2009. Before that treaty, there was no formal mechanism for a country to leave the EU. For those who still want to know the nitty-gritty of Article 50 must know that there is not much in Article 50 apart from a few conditions for any EU member state that wishes to exit the EU, such as:
- Any EU member state that wishes to quit the EU must notify the European Council and negotiate its withdrawal with the EU.
- There are two years to reach an agreement - unless everyone agrees to extend it - and that the exiting state cannot take part in EU internal discussions about its departure.
The Road Ahead
- If everything goes as planned and well within the stipulated time frame of the negotiation process that Theresa May triggered on 29 March 2017, the UK is scheduled to leave on Friday 29 March 2019. Although, it can be extended if all 28 members agree.
- Case in point here is that Scotland who voted to stay in the EU is not pleased with the decision of exiting the EU. Scotland's First Minister Nicola Sturgeon said in the wake of the Leave result that it was "democratically unacceptable" that Scotland should leave the EU when it categorically voted to stay in the EU.
Effects of Brexit
Hard Brexit and Soft Brexit:These are very popularly discussed terms in debates centred around Brexit nowadays. A Hard Brexit would imply the UK refusing to compromise on issues like the free movement of people in order to maintain access to the EU single market. On the other hand, a Soft Brexit might follow a similar path to Norway which is not a member state of the EU but is closely associated with the Union through its membership in the European Economic Area (EEA), in the context of being a European Free Trade Association (EFTA) member.
Citizenship IssuesAnother growing point of concern is about the status of EU citizens living in the UK and the UK citizens living in the EU as currently an EU national is granted a right to permanent residence in the UK after they have lived in the UK for 5 years. For this to continue, the UK would expect the same reciprocity from other EU members for the status of millions of British nationals living on the continent.
Work PermitsSimilar is the case when it comes to work permits for both EU and UK citizens. If the UK government decides to impose work permit restrictions on EU national then the other countries could respond on the same grounds resulting in UK citizens to apply for Visas to work.
Other Miscellaneous Issues
- Someone who is married to a UK national or an EU national is anxious about the possible changes in his/her rights & privileges with respect to medical insurance, banking services, taxation norms etc. as far as their current status is concerned.
- With inflation risen to 2.3% in February (its highest rate for three and a half years), concerns are looming over the future status of pensions, savings, investments and mortgages in the UK.
- If the growing inflation becomes a concern for the Bank of England and it considers raising the interest rates then mortgages and loans will become more expensive to repay.
- However, the elaborated outcome of Brexit can only be seen once this process turns into a done deal!
Smart Prep Kit for Banking Exams by Ramandeep Singh - Download here