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A Brief History of Brexit Timeline: How We Got Here

Looking for information on Brexit? Still, trying to understand what Brexit is all about? Let’s have a walk of it.

Almost four years after the referendum, people are still confused about Brexit’s state and its significance in the business world.

So, what does Brexit mean? How does it impact the financial markets and you? Can Brexit Survive the Pandemic?

Story of Brexit

Brexit or British Exit describes the United Kingdom’s decision to end their European Union (EU) membership. Currently, the EU comprises twenty-eight countries that partner with each other for trade and employment. This relationship removes the ban against travel, residency, and work. Meanwhile, the UK became a part of the EU in 1973, enabling her citizens to move freely, work, and reside in any EU state.

The struggle for or against Brexit reached its peak on June 23, 2016. On this day, UK citizens decide via a referendum to stay or leave the EU. Following the vote, the left party won by about 17.4m to 16.1m votes, representing 52% to 48%. But, the exit didn’t happen immediately to allow room for more discussions and deals.

Notable points of the Brexit Withdrawal negotiations include:

  • $44bn payment from the UK to EU for ending the partnership
  • What happens to UK citizens still residing in EU states?
  • What happens to EU citizens that visit, work, or reside in the UK
  • Avoiding the reintroduction of a physical border between the Republic of Ireland and Northern Ireland concerning the UK and EU
  • The transition period to enable the EU and UK to trade until businesses adjust

Following months of negotiations, the EU and UK agreed to a Brexit deal. Both parties ratified the deal in November 2018, and the UK was to leave on March 29, 2019. Surprisingly, the British MPs have constantly voted against this deal, delaying its implementation. Since MPs disapproved, UK Prime Minister, Theresa May, had to buy more time from EU leaders.

Two outstanding complaints against May’s deal bothers the level of UK control over its affairs and the Irish border’s return. Of course, both the EU and UK have agreed to a backstop over the Irish border issue.

What Does This Mean?

The backstop serves as a last resort to keep the Irish border open for free trade. This means that Northern Ireland would still be a part of the EU. However, most British MPs are angry with the Irish border situation, preferring to remain in the European Union.

However, Theresa May resigned because most MPs believed her deal keeps the UK closely tied to the EU.

After scrapping the backstop in October 2019, British Prime Minister Boris Johnson has renewed calls to renegotiate the withdrawal agreement. The proposed Northern Ireland Protocol (NIP), which replaces the border stop, will take off on January 1, 2021.

If successful, NIP law will allow Northern Ireland to still follow some EU laws, eliminating cross-border checks. But, EU leaders have not offered their consent, stating that the backstop is probably an essential part of the deal.

Why Is Brexit Still Being Talked About?

The 2018 withdrawal agreement means the UK is no longer an EU member, but we are yet to see Brexit’s end. Currently, the proposed date for ending the EU-UK relationship is January 1, 2021. Meanwhile, the transition period ends in December 2020, and there is no more room for extension. This means a No-deal Brexit comes into action if Boris Johnson cannot convince EU leaders to review the current withdrawal agreement.

The UK still follows EU rules and continues to pay its contributions. But this trading arrangement ends at the expiration of the transition period. Meanwhile, EU rules forbid countries from charging tariffs on each other’s products.

If there is no favorable deal, EU countries will place taxes on UK goods moving across borders. As expected, the UK will also impose tariffs on EU goods. But the introduction of full border checks keeps goods longer at ports. Even if there is a trade deal, UK goods will always go through regular border checks, meaning firms should prepare.

Of course, the imposition of tariffs makes UK goods expensive and difficult to sell at competitive prices. Again, no-deal Brexit causes UK industries, workers, and entrepreneurs to lose their full benefits as EU members.

Another aspect of the future relationship between the EU and the UK is security and fishing access. While critics say it’s profitable to remain in the EU, Brexit supporters believe the UK gains more in these areas.

