Brexit

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"Brexit" is a portmanteau word meaning "British exit" and referring to a referendum by British voters held on June 23, 2016, to decide whether to exit the European Union. British voters decided to leave the EU in a 52 percent to 48 percent vote that shocked the world and left markets the following day reeling and the pound down to levels not seen since 1985.[1] More than 30 million people turned out to vote.

British Prime Minister David Cameron, who led the "remain" camp, announced he would resign, and Scotland’s first minister, Nicola Sturgeon, said that country would revisit the idea of holding a referendum on independence from Britain, given that an overwhelming majority of Scots voted in favor of staying in the EU.

The move opened up questions about regulation of the British markets, as well as about the stability of banks and currencies.

The main reasons cited for leaving were that the European Union had too large and bureaucratic over the past four decades and had diminished British influence and sovereignty. Immigration was also considered a key issue to the "leave" camp. [2] There has been growing disillusion with the EU over migration and problems with the euro.

Reasons to stay included the economic cost of leaving, which some economists warned would cut growth, weaken the pound and diminish the City of London as a financial center.[3]

The U.K. formally began the process of exiting from the European Union on March 29, 2017, nine months after the vote to leave the EU. The triggering of Article 50 of the Lisbon Treaty, which governs EU law, opens a two-year window for Britain to negotiate the terms of its exit, a path from which British Prime Minister Theresa May said there would be no turning back.[4]

The U.K.'s exit is scheduled to happen at 11:00 p.m. UK time on Friday, March 29, 2019. The UK and EU have provisionally agreed on three issues: how much the UK owes the EU, what happens to the Northern Ireland border, and what happens to UK citizens living elsewhere in the EU and EU citizens living in the UK.[5]

However, disagreements over how to address a number of crucial issues in a U.K. exit caused delays in reaching a Brexit deal. The main cause of the delay was Northern Ireland. The idea of a backstop plan that would avoid a hard border in Ireland in all circumstances was accepted by both sides in December of 2017. But May rejected the EU’s interpretation of the agreement, which was to keep Northern Ireland in a customs union and in regulatory alignment with its single market. The backstop in the withdrawal agreement is to keep the whole United Kingdom in a customs union with the EU until an alternative is found.[6]

Members of Theresa May's cabinet held strongly opposing views about Brexit. The "Chequers Plan," drawn up in July of 2018 by May and the cabinet at her country house "Chequers" in Buckinghamshire, included proposals for the UK to mirror EU rules on goods and for the UK and EU to be treated as a "combined customs territory" which would mean the UK would apply domestic tariffs and trade policies for goods intended for the UK, but charge EU tariffs and their equivalents for goods which will head into the EU. This was intended to avoid the need for a visible border with the Republic of Ireland. The plan suggested that the UK would also be free to strike its own trade deals with countries around the world, something it is currently unable to do as a member of the EU customs union.[7]

In October 2018 the Bank of England issued a strong warning to the EU that lack of proper planning for Brexit had created a growing risk for £70tn in derivatives that could be rendered illegal the moment Britain leaves the Union. EU firms have trillions in outstanding derivatives contracts that clear in the UK.[8]

On November 14, 2018 the UK and the European Union confirmed the provisional text for the Brexit withdrawal agreement, which set out plans for addressing a range of key issues including citizens' rights, customs arrangements, the UK's financial settlement to the EU and a transition period out to the end of 2020. [9] The deal still needs to be approved by the British Parliament.[10] Just over 12 hours after May announced that her cabinet had agreed to the terms of the deal, Brexit minister Dominic Raab and work and pensions minister Esther McVey - and others - resigned, and some in May's Conservative Party said they had submitted letters calling for a vote of no confidence in her leadership, raising the risk that the deal would be rejected and Britain would leave the EU on March 29, 2019 without an agreement. Both sides criticized the agreement for effectively ceding power to the EU without securing the promised benefits of greater autonomy.[11]

History

The European Union came from a movement after World War II to create unity between Germany and France which eventually laid the foundations for the EU forty years later.[12] Britain first joined what was then called the European Economic Community (formed in 1957) in 1973.

Over the years the political base of British "Euroscepticism" (the Leave camp) has moved from left to right. Labour was more suspicious of the EU in early years, and in 1962 its leader, Hugh Gaitskell, warned that joining the common market would end 1,000 years of British history. Labour was also in favor of withdrawal during the 1980s. But in 1998 Margaret Thatcher gave a speech attacking undue EU influence in the UK. Her denunciation of European Commission President Jacques Delors plan for closer EU integration and a single currency led to her downfall two years later, and the Tories replaced Labour as the party of Euroscepticism.[13]

Prime Minister David Cameron promised a Brexit in the Conservative Party manifesto for the May 2015 election, but as he never expected the amount of negative sentiment toward the EU, nor did he believe that leaving was in the best interest of the nation, he went on to back the "remain" camp.[14] Automobile companies, such as Toyota UK, Vauxhall, Jaguar Land Rover and BMW, as well as component makers GKN and Magal Engineering, also backed the remain campaign.

The “leave” camp was led by Michael Gove, the justice minister, and Boris Johnson, the former mayor of London. Nearly half the Conservative members of Parliament favored leaving, as did the members of the UK Independence Party, or UKIP, and its leader, Nigel Farage.

References

  1. Pound plunges after Leave vote. BBC News.
  2. ‘Brexit’: Explaining Britain’s Vote on European Union Membership. The New York Times.
  3. Sayeeda Warsi quits leave campaign over 'hateful, xenophobic' tactics. The Guardian.
  4. Britain Sets Historic Brexit Process in Motion. The Wall Street Journal.
  5. Brexit: All you need to know about the UK leaving the EU. BBC.com.
  6. The beginning of the end game for Brexit. The Economist.
  7. Brexit: All you need to know about the UK leaving the EU. BBC.com.
  8. Bank of England warns EU over Brexit risk to financial stability. The Guardian.
  9. Special Report - UK and EU withdrawal agreement text confirmed. FIA/Marketvoice.
  10. UK's May Gets Cabinet's Go-Ahead on Brexit Deal. The Wall Street Journal.
  11. May vows to fight for her Brexit deal and carry on. Reuters.
  12. What is the EU, why was it created and when was it formed?. The Telegraph.
  13. The roots of Euroscepticism. The Economist.
  14. Economist Brexit Briefs: The roots of Euroscepticism. The Economist.