“The British are Leaving!”

My husband spent about 10 years in London, and so naturally, he was glued to his laptop last night eagerly monitoring the UK Referendum vote. And when he finally heard BBC call it – 52% Leave vs. 48% Stay – he remained calm for the most part and went to bed. But as of this morning, “calm” is not the way the world reacted.

Let’s break this down in simple speak…What does the United Kingdom leaving the European Union mean?

EU Fee

Because there is a membership fee to be part of the EU, Britain’s decision to leave the group results in immediate cost savings, as they would no longer need to contribute. In 2015, the UK paid EU about £13B, but was rebated £4.5B, making their net contribution about £8.5B. At a quick glance, this sounds great – to be able to save billions every year, but (here’s the BIG but) there are now…

Trade Tariffs

The EU association exempts member states from import and export taxes. According to Sky News, “More than 50% of UK’s exports go to other EU countries.” Being part of the EU team also allowed Britain to benefit from trade deals between other world powers. Going back to the math, UK will now have to determine whether the financial advantages of being freed from the EU membership fee outweighs the costs of these trade tariffs. With all things in life, this situation isn’t so black and white, so the UK is hopeful that they can strike an arrangement with the EU, similar to countries like Norway and Canada, to still get access to the single market but not be bounded by EU laws. We’ll see how that pans out…

Business in the UK

It’s no surprise that inward investment slowed down when talks of the referendum started due to uncertain outcomes. Now that the verdict is in and the “Leave” camp has won, there’s no doubt that British businesses will be greatly affected. Overall, most businesses recognized that it was in their best interest to stay in the Union. However, for those that disagreed, it came down to answering “are my negotiation skills better than the EU?” Business owners in favor of leaving felt that they’d be better off negotiating with non-European nations with the UK brand, rather than the EU identity. Of course, each business will be impacted differently; for example, the financial services industry can now enjoy its freedom from EU regulation, which imposed large transaction taxes and limitations on trading. The automotive industry, on the other hand, which is mainly foreign-owned, may take a hit, as one of the incentives in investing in Britain was the unfettered access to European markets. One thing is clear though – with the vote to “Leave”, the UK has made a significant bet on themselves and they may be “out in the cold with few friends, no influence” (Gordon Brown).

Immigration

Under EU law, citizens of member states can reside in any country within the Union. Although this is a 2-way street, where Brits can go live and work anywhere in the EU, an increasing number of Europeans are migrating to Britain, particularly from eastern and southern Europe. The pace of immigrants settling in has made Brits concerned for various reasons, including effects on the economy, wages, employment, and national security. This topic of “securing borders” has truly gone global.

Social Consequences

With the “Leave” camp thinking that they may reduce immigration in the UK by being more protective of their border, the flip side is “what happens to the British expats within the EU?” There are 9 countries in the Union that host British nationals, including Spain, which is home to more than a million Brits. Who knows what the Brexit will mean for almost 1.3M Britons living in Europe, but if the EU begins to treat the UK as any other non-European country, the freedom to move around their continent just got difficult.

Overall, one thing is for sure – the decision to leave the EU has made history. Time will tell if it was a wise choice on United Kingdom’s part, but this is just the beginning of a long journey for the UK, EU, and the rest of the world.

 

Leave a Reply

Your email address will not be published. Required fields are marked *