In March 2017, the European Union for the first time received an application for the withdrawal of a member country from this integration group – Great Britain. As the United Kingdom joined the European Economic Community in 1973, the country almost immediately took a special position in it. Relations between Britain and the EU were not smooth and largely depended on the vicissitudes of inter-party struggle that influenced the course of the government. From 1973 to the present, there has been no consensus on European integration in Britain. The course of the government depended on the party that was in power, the prevailing influence of Eurosceptics or Eurooptimists at a given period, and the influence of interest groups and the media. However, on January 3rd, 2021, the United Kingdom finally reached a consensus on the question of Brexit and left the European Union. This paper will examine some of the effects it had on both local and world communities.
Brexit Vote’s Significance for the UK and the World
There were several main goals pursued by the UK when leaving the EU. First, to finally insulate itself from the euro area to minimize the risks it may face in the event of financial difficulties within the Union. Secondly, the UK does not want to follow the prescriptions and norms “from the outside.” The most acceptable for the UK was to obtain preferential access to the EU markets through the signing of a trade agreement on FTA and FTA+. Thirdly, the need to limit the access of migrants from the EU to unemployment benefits in the UK was also considered during the vote.
The question arises: what the consequences of Brexit for the UK economy are. Some of them can already be noted: the growth of the UK economy has slowed down, and many transnational corporations have moved their headquarters to the EU. Bloom et al. (2019) estimate that “the Brexit process has reduced the level of the UK’s productivity by between 2% and 5% over the three years since the referendum” (p. 3). Moreover, Brexit deprives the UK of the status of a country free from customs duties with other EU members. In turn, tariffs would raise the cost of exports globally. This would hurt British exporters as their goods would become more expensive in Europe. The exit of the UK, among other things, complicates the situation in the international labor market. Germany is projected to face a labor shortage of 3 million skilled workers by 2030 (DPA/The Local, 2017). These international jobs will no longer be so easily accessible to Britons after Brexit, and it is already becoming increasingly difficult for employers to find candidates.
Brexit is essentially a vote against globalization: it is taking the UK off the main stage of the financial world, creating uncertainty across the UK as companies seek to retain their international clients. According to Bloom et al. (2019), “anticipation of Brexit has substantially reduced UK’s investment, cutting this by around 11%, relative to what would have otherwise happened” (p. 3). Meanwhile, the stability of the US means that London’s loss could be New York’s gain in terms of Wall Street financial market performance. The day after the Brexit vote, the currency markets were in turmoil. The euro fell by 2% to $1.11 which increased the value of the dollar (Federal Reserve Bank of St. Louis, 2022). This was a negative consequence for US stock markets since they became more expensive for foreign investors. A weaker pound also meant more expensive US exports to the UK, as the US has a trade surplus with the UK of $18.9 billion (United States Trade Representative, 2020). In 2018, the US exported $141 billion worth of goods while importing $122 billion (United States Trade Representative, 2020). Brexit has the possibility of turning this surplus into a deficit if a weaker pound makes UK imports more competitive.
Brexit Vote’s Effect on the Relationship between Canada and UK
The effects of Brexit were not limited to Europe and the USA – a significant impact is placed on Canada, as well. According to Mestral (2019), “the United Kingdom is the second-most important European country exporting goods and services to Canada, and the most important source of European foreign direct investment” (para. 9). It is incredibly important for Canada to retain its trading relationships with the UK. To maintain a stable trade, Canada would need not only to take into account the laws of the World Trade Organization but also to work out the agreements with new local rules of the UK. An international treaty is required, with adherence to the Comprehensive Economic and Trade Agreement, although the UK lost its benefits due to leaving the EU (Mestral, 2019). In 2020, Canadian Premier-Minister Justin Trudeau and at the time British Premier-Minister Boris Johnson announced that the countries did reach a temporary trade agreement. However, this issue needs both governments to continue working together to achieve a permanent solution.
Leadership’s Key Challenges Due to Brexit Vote
The position regarding the place and role of the UK in European integration cost some politicians and statesmen their careers and the parties the loss of power. A study by the National Center for Social Research (2016) polling nearly 3,000 Britons says that the Brexit vote represented a “lightning rod” for general disillusionment with government policies that have been insufficient of late. Anti-immigrant sentiment has become a major factor plaguing citizens who voted for Brexit. Nearly 73% of those concerned about immigration voted to leave, compared to 16% of those who did not think it was necessary (National Center for Social Research, 2016). Meanwhile, 45% of those who have a high degree of trust in the government or tend to trust it voted to leave, compared with 55% of those who trust it less (National Center for Social Research, 2016). This suggests that trust in the institution of power was less of a driving factor in the vote for Brexit, presenting a serious concern for the country’s leaders.
Another aspect of the vote was sovereignty: allowing the UK to abandon the EU’s fundamental desire for an even closer union so that it is not drawn into further political integration. The separation was said to give greater powers to the national parliament for lawmaking, but in turn, it would require the government to design new rules for creating and passing new laws. Bruner and Hare (2017) add that due to EU policies that put priority on the Union’s interests against national aspirations, conflict of interests inevitably arose. The most important piece of the UK law to be repealed is the European Communities Act of 1972, which provides for the EU’s rule of law. Its repeal would put an end to the constitutional relationship that exists between EU and UK law. In addition, the government would have to consider the huge amount of secondary legislation that has been adopted with the purpose and justification for the implementation of EU legislation.
Bloom, N., Bunn, P., Chen, S., Mizen, P., Smietanka, P., & Thwaites, G. (2019). The impact of Brexit on UK firms. NBER.
Bruner, R. F., & Hare, K. (2017). The panic of 2008 and Brexit: Regional integration versus nationalism. SSRN Electronic Journal.
DPA/The Local. (2017). Germany could lack 3 million skilled workers by 2030, study finds. The Local Germany.
Federal Reserve Bank of St. Louis. (2022). U.S. dollars to Euro Spot Exchange Rate. FRED.
Mestral, A. de. (2019). How will Brexit impact Canada? Centre for International Governance Innovation. Web.
National Center for Social Research. (2016). Natcen Social Research that works for Society. NATCEN Social Research. Web.
United States Trade Representative. (2020). United Kingdom. United States Trade Representative.