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.