By Christiana Ioannou
Brexit or the United Kingdom’s withdrawal from the European Union (E.U.) officially completed on January 1, 2021, nearly after five years.
The UK has been a member of the European Union since 1973, but on June 23, 2016, U.K. voted to leave the E.U.
During the Brexit, a new trade agreement is signed between U.K. and E.U. to retain their tariff-free status. The constraints on immigration were levied, which hampered the U.K.’s labour force.
How Brexit proceeded under different Presidents?
On March 29, 2017, the then U.K. Prime Minister Theresa May submitted the Article 50 withdrawal notification to the E.U., but it wouldn’t get approval from the divided Parliament.
In the general election on December 12, 2019, under Prime Minister Boris Johnson, the U.K. has approved the withdrawal agreement.
On January 23, 2020, after receiving the legislative Royal consent, the agreement Act was made the bill into law, and the U.K. left the E.U. on January 31, 2020.
However, it has entered a transition process that ended on December 31, 2020.
From January 1, 2021, the Trade and Cooperation Agreement between the EU-UK has come into existence which does not cover foreign policy and defence. However, it covers trade, corporation and governance.
Impact of the Trade and Cooperation Agreement
- According to the agreement, the U.K. is no longer a customs union and a single market part.
- However, as per the trade Agreement, zero tariffs and zero quotas on the goods traded would be applicable based upon the product’s place of origin.
- The free movement between the U.K. and the E.U. has ceased. It is mandatory for the European nationals already living in the U.K. to have documents from the U.K. government allowing their stay in the country.
- Services like telecommunications, Broadcasting and electronic services may be taxed.
- The U.K. has to pay a ‘divorce bill’ of 25 billion pounds by 2057 regarding financial commitments remaining while the UK was an E.U. member.
- The E.U. law is no longer applicable to the U.K.; however, it will cooperate on law enforcement and criminal justice matters.
Impact on Travelers
Travelers commuting between the E.U. and the U.K. should have a passport to be shown at the border.
For the business travellers, the additional prerequisite is that for the business regularly existing with the E.U. country, setting up of local subsidiary is compulsory.
Economic Impact of Brexit on the U.K.
- Brexit has largely affected the U.K.’s economic growth, slowing down to 2.4% in 2015 to 1.0% in 2019. According to the U.K. government estimate, the economic growth hampered by Brexit would have an impact for the coming 15 years with the effective rate Of 6.7%.
- The fall in the British pound was recorded from $1.48 to $1.36 on the day of the referendum to the next day. Since the Brexit U.K. pound has never regained its previous high, this has made export easier, but import prices have increased.
- The job market has also been hurt in the U.K., with a shortage of around 3 million skilled labour by 2030.
- U.K. must negotiate new trade agreements with countries outside the E.U.
- The U.K. would be free to enter into new trade deals based upon domestic priorities; however, it would face a few challenges of renegotiating the existing E.U. deals that have ceased to apply.
- It would be difficult for London to serve European markets, particularly retail banking and euro trading, as they will be moved to Eurozone financial centres or be shifted to Europe. However, this will impact the E.U. too, in terms of higher charges and poor products from other nations.
Impact of Brexit on E.U. and Britain
- Brexit has also impacted the E.U. Members of the right-wing, anti-immigration parties are against the E.U. in France and Germany. If they gain enough ground, they could introduce an anti- E.U. vote, which would lead to the E.U.’s dissolution. However, most E.U. members support the union and find the U.K.’s role as mitigating.
- Exports of the goods to European Union have decreased by 40% between December 2020 and January 2021, and the import has dropped down by 30% due to the pandemic and new post Brexit scenario.
- According to the estimates, Britain avoiding the imposition of tariffs, has signed a trade deal with the E.U., resulting in new friction. Britain’s Brexit trade deal with the EU, applicable since Jan. 1, does not cover financial services. This leaves the City of London financial centre largely desolated from the bloc.
Overall impact
Losing E.U. membership will hamper U.K. economic growth, which it (U.K.) claims to overcome by trading more with other parts of the world.
Also, there would be an economic cost of building up a new relationship.
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