Brexit
Brexit – A “quick” overview
• 20 February 2016: The Referendum date is announced
• 23 June 2016: The UK holds a referendum on whether to leave the EU.
• 24 June 2016: The results are announced: 52% of voters choose to leave
• David Cameron resigns as Prime Minister, after this shock to the ‘remainers’
• 13 July 2016: Theresa May becomes new Prime Minister
• 29 March 2017: Article 50 is formally triggered by the UK
• 2016-2020: Long Talks and Negotiations with the EU; many issues over trade, movement of goods and people; Ireland border, fishing rights etc.
• 2019: Boris Johnson becomes new PM
• 31st January 2020: The UK formally leaves the EU
• The UK enters an 11-month transition period until 31st Dec 2020.
(1) BBC: “Brexit: What is the transition period?”
Available at: https://www.bbc.co.uk/news/uk-politics-50838994
(2) FT: “Brexit timeline: key dates in the UK’s divorce from the EU”
Available at: https://www.ft.com/content/64e7f218-4ad4-11e7-919a-1e14ce4af89b
(3) BBC: “Brexit: The UK has officially left the EU - what happens next?
Available at: https://www.bbc.co.uk/news/world-europe-51307874
(5) FT: “The UK economy since the Brexit vote — in 6 charts”
Available at: https://www.ft.com/content/cf51e840-7147-11e7-93ff-99f383b09ff9
Some useful background reading:
The EU-UK Trade and Cooperation Agreement (as of Dec 2020) consists of:
A Free Trade Agreement
A close partnership on
citizens’ security
An overarching governance framework
A Free Trade Agreement:
• This agreement covers more than trade in goods and services; it also entails areas such as investment, competition, State aid, tax transparency, air and road transport, energy and sustainability, fisheries, data protection, and social security coordination.
• Zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin→ Zero tariffs does not mean zero non-tariff barriers…
• the agreement provides for continued and sustainable air, road, rail and maritime connectivity, though market access falls below what the Single Market offers.
• The agreement enables the UK's continued participation in a number of flagship EU programmes for the period 2021-2027 (subject to a financial contribution by the UK to the EU budget) → We already know that the UK left Erasmus…
A Free Trade Agreement:
• While the agreement certainly goes beyond traditional free trade agreements and provides a solid basis for preserving the UK-EU friendship and cooperation, there are BIG changes.
• As of 1st January 2021, the UK has formally left the EU Single Market and Customs Union, as well as all EU policies and international agreements.
• The free movement of persons, goods, services and capital between the UK and the EU will end…
• …What does this mean in practice?!
Brexit – Impacts on the UK & trade
Source: OECD TIVA 2011 and Rabobank 2017
In fact…
• The volume of exports going through British ports to the EU fell by 68% last month compared with January 2020.
• Additionally, ca. 65%-75% of vehicles that had come over from the EU were going back empty because there were no goods for them to return with, due to hold-ups on the UK side, and because some UK companies had either temporarily or permanently halted exports to the EU.
• See Fury at Gove as exports to EU slashed by 68% since Brexit | Politics | The Guardian
Brexit – Impacts on the UK & FDI • According to UNCTAD’s 2019 Global Investment Trends
Monitor, global FDI has decreased by 1% compared to the previous year.
• FDI into developed countries was at a historical low, having decreased by 6% in 2019, whereas inflows into developing countries remained unchanged at $695 billion.
• Specifically, FDI in the United Kingdom decreased by 6% as Brexit further unfolds. → The UK may in the long term lose its position as a “gateway to Europe”.
• On the other hand, inflows into Germany tripled as MNEs extend loans to foreign affiliates in a year of slow growth.
Source: ONS and Rabobank 2017
Foreign direct investment in the UK
Brexit – Impacts on
the UK
Brexit – Impacts on
the UK
Brexit – Impacts on the EU • With Brexit, the EU loses its second largest net contributor to the EU
budget; net contributors contribute more to the EU budget than they receive back from it. Opposite situation for net recipients.
Source: https://www.bbc.co.uk/news/uk-politics-48256318
Brexit – Impacts on the EU • It depends on the ‘final’ deal and the country… and the industry!
• Only under a “Norway” scenario (EEA), where access to the single market is preserved and membership in the customs union is lost, impacts on the EU is negligible.
• The more a country trades with the UK, the larger the impacts on output caused by Brexit will be.