Recently, the British government is on course to review the Northern Ireland Protocol through new legislation. According to the UK government, this new law will interfere with international laws in a specific way. Even so, the plan is to prevent any disruptions against Brexit implementation on January 1.

What Getting Brexit Requires?

After considering many factors, analysts believe these three considerations create a smoother Brexit implementation.

No More Extension

As mentioned earlier, the approval of the withdrawal agreement has brought succor to UK citizens. But both EU and UK understand there is more work to do. And this time, it seems the negotiations will take a bigger twist. Currently, Boris is against the idea of extending the transition period. Of course, that leaves only a few months for the UK to come to terms with the EU parliaments.

Meanwhile, having a deal sounds like a good decision. But there will be a lot of compromise in areas of business, trade, and labor. Thus, Johnson should be mindful of making mistakes while trying to resolve this issue.

More Practical in Approach

The present UK government should try everything within its power to avoid repeating past mistakes. Again, UK powers often regard Brexit losses as a non-issue, believing they can always exercise their sovereignty. This sounds good politically when looking for public support, but it won’t help create a smoother deal. So, both sides need to be realistic to reach a good end.

No Vacuum in Governance

Apart from the Irish Protocol, Johnson’s withdrawal agreement is the same as May’s. But, clauses that reference the joint government arrangements per the EU and UK relationships are non-existent. These arrangements will create a smoother footing for future trade negotiations/agreements between the EU and the UK.

While the UK agrees to a joint governance arrangement, the EU will give the UK greater market access. Meanwhile, the UK will create regulatory agencies to handle the duties of the EU commission. Of course, that’s a huge burden for the UK government; hence, joint governance could be better.

Brexit Impact and Effect on Financial Markets

According to Bloomberg, Brexit would have a bad effect on the UK economy. Of course, EU membership allows interstate trading, which has favored many British firms and financial institutions. For example, in 2015, British Fintech Firms gained about 660 million pounds, the highest for any EU member country. If Brexit is successful, Britain could lose up to $5 Billion in five years.

Again, most fintech startups may choose to site their offices in EU states instead of Britain. Thus, many people in the UK could lose their jobs, especially in the finance and tech industries.

Consequently, British banks are asked to increase their reserves to avoid issues if more customers withdrew their funds after Brexit. Besides, TransferWire, a major money transfer firm in the UK, has announced plans to stop certain GBP transfers. All these echoes the fact that Brexit could be disastrous to the UK financial markets.

Though the US seems far, experts say it is not immune to the impact of Brexit. According to MarketWatch, many investors are apprehensive over Brexit risks, resulting in lower stocks. Again, the Guardian revealed that banking stocks could fall by 8 percent following a successful Brexit vote. Of course, many investors would likely leave the UK markets to pitch their tents elsewhere; probably, the US.  

Brexit in The Pandemic

It seems the pandemic might cause serious disruptions to the January 1st Brexit deadline. The lack of attention to post Brexit relationship agreements is still a problem, let alone Covid-19. Thus, it leaves us to ask if the UK will be making the right decision to leave the EU in this present economic situation.

So far, much progress has not been made with negotiations from both sides since march. Again, citizens are uncertain about the possibility of a smoother exit. Since the world is facing the threat of re-emergence of Covid-19, the time to act is now.

At the moment, Boris has planned to introduce legislation that will replace the withdrawal agreement clause in Northern Ireland. Besides, all negotiations and deals should be settled before October 15. If not, the UK will resort to ‘No-Deal Brexit.’ However, with the rising Covid-19 cases and closing in the transition period, a lot of uncertainty surrounds the Brexit outcome.

Conclusion

Several years have passed, several deals drafted; Brexit’s planned date is January 1, 2021. While we’re still unsure of Brexit’s outcome for both UK and EU citizens; yet, the government says it has the solution in place.

Even so, the pandemic has caused a serious economic downturn in Europe, causing many to oppose Brexit. Though Brexit will impact the world’s economy, the EU high court says the UK can cancel it at any time.  

Meanwhile, all we can do is wait and observe the outcome, even as the negotiations continue.

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