Brexit
History of the European Union and the United Kingdom
EU roots and British accession (1957–1973)
The UK was not a signatory of the three original treaties that were incorporated into
what was then the European Communities, including the most well known of these, the 1957
Treaty of Rome, establishing the European Economic Community (EEC). The UK's applications
to join in 1963 and 1967 were vetoed by the President of France, Charles de Gaulle, who said
that "a number of aspects of Britain's economy, from working practices to agriculture" had
"made Britain incompatible with Europe" and that Britain harboured a "deep-seated hostility"
to any pan-European project.
Once de Gaulle had relinquished the French presidency in 1969, the UK made a third
and successful application for membership. The Treaty of Accession was signed in January
1972 by the then prime minister Edward Heath, leader of the Conservative Party. Parliament's
European Communities Act 1972 was enacted on 17 October, and the UK's instrument of
ratification was deposited the next day (18 October),[4] letting the United Kingdom's
membership of the EC come into effect on 1 January 1973.
Referendum of 1975
In the 1970s and 1980s, withdrawal from the EC was advocated mainly by the political
left, with the Labour Party's 1983 election manifesto advocating full withdrawal. In 1975, the
Labor Party held its first ever national referendum on whether the UK should remain in the
European Communities. Every administrative county and region in the UK returned majority
"Yes" votes, apart from the Shetland Islands and the Outer Hebrides.
From Referendum to Maastricht Treaty (1975–1992)
The opposition Labour Party campaigned in the 1983 general election on a
commitment to withdraw from the EC without a referendum. It was heavily defeated; the
Conservative government of Margaret Thatcher was re-elected. The Labour Party
subsequently changed its policy.
In 1985, the United Kingdom ratified the Single European Act—the first major revision
to the Treaty of Rome — without a referendum, with the full support of the Thatcher
government.
In October 1990 — despite the deep reservations of Margaret Thatcher,[citation
needed] who was under pressure from her senior ministers[citation needed] — the United
Kingdom joined the European Exchange Rate Mechanism (ERM), with the pound sterling
pegged to the deutschmark. Commented [P1]: Sairia logo em 1992
Maastrich treaty and Referendum party
Under the Maastricht Treaty, the European Communities became the European Union
on 1 November 1993, reflecting the evolution of the organisation from an economic union into
a political union. In accordance with British constitutional convention, specifically that of
parliamentary sovereignty, ratification in the UK was not subject to approval by referendum.
However, some believe that this perceived democratic deficit directly led to the formation of
the Referendum Party and the United Kingdom Independence Party.
The Referendum Party was formed in 1994 by Sir James Goldsmith to contest the 1997
general election on a platform of providing a referendum on the UK's membership of the EU.
The UK Independence Party (UKIP), a Eurosceptic political party, was also formed, in 1993. It
achieved third place in the UK during the 2004 European elections, second place in the 2009
European elections and first place in the 2014 European elections, with 27.5% of the total
vote. This was the first time since the 1910 general election that any party other than the
Labour or Conservative parties had taken the largest share of the vote in a nationwide
election. UKIP's electoral success in the 2014 European election is documented as the
strongest correlate of the support for the leave campaign in the 2016 referendum.
Referendum of 2016
Prior to the 2010 general election, the then Leader of the Conservative Party David
Cameron had given a "cast iron" promise of a referendum on the Lisbon Treaty, which he
backtracked on after all EU countries had ratified the treaty before the election.
Cameron promised in January 2013 that, should the Conservatives win a parliamentary
majority at the 2015 general election, the British government would negotiate more
favourable arrangements for continuing British membership of the EU, before holding a
referendum on whether the UK should remain in or leave the EU.
In early 2014, David Cameron outlined the changes he aimed to bring about in the EU
and in the UK's relationship with it. These were: additional immigration controls, especially for
citizens of new EU member states; tougher immigration rules for present EU citizens; new
powers for national parliaments collectively to veto proposed EU laws; new free-trade
agreements and a reduction in bureaucracy for businesses; a lessening of the influence of the
European Court of Human Rights on British police and courts; more power for individual
member states, and less for the central EU; and abandonment of the EU notion of "ever closer
union". He intended to bring these about during a series of negotiations with other EU leaders
and then, if re-elected, to announce a referendum. The outcome of the renegotiations was
announced in February 2016.
In a speech to the House of Commons on 22 February 2016, Cameron announced a
referendum date of 23 June 2016, and commented on the renegotiation settlement. He spoke
of an intention to trigger the Article 50 process immediately following a leave vote, and of the
"two-year time period to negotiate the arrangements for exit." The agreed referendum
question was "Should the United Kingdom remain a member of the European Union or leave
the European Union?". The result was announced on the morning of 24 June: 51.89 per cent
voted in favour of leaving the European Union, and 48.11 per cent voted in favour of
remaining a member of the European Union. 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. After the referendum, David
Cameron resigned and Theresa May is now responsible for negotiating the Brexit with the EU.
