Brexit Essay – Impact of Brexit- Critical causes and effects

| August 15, 2017

Brexit Essay– A critical review of its causes and effects


It was on the 23rd of June 2016 that British people declared, through the Brexit referendum, their willingness to leave EU (Ford and Goodwin, 2017). In the above referendum, 51.9% of the participants voted for leave while the ‘stay’ votes reached the 48.1% (Hunt and Wheeler, 2017). Some of those who voted for the exit of Britain from the EU, claimed that their decision was based on the argument that “decisions about the UK should be taken in the UK” (Stuttaford, 2016, par.6). Let’s explore the impact of Brexit on UK.

Brexit Essay

For many people, the result of the referendum has not been a surprise (Stuttaford, 2016). In fact, the first doubts about the participation of Britain in the EU were revealed in the first two years after Britain’s the first joined the EU, on the first of January of 1973 (Crafts, 2016). Indeed, it was in June 1975 that Britain’s membership of the EU was addressed in a referendum for the first time (The Guardian, 2016). The first consequence of Brexit was David Cameron’s resignation. The new prime minister, Theresa May, had been an opponent of Brexit but decided to support it, considering it as the will of British people (Hunt and Wheeler, 2017). This study explores the various aspects of Brexit, with emphasis on its causes and effects.

What is Brexit?

The term Brexit has been a media term which was introduced for showing the exit of the UK from EU. The term has been produced through the merge of the initial two letters of Britain with the word exit (James, 2016). The question that participants were asked to respond in the Brexit referendum was: “Should the United Kingdom remain a member of the European Union or leave the European Union?” (Green, 2017).  

What is the role of article 50?

The process of the exit from EU of a member state is regulated in article 50 of the Treaty of the European Union. The specific article was incorporated in the TEU in 2009 through the Treaty of Lisbon that amended TEU, a treaty known also as the Maastricht Treaty (Armstrong, 2017). In order for article 50 to be triggered, an official letter with the relevant claim has to be submitted to the EU by the member state that wishes to leave EU. In the case of the UK, such letter was “hand-delivered” by Theresa May, the prime minister, to the “President of the European Council, Mr. Donald Tusk” in the 29th of March 2017 (Mortimer, 2017, par.3).

In the context of article 50, the process for the exit of a member state from EU lasts two years; this period can be extended after a relevant arrangement between the European Council and the Member State involved (Miller and Lang, 2016). The 2-year period starts from the day that the intention of a member state to leave EU is announced to EU (Barrett, 2016). In the case of the UK, the 29th of March is considered as the first day of the 2-year period mentioned in article 50. This period of 2 years is used for negotiations between the parties, meaning the EU and the member state, in order for the terms of the withdrawal of the member state from the EU to be defined (Gordon and Moffatt, 2016).

The final arrangement between the EU and the member state has to be approved by the parliaments of all member states; the European Court of Justice has the power to check the alignment of the agreement with the European Treaties, if a relevant claim is submitted (Acton, 2017; article 218 of the Lisbon Treaty). In the 30th of May 2017 the EU published two documents showing the key positions of EU in regard to the “Brexit’s bill” and the effects of the UK’s withdrawal from EU on the rights of citizens (Rankin, 2017). EU justified the decision for publishing the relevant documents by referring to the need for securing the transparency of the process (Rankin, 2017).

Key elements of the negotiations between EU and the UK in regards to Brexit process

The framework of EU for the negotiations with the UK, in the context of the Brexit process, was decided by the European Council in the 29th of April 2017, a month after the delivery to the Council’s president of the letter that expressed the UK’s intention to leave EU (Mortimer, 2017; European Commission, 2017).  The specific framework includes the “political guidelines” on which the negotiations of Brexit will be based (European Commission, 2017). It should be noted that the Brexit referendum did not refer to Brexit’s terms. It is now the responsibility of Theresa May to choose the version of Brexit that protects the interests of the British population (Barrett, 2016). The negotiations are based on the following schedule: the representatives of the two parties will have a meeting, lasting for four days, on monthly basis (BBC News, 2017). The first of these meetings took place in June, the second in July and the next one is arranged for the end of August (BBC News, 2017). So far, no agreement has been achieved between the parties (BBC News, 2017).

