1. Economics
May 24, 2017

What are the consequences of the UK’s departure from the EU?

The UK voted to leave the European Union in June 2016 by a majority of 52 percent in what had already become widely known as the Brexit vote.

While the UK voted for Brexit, Brexit still hasn’t happened. Though with the formal triggering of Article 50 it is highly likely to do so within the next two years.

Verdict takes a look at what has happened since then the historic referendum and what’s still to come.

What’s the story so far?

Former British prime minister David Cameron resigned the day after the EU referendum results were announced and sterling plunged to a three-decade low.

Less than a week later, the then home secretary Theresa May formally declared she would be running for the Conservative Party leadership, coining the phrase “Brexit means Brexit” — though no one is yet sure what exactly that means.

On 13 July, she became prime minister, naming Boris Johnson as foreign secretary, David Davis as Brexit secretary, Liam Fox as trade secretary and Philip Hammond as chancellor of the exchequer.

By the end of July, the European Commission had appointed Frenchman Michel Barnier to lead the EU’s Brexit negotiations.

The Bank of England (BoE) lowered its benchmark interest rate to a record low 0.25 percent the following month, amid Brexit uncertainty and fears over a recession.

However this has not yet transpired.

In November, the High Court ruled that the UK  government had to hold a vote in parliament before starting the Brexit process.

Many media outlets criticised the ruling; the Daily Mail denounced judges as Enemies of the People while The Sun‘s front page headline read: Who do EU think you are?

On 7 December, the House of Commons voted by a majority of 448 to 75 in favour of May’s plan to trigger Brexit by the end of March 2017.

The Bank of England’s Mark Carney then announced that the risks to the economy have diminished since the referendum.

The government introduced a 137-word bill in Parliament to win the right to trigger Brexit in January. The House of Commons backed May’s bill by 494 to 122 the following month.

In March, the House of Lords amended the Brexit bill to guarantee the rights of EU citizens in the UK.

“This is an historic moment from which there can be no turning back,” said May on March 29, the day she triggered article 50, the official EU exit clause.

What’s expected to happen next?

The EU has now completed its preparations for the Brexit negotiations by handing legal directives to Barnier.

This 18-page document sets out the EU’s opening bids for the first phase of the Article 50 negotiations.

The initial talks will tackle three main areas.

Safeguarding the status and rights of EU citizens in the UK and vice versa is one of them as well as reaching an agreement on the UK’s financial obligations to the EU.

The amount of money the UK must pay the EU once it leaves has not yet been agreed, but it could be up to €100bn.

According to the European Commission’s statement:

The negotiations will also focus on “the new external borders of the EU, including the protection of the Good Friday Agreement, and finding imaginative solutions in order to avoid a hard border on the island of Ireland. Other issues include arrangements regarding dispute settlement and the governance of the withdrawal agreement.

British and EU negotiators must reach an agreement by March 2019, when Britain formally leaves the EU.

One senior EU figure warned that there is a more than 50 per cent chance talks could fall through, the Financial Times reported.

“Two years is unfeasible,” said another senior EU figure closely involved in the Brexit talks. “The more you learn the more you bump into the complications and legal problems.”

What’s going to happen to the UK?

The UK is facing its greatest existential threat in decades, with the country divided on whether leaving the EU will be good or bad.

This is likely to determine the course of politics for generations, with the Conservatives, who have traditionally been split on the EU, fighting for a so-called hard Brexit under May.

Up until recently there was hope among some businesses that a so-called soft Brexit would be possible — meaning the UK could retain access to the EU’s Single Market and that no new trade agreements between the UK and the EU would have to be put in place.

May ruled this out however, as EU negotiators have signalled the UK cannot have Single Market access without accepting the blocs other four so-called freedoms – movement of goods, capital, services, and labour.

As a result many of the City of London’s financial giants are considering leaving the capital as they will have to pay to move money around the EU, when before they could do it for free.

Different sides are lobbing hard to keep so-called passporting rights for the City, or to put a new deal into place quickly. However, the lights of Paris, Frankfurt, and Dublin are courting many of the big financial services firms to try to convince them to move.

While many companies have begun making contingency plans for a move away from the UK, few have put them in to practise, preferring to wait until more details emerge over how the landscape will look post-Brexit.

Other businesses could also leave, though May’s government has been trying to charm them, already promising car maker Nissan a deal if it keeps its factory open in Sunderland.

There is also increasing concern that either Scotland, Northern Ireland, or Wales could choose to leave the UK.

Scotland seems the most likely to do so, despite voting in a referendum in 2014 to remain the union.

The leader of the Scottish National Party Nicola Sturgeon has requested a second independence referendum from May, though May rejected the bid.

What’s going to happen to the EU?

Amid Brexit and the UK’s vote to quit the EU there is also a rising tide of populism sweeping Europe.

Despite France’s election of the pro-EU Emmanuel Macron last month, the anti-EU National Front party’s Marine Le Pen managed to garner over 30 percent of the vote in the two-candidate run off.

While the EU has admitted the UK’s vote to leave has been a wake up call that it needs to improve there is a chance that other member countries could follow the UK’s lead and quit the bloc.

Countries to look out for leaving include Greece, Italy, Spain, and Portugal.