Debates between the EU and the UK
The debate over the right terms and conditions for Britain’s departure from the
European Union is often simplified into two clashing concepts: a soft Brexit and a hard one.
The first tends to be favoured by those who voted Remain in the 2016 referendum, the second
by those who voted Leave. Yet what is the real, practical difference between the two? And can
bits of both be combined to some degree?
A soft Brexit is usually taken to refer to one that keeps Britain closely aligned with the
EU. The objective is to minimise the disruption to trade, to supply chains and to business in
general that would be created by diverging from the EU’s regulations and standards, thereby
reducing the cost of Brexit. In practice a soft Brexit means staying within both the EU’s single
market (like Norway) and its customs union (like Turkey). Soft Brexiteers are willing to be Commented [P2]: If that is the case, the UK must make
payments into EU budgets and accept the "four freedoms" of
bound by EU rules and tariffs even though Britain will lose any say in making them. They also movement of goods, services, capital and people. Nonetheless, it
accept the inevitable consequence that it will be hard, even impossible, for Britain to do any would no longer be a member of the EU and would not have a seat
on the European Council.
trade deals with third countries.
A hard Brexit rejects the whole idea of close alignment. The goal is to escape
burdensome EU regulations and tariffs, so as to be able to draw up rules and customs
arrangements of Britain’s own choosing. In practice a hard Brexit means leaving both the single
market and the customs union. Hard Brexiteers believe that staying in either would turn
Britain into a “vassal state” of the EU. They are willing to accept the short-term disruption and
potentially high costs of breaking free from Brussels, because they believe that the long-term
gains from better regulation and the striking of free-trade deals all round the world will do
more than enough to offset them.
Theresa May’s declared policy is to take back control of Britain’s laws, borders and
money, which seems to imply a hard Brexit. She still insists on red lines that include leaving
both the single market and the customs union. Yet in the Brexit negotiations in Brussels she
has agreed to a transition during which Britain will continue to be bound by all EU rules. And to
guarantee that there will be no hard border between Northern Ireland and the Irish Republic,
she has also accepted that there must be a “backstop” solution that keeps Britain in a customs
union and in close regulatory alignment with the EU for some years, until another way is found
of avoiding any infrastructure, customs checks or associated controls on the border. As Mrs
May keeps softening her red lines, many expect the eventual result to combine elements from
both a hard and a soft Brexit. One possible answer would be to stay in a customs union and the
single market for goods alone, but not for services. Like most compromises, such an outcome
would please neither side. Yet both may just have to learn to live with it.
Brexit withdrawal agreement
Published on 14 November 2018, it was a result of the Brexit negotiations. The
agreement was endorsed by the leaders of the 27 remaining EU countries and the UK
Government led by Prime Minister Theresa May, but faced opposition in the UK parliament,
whose approval was necessary for ratification. On 10 December 2018, May deferred the vote
scheduled on 11 December, because she thought it "would be rejected by a significant
margin". On 15 January 2019, the House of Commons rejected the withdrawal agreement by a
vote of 432 to 202. The Agreement was rejected again on 12 March 2019 by the House of
Commons on a vote of 391 to 242, and rejected a third time of 29 March 2019 by 344 votes to
286. Closely connected to the withdrawal agreement is a political declaration on the future Commented [P3]: The backstop was a key sticking point for
many MPs who voted down the deal. They feared it could leave
relationship between the UK and EU. Britain tied to the EU indefinitely with no say over its rules and no
ability to strike trade deals with other countries. Since the Good
Following the failure of UK Parliament to approve the Withdrawal Agreement by 29 Friday Agreement, there are no rigid borders between Ireland and
Northern Ireland.
March, the UK was now legally due to leave the EU on 12 April 2019. On 10 April 2019, late-
night talks in Brussels resulted in another extension (the second one) to 31 October 2019;
Theresa May had again only requested an extension until 30 June. Under the terms of this new
extension, if the Withdrawal Agreement is passed before October, Brexit would occur on the
first day of the subsequent month. However, the UK would now be obligated to hold European
Parliament elections in May, or leave the EU on 1 June without a deal.
Possible effects and risks
1. Trade
The impact on UK trade with Europe will depend on the relationship between the UK and
the EU after Brexit. In the most likely scenarios – either the Swiss model, or an FTA-based
relationship – regulatory divergence that adds to the cost of trade is likely to increase over Commented [P4]: As well as wreaking havoc with economies of
scale
time, damaging bilateral trade volumes and the UK’s position in European supply chains. The
costs will be borne by consumers as well as businesses. Post-Brexit outcomes which reduce
trade or increase the cost of trade between the UK and the rest of Europe will be damaging for
both sides.