Difference between ‘SOFT’ and ‘HARD’ Brexit

The negotiations of Brexit would result to two versions of Brexit. More specifically, a ‘hard’ version of Brexit means that the UK would become fully independent from EU (Haq, 2016). In this case, the EU could not oblige the UK to apply measures that would limit the free movement of people from and to the EU (Ford and Goodwin, 2017). Additionally, the legal framework of the UK would become independent from the rules and case law of European legal bodies (Grimmel and Giang, 2017). Still, tariffs should be imposed on the products imported and exported from the UK, a fact that would increase the trade costs for the UK (Ford and Goodwin, 2017). On the other hand, a ‘soft’ version of Brexit would allow the UK to avoid tariffs in imports/ exports and to keep parts of its current rights, as a member of EU (BBC News, 2017b).

Causes of Brexit

Several reasons led British people to support Brexit. First, the fear for radical increase of the number of immigrants in the UK. Second, the communication between people and the political parties and politicians has been deteriorated (Morphet, 2017). Third, certain supporters of Brexit were highly popular to the public; reference is made in particular to Boris Johnson and N. Farage (BBC News, 2016).

Most important, many British people seem to believe that EU is highly exposed to financial risks, a fact that would adversely affect the UK economy (Mauldin, 2016). Also, the continuous increase of powers of the EU bodies have caused concerns in the UK in regard to their effects on the country’s sovereignty (Mauldin, 2016). At the same time, age seems to had an impact on voters’ decision for Brexit. In a survey across several regions in the UK, in July of 2016, it was revealed that older people had supported the leave of the UK from EU; instead younger people tended to support the remain vote (Beukers et al., 2017).

Bank lending in the UK in the post Brexit era

Brexit would also affect the UK’s banking sector. In fact, the loss of “passporting rights” is one of the most critical concerns for banks in the UK. Indeed, many banks in the UK are involved in cross-border banking services. In the context of these services, the UK banks cover the borrowing needs of firms in different countries; by losing their passporting rights, the UK banks would have to terminate their cooperation with overseas customers, a fact that could threaten the banks’ stability in the market (Ford and Goodwin, 2017; Walsh, 2017).

Ashurst (2016) explained that cross-border banking services represent the high percentage of activities of the UK banks. These activities are based on EU legislation. If this legislation is updated after Brexit, these activities could be terminated, an issue which would be quite difficult to be managed, both as of its legal and as of its financial aspects (Ashurst, 2016).  At the same time, the percentage of bad loans, under the influence of Brexit, is expected to be highly increased. In 2017, the value of these loans is estimated to reach the £6.9 billion and in 2018 the £9.7 billion (Gros, 2016). In March of 2017, the Bank of England warned the UK banks that they should be appropriately prepared in case of severe turbulences in the UK’s economy as a result of Brexit; these turbulences were characterized by the Bank of England as “knee-jerk reactions” (Burton, 2017).

How much would Brexit Cost for the UK?

The bill that the UK would have to cover when the Brexit process is completed is still under negotiations, but it is expected to be between $66 and $111 billion (Lowe, 2017).  Additionally, because of Brexit, the foreign investment on the UK’s business sector is expected to be reduced approximately by 25% by 2019 (Cox et al., 2017).  The above figure is mentioned since it represents one of Brexit’s costs. In a survey among executives in Britain’s most powerful firms it was revealed that the impact of Brexit on the country’s businesses has been negative, at least so far (Ross and Meakin, 2017).  Brexit’s impact on the UK’s economy would be severe, according to the version of Brexit finally achieved through negotiations.

However, the exit from EU would also benefit the UK. More specifically, in the long term, the withdrawal from the EU could increase the strength of the UK’s economy since the country will not have to contribute in the EU’s expenses and capital. For example, in 2016 the amount given by the UK to EU reached the £13.12 billion (Begg, 2017). Still, the positive effects of Brexit on the UK could take long to appear. Indeed, in 2018 the country’s growth has been estimated to 1.6%, from 2% in 2017 (Kottasova, 2017). According to a recent report of PWC, the Bank of England is expected to avoid making changes on the country’s monetary policy for a period of time, at least up to the release of news in regard to the progress of Brexit’s negotiations (PWC, 2017).

