The word ‘Brexit’ is an abbreviation of ‘British exit’, and refers to the UK’s plan to depart from the European Union. The official referendum was held throughout England, Scotland, Wales and Northern Ireland on 23rd June, 2016 during David Cameron’s tenure and the decision by popular vote was that Britain should leave. Negotiations are going on currently between United Kingdom and the European Union to negotiate the terms of the exit deal. The Lisbon Treaty (Article 50) provides for exit of member countries from European Union. For any country to come out of the European Union, it has to negotiate a deal with EU. Thus, a deal will provide the final settlement between EU and UK. The UK joined the European Communities (EC) in 1973 under the Conservative government of Edward Heath, with continued membership endorsed by a referendum in 1975.
A public vote called a referendum was held in June 2016 when voters were asked just one question-whether the UK should leave or remain in the European Union. Brexit campaigners told their constituents that the UK will no longer be responsible for paying their share of the budget of the European Union. The UK had been liable for billions of pounds in contributions for EU. Brexiteers argued that leaving the EU would result in an immediate cost saving, as the country would no longer contribute to the EU budget. In 2016, Britain paid £ 13.1bn, but it also received £4.5bn worth of spending. The vote to leave the EU signifies a growing distrust in worldwide trade and commerce organisations as well.
Many proponents of Brexit believe that it as an opportunity for the UK to reinvent itself as a Singapore or Hong Kong-style super economy, while some critics feel that Britain has now lost the ability to leverage its place in the EU to create better deals. Although UK will remain a member of both NATO and the UN after leaving EU, some pro-remain voters worry that their influence in these organisations will now be weak.
They also argued that the EU is a single market in which imports and exports between member states are exempt from tariffs and other barriers. Services, including financial services, can also be offered without restriction across the continent. Outside the EU, the UK would lose the benefits of free trade with neighbours and reduce its negotiating power with the rest of the world.
Mean while the Brexiteers stated that the UK could compensate for those disadvantages by its own trade agreements and that most small and medium-sized firms, which have never traded overseas, would be freed of the regulatory burden that comes with EU membership.
The growing dissent among Brexiteers is about the immigration crisis that swept across Europe in the last couple of years. While those that support the EU state that it’s a moral obligation of the wealthier countries to aid immigrants with placement and jobs, all Brexiteers found an influx of immigrants that seemed to never end as affecting their lives adversely. Brexiteers also worry about the impact of Job-seekers moving around Europe, thus changing the economic landscape. It’s a kind of brain drain from UK to EU. Britain’s history differs from that of its European neighbours. Its position as an unconquered island nation, a long tradition of Parliamentary democracy and an ingrained sense that ultimately it can look after itself, marks it out from other European nations. It was never that sympathetic to the European ideal. It joined EU in 1973 because there did not seem to be any other option than joining the then more prosperous Western European Democracies.
The draft of the Brexit Withdrawal Agreement sets out how the UK should leave the European Union, which scheduled it between March, 2019 and December, 2020. One of the key points of the agreement, the transition period, which the UK government calls ‘implementation period’, was scheduled to begin on 29th March, 2019 and last until 31st December, 2020. During this period, the UK is required to abide by all EU rules, but will lose membership of the EU’s institutions. The draft withdrawal agreement states that the transition can be extended, but only for a period of one or two years (in other words up to the end of 2022 at most). Both the UK and EU must agree to any extension and the decision must be taken before 1st July, 2020. Britain could break from the EU by 2019 but, being the first time in history that Article 50 of the Lisbon Treaty, the necessary catalyst to Brexit, will be invoked and given the complexity of the deals being resolved, it may miss the target. Some see Brexit as a wakeup call that rising inequality and low growth can and will promote frustration among citizens.
While leaving the EU will allow Britain to re-establish itself as a truly independent nation, Britons will eventually have to limit the amount of work, travel or leisure that they currently enjoy within EU borders. Some pro-remain voters liken it to turning back the clock to pre-WW-II days when European countries did all of their trading independently. What Brexit means for countries trading with the UK and investors who have money is to wait and watch. Another fact is that Britain’s economy is strong enough to ensure no sudden collapse or breakdown of the economy.
India being one of the most lucrative markets for foreign investors, any major change across the globe – be it political or economic, is bound to have an impact on our economy. India enjoys close economic, trade, political and cultural ties with the United Kingdom, Consequently, the ongoing Brexit negotiations undoubtedly created a sense of ‘grave uncertainty’ about the future trade scenario.
There are fears that the UK might end up without a final Brexit deal at all. Britain accounts for 18% of European Union’s GDP and both the EU and UK are crucial to the Indian economy. A large amount of India’s foreign exchange earnings come from export earnings and other inflows from the European Union and the UK.
The remarkable transformation of Indian companies during the last few years has altered the business equation globally. Currently Indian companies invest more in the UK than in the rest of the EU countries combined. Business of these companies will depend on how the UK rebuilds its trade ties with the EU and other countries. On the other hand, India enjoys strong trade ties with Britain and this could play out favourably in the years following a final Brexit deal. So, it is high time for the UK to reach a deal, because no-deal outcome is sure to hit the British economy’s capacity to produce goods and services and to arrest a fall in its currency. Even global institutions such as IMF and World Bank have suggested to the UK and Europe to set up permanent bodies that would work together to make sure that their trade relations are harmonized in a mutually satisfying manner.