2. FDI
The UK is the largest recipient of FDI in the EU. Brexit could reduce the attractiveness of
the UK as a gateway to Europe. It could also lead to a reduction in investment from the rest of
the EU, which is the biggest source of FDI in the UK. It may become harder to attract corporate
HQs. The UK has many advantages that would be unaffected by Brexit such as language, light
regulation and deep capital markets. Even so, the UK may struggle to attract as much new
investment following Brexit. Other locations inside the EU are likely to be more attractive for
marginal investment decisions.
3. Industrial policy
UK industry benefits from research collaboration in Europe and researchers have done
well in EU competitions. While the UK would gain flexibility over industrial policy outside the
EU it would lose the benefits from scale and influence over policy in areas such as energy. The
UK receives more funding from the European Research Council than any other country and
50% more than Germany, allowing UK universities to fund more than 10% of project-based
research from EU contributions. Ten of the top twenty universities in the FP7 programme are
in the UK, including the top three. UK researchers benefit from the pan-European collaboration
encouraged by programmes like Horizon 2020. 49% of CBI members say access to EU research
funding helps their business. The automotive, aerospace, pharmaceuticals, and chemicals
sectors are among the beneficiaries. The impact on industrial policy in the EU depends on the
Brexit model, but we may see a weakening of competition policy, looser collaboration in
education and research, and fewer EU students in the UK.
4. Immigration
Immigration is a fraught political issue in the UK both because the costs and benefits are
not distributed evenly and as perceptions have become disconnected with reality, partly due
to hostile media coverage. The scope to tighten immigration depends on the Brexit model. This
risks damaging competitiveness, particularly of London, and being economically costly.
Immigration helps address skills shortages and the consequences of an aging population. Free
movement allows UK firms access to specialist skill that are increasingly important to high-
value added industries. 63% of CBI members say free movement has benefitted their business.
It is estimated that 1.5m new jobs will be created in higher-skilled jobs popular with EU15
migrants by 2022. Few new lower-skilled jobs will be created, but there will be a high demand
for labour to replace retirees in these areas. Businesses operating elsewhere in Europe can
largely work around any restrictions on the free movement of labour imposed by the UK.
However, changes to the labour supply and the flow of remittances will impact on some
countries. Perhaps the biggest risk, but the hardest to predict, is of ‘political contagion’
elsewhere in Europe if the UK tightens border controls.
5. Trade policy
The UK would be free to set its own trade policy priorities under some Brexit models, but these
are unlikely to be much different from the EU’s. The UK would have less leverage and be a
lower priority trade partner than the EU for the major economies. The UK would lose the
strength in numbers at the WTO when settling disputes with countries like China. The EU has
considerable experience negotiating deep and comprehensive trade agreements. The EU is a
signatory to over 30 bilateral and regional agreements with over 50 partners. The EU is
currently negotiating trade deals with the US, Canada and Japan, which would improve access
to markets worth $23tn in total. The EU is negotiating an investment agreement with China.
The UK would have to renegotiate EU trade agreements as these would not automatically
apply. This would require considerable diplomatic effort before the UK could turn to new
deals.
The EU has an open, liberalising approach to trade policy, in part due to UK influence.
The UK, more than any other state, has put top-level political weight behind trade
negotiations. The EU would be a less attractive partner for trade agreements if the UK was no
longer part of the deal. Furthermore, after Brexit the balance in the European Council on
economic policy debates would shift, with the loss of a large member state supporting
liberalisation. Germany, in particular, would find it harder to assemble a blocking minority or
to act as the swing state in regulatory debates. Germany would become more exposed
politically, by having to lead opposition to illiberal measures.
6. Uncertainty
Brexit would be a protracted process, lasting around ten years. The endpoint for the UK-EU
relationship would be subject to a negotiation. Business would face high and increasing levels
of uncertainty during this process, impacting on investment decisions and with
macroeconomic consequences. Brexit could create an extended period of uncertainty that
damages confidence and the appetite for both domestic and inward investment in the rest of
the EU. But perhaps the biggest risk is political contagion from the ‘proof of concept’ of leaving
the EU, with Brexit encouraging disintegrative political forces elsewhere in Europe.
7. Budget
The EU would lose a significant net contributor to the EU budget. This gap would need to be
filled either by higher contributions from other states or less spending. The UK is currently the
second largest net contributor to the operating budget of the EU in absolute terms, behind
Germany, and the fourth largest as a percent of GNI, behind Sweden, Denmark and Germany.