Impact of Brexit on the legal system of UK

Due to its membership in the EU, as so far, Britain is obliged to take into consideration the case law of the European courts and to incorporate policies and laws published by the EU legislative bodies (Gordon and Moffatt, 2016). Whether the above obligations would continue to exist in the post-Brexit era would be dependent on the version of Brexit resulted from the negotiations (Gordon and Moffatt, 2016).

The other implications of Brexit for the UK’s legal system would include:

a. the necessity for aligning the UK’s law, especially the family law, the human rights law and the company law, with the relevant rules of the EU and b. the right of the UK authorities to access information stored in EU – based databases (House of Commons – Justice Committee, 2017; Gilson Gray, 2017).


Brexit and Flow of People

The freedom of movement, as applied across EU, obliges the member states to allow the free movement of people from EU to their territory. In the UK, most migrants are originated from Eastern Europe (Lichfield, 2016). However, there are also many French people, around 300,000, and people from other European countries, such as Portugal, Spain and Greece (Lichfield, 2016). Different views have been developed in regard to the role of migrants in the UK’s economy. More specifically, migrants have been related to the enhancement of the UK’s economy but also to the decrease of wages (Lichfield, 2016; Rosamond, 2016). Still, the actual representation of migrants in the workforce of the UK is rather low, a fact which is verified by the graph in Figure 1.

Figure 1 – Types of employees, per origin, in the UK (House of Lords, 2017, p.53)

Figure 1 – Types of employees, per origin, in the UK (House of Lords, 2017, p.53)

Brexit’s effects on the investors in the UK Airline Industry

In the context of Brexit, the number of passengers in the UK Airline industry is expected to be reduced by 3-5% by 2020 (IATA, 2016). Most Airlines in the UK Airline industry can operate in European countries even after Brexit, since they have relevant certificate (Gerrard, 2017). The company which is excluded from this rule is EasyJet, a company which is certified, as an airline, only by the UK and Swiss (Gerrard, 2017).  At the same times, British Airways is not engaged to “any intra-continental routes” and its operations would not be affected if EU would ban UK-based companies to support flights within EU, a practice which is expected to be adopted by the beginning of 2019 (Gerrard, 2017). It should be noted that in the context of Brexit, European officers have notified the airlines based in the UK to relocate in order to be able to continue their operations in the future. This issue was particularly highlighted to Ryanair and EasyJet (Boffey, 2017). However, Ryanair is currently based in Dublin and would not have to worry, in opposition with EasyJet that would need to consider relocation in the post – Brexit period (Boffey, 2017). At this point, emphasis should be given to the following fact: the people travelled from UK to EU using UK – based airlines were estimated to 78 million in 2014, from 9.8 million in 1993 (KPMG, 2016). The different in figures is impressive denoting the importance of the UK-based airlines for the global airline industry. Also, the number of people visiting the UK monthly is quite high. The operations of the UK-based airlines would be fully secured in the context of Brexit, since a disruption in these firms’ operations would highly harm the country’s economy (RDC, 2017; Figure 2).

Figure 2 – Monthly visits of foreign people in the UK (RDC, 2017)

Figure 2 – Monthly visits of foreign people in the UK (RDC, 2017)

Is Higher Education in the UK affected by Brexit?

The academic staff from EU that works in the UK’s universities is estimated to 32,000 people. If those individuals would have to leave the UK after the completion of the Brexit process, the UK would have to face a critical phenomenon, which is often described as “brain drain’” (Weale and O’Carroll, 2017; UK Parliament, 2017).  On the other hand, the fees of European students in the UK Universities are currently equal to those paid by the UK students. After Brexit, the income generated from the country’s university would be significantly increased since European students would have to pay increased fees, equal to the fees of international students (UCL European Institute, 2017). Still, the significant increase of fees would lead European students to avoid the UK for their studies, a fact that would significantly harm the income for a series of services and products, such as rent, electricity, food and clothing (Martin, 2017). As for the EU, Brexit would result to the elimination of the potential of EU students to visit Britain in the context of Erasmus, a fact that would negatively affect the programme’s quality (EUPRIO, 2017).

