You can’t look anywhere these days without seeing the latest Brexit news. For some people – even for those involved with negotiations – it can get a little confusing.
What does it mean? Why did it happen? When will it happen? Will it have any impact on Canadian businesses? There are so many questions.
So, we’ve put together an easy to understand guide to Brexit that will hopefully answer all of these questions for you.
What is Brexit and What Does it Mean?
The term Brexit is a shorthand way of referring to Britain exiting the European Union.
In June 2016, the United Kingdom held a referendum to decide if it should leave or remain in the European Union (EU). In an incredibly tight finish, leave won by a margin of 51.9% to 48.1%.
The result was considered a shock, and Prime Minister David Cameron – who called the referendum – stepped down. Conservative Party leader and Prime Minister Theresa May is currently overseeing the Brexit process.
How Did Each Country Vote?
The referendum turnout was 71.8%, with more than 30 million people voting. While the overall result was for the UK to leave the EU, not every country was in favour of it.
Here’s the breakdown of the results by country:
England: 53.4% to 46.6%
Scotland: 62% to 38%
Wales: 52.5% to 47.5%
Northern Ireland: 55.8% to 44.2%
You can see the referendum results in more detail here.
When is the UK Due to Leave the EU?
For the UK to leave the EU, it had to invoke Article 50 of the Lisbon Treaty. This gave both sides two years to agree the terms of the split. Theresa May triggered this process on 29 March, 2017, meaning the UK was scheduled to leave on 29 March 2019.
However, the UK has not yet left. British Parliament voted both against a deal with the EU and against no deal with the EU. The UK was forced to ask the EU for more time, and is currently due to leave on October 31st. As of April 16th, no withdrawal deal has been approved by British Parliament.
Will Brexit Definitely Happen?
Many things remain uncertain regarding Brexit, but as things stand the UK is leaving the European Union. And, most likely without a deal.
Several groups have been formed campaigning for Brexit to be stopped, as well as mass protests on the streets of London.
However, politicians seem to be focusing more on the UK’s relationship with Europe post Brexit, rather than halting the process.
What Will Happen When The UK Leaves The EU?
The true answer is that nobody really knows. There are several tricky issues that The UK and EU have to officially agree terms on.
One of these issues is how much money the UK still owes the EU. Another is what happens to UK citizens living elsewhere in the EU, and EU citizens living in the UK.
Perhaps the most divisive issue is what will happen with the Irish border. EU member states allow for the free movement of people, goods and services between other member states.
Brexit negotiations are currently focusing on avoiding a physical border between the EU and the UK (Ireland and Northern Ireland). A physical border would be a huge setback to peace in Northern Ireland, as well as to those who work on the other side of the border.
How Will Brexit Affect Businesses?
As it stands, Brexit will have a significant impact on trading with the UK.
The UK joined the EU in 1973 – this was the last time the country had to negotiate a trade deal. Until now that is.
Brexit means that the UK will have to sign 295 trade agreements if it wants to retain current trading relationships!
The UK and EU are negotiating their future trading relationship, which will determine tariffs and regulations for UK-EU trade. Brexit supporters argue that being outside the EU will enable the UK to develop new agreements with other countries.
Currently, around half of UK imports and exports of goods and services are with the EU. Brexit supporters want to focus on trading with countries like the US, China, India and Canada.
However, new agreements will be required for trade between the UK and countries who already have a trading agreement with the EU.
The ability to finalise trade agreements with other countries will only become a reality once the UK has left the EU officially.
These will all take time, so as is often the case with Brexit, no one really knows what will happen.
Already, one of the most impacted sectors to be hit by Brexit is the financial sector. Several investment banks have already announced plans to move 17,000 jobs out of London.
These jobs are predominantly being moved to mainland Europe and Ireland. Ireland is close, has a very low rate of corporate tax, and offers the security the EU and its existing trade deals.
Currently, migrants make up 14 per cent of the UK workforce. Of that 14 per cent, 5 per cent are EU nationals.
If the UK departs the EU, most EU migrant workers will be presented with the opportunity to stay and obtain British citizenship.
The real concern for businesses is future hiring and how to maintain a robust workforce. Currently, non-EU work visas are only awarded to those with specialised skills.
It is likely that, after the UK’s departure, EU work visas will follow suit.
With Brexit knocking on the door and no deal agreed, there is a lot of political uncertainty in the UK. This is one of the factors that lead to a currency’s depreciation.
When a currency depreciates, it declines in value. If the pound depreciates, this will cause problems for UK businesses who wish to obtain crucial materials.
They will have to pay more than usual for imports, and in turn jack up prices. This will make them much less competitive with rivals, and less desirable to consumers.
On the flip side, when a currency appreciates, it strengthens in value. This means any business importing goods from the UK could end up paying much less for materials.
Again, no one knows exactly what will happen with Brexit. However, it seems reasonable to assume that there will be some volatility for the Pound.
The pound is expected to depreciate in value both whilst the Brexit deal is being negotiated and again when the UK eventually leaves.
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