Brexit and energy policy of the UK

In the context of the Renewable Energy Directive (RED), the UK is obliged to significantly reduce its dependency on traditional sources of energy by 2020. More specifically, the directive defines that by the above year the UK would cover a percentage of 15% of its energy needs using renewable energy sources (Burns, 2017). Brexit would lead to the termination of the above obligation for the UK (Burns, 2017). On the other hand, Brexit would not affect the UK’s responsibilities in regard to climate change (Gosden, 2017). In fact, the Climate Change Act of 2008 includes a goal of reducing the country’s gas emissions at least by 80% up to 2050 (Baringa, 2016). In other words, Britain is already highly committed in regard to climate change.  However, the potential of the UK to develop its nuclear programme could be significantly reduced in case of Brexit, considering that the UK’s current involvement in the production of nuclear energy is based on the rules of Euratom, a European organisation focusing on nuclear energy (Burns, 2017).

Effects of Brexit on UK

Brexit would affect EU in a variety of ways. The graph in Figure 3 shows the expected change in the GDP of member states in the case of different Brexit scenarios. It is clear from the graph that a ‘hard’ Brexit would cause severe harm on the economies of member states. It should be noted that the graph reflects changes to GDP of member states up to 2030.

Brexit GDP

Figure 3 – Fluctuations in the GDP of member states by 2030, in the post-Brexit period (European Parliament, 2017, p.33)

Brexit and International Relations

After the completion of the Brexit process, the trade limits for UK businesses would be eliminated. Still, these companies could suffer significant losses if the rest EU countries would deny to trade with them after the completion of Brexit (). At the same time, Brexit would affect the free movement of people between Britain and EU, a fact that could be both positive, if referring to immigrants, and negative, if referring to professionals, entrepreneurs and academic staff (Swinford, 2017). Additionally, Brexit would set severe obstacles to EU’s integration, one of the key aims of EU’s creators and supporters (Grant, 2016; Patel and Reh, 2017).

Brexit could cause a series of issues related to international relations. The performance of stock markets during the Brexit period reflected low to average exposure to turbulences from Brexit (Passlack, 2016). However, the price of pound has been highly volatile from the announcement of Brexit and up today. Britain’s power as a member of international community would not highly affected, a view though that could be verified only in a few years after the completion of the Brexit process (McBride, 2017). Since Britain would be no more a member of the EU, its potential to negotiate in regard to global policies could be possibly influenced, but not at high level since the country remains a member of the so-called Anglo-Saxon union of countries, along with USA, Canada and Australia (McBride, 2017). Still, for the EU a different outcome could occur, meaning that EU could be possibly considered as weaker, as of its power in regard to international politics and trade, after the withdrawal of the UK (Glencross, 2016). On the other hand, the completion of the Brexit process could lead to the decrease of pound’s price and the subsequent increase of dollar price, a fact that will result to the increase of oil prices globally (Guild, 2016). According to the House of Lords, International Relations Committee, Brexit should be carefully managed by the UK government so that the country’s relations with the EU are not harmed. Moreover, the Committee regarded the current relationship between Britain and US as instable. In this context, it has been suggested to British government not to over-rely on USA for securing the position of Britain in the international community in the long term (House of Lords, Hansard, 2017).


Brexit’s impact on the UK seems to have several, both positive and negative, dimensions. More specifically, in terms of economy the potential of the UK to trade with countries worldwide would be increased since the relevant restrictions of the EU would not be applied in the UK. Still, the introduction of tariffs and barriers to trade between the UK and EU would reduce the benefits from the UK’s trade liberalisation. At the same time, the country’s power to decide on critical issues, such as immigration, involvement in armed conflicts worldwide and introduction of economy restrictions, would become absolute.

On the other hand, it cannot be doubted that the full independency of the UK from the rules of the EU, a condition which has been characterised as ‘hard’ Brexit, could harm the UK in several ways, an issue which is analysed above.  In fact, the review of several aspects of the UK’s political, economic and social environment, has led to the assumption that the benefits of the UK from Brexit are almost equal to drawbacks. In this context, the achievement of a ‘soft’ version of Brexit through negotiations should be the key target of Britain’s government.


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