Brexit stands for “British Exit” – the abbreviation indicates the decision taken by British citizens to leave the European Union (EU) through voting, which took place on June 23, 2016. Britain has been an EU member since 1973, with 73 European Parliament members hailing from the United Kingdom as of 2016. The citizens who voted on the EU referendum, despite quite a lot of them not aware of what EU is and what role it plays in their lives.
The decision to quit the EU was not an overwhelming majority; it was 52:48 percent in favor of Brexit. In fact, the people were almost equally divided on the issue. Prime Minister David Cameron wanted Britain to be a part of the EU and therefore urged citizens to vote against Brexit. However, the U.K. Independence Party led by Nigel Farage and Mr. Cameron’s own Conservative party members, including Boris Johnson (former London mayor), campaigned for Brexit. Also, there were several British celebrities for and against Brexit. For example, David Beckham and Daniel Craig wanted their country to stay in EU. Celebrities such as Elizabeth Hurley wanted to see Britain alienate itself from the EU.
Britain-Euro Association History
As aforementioned, Britain has been associated with the EU since 1973, which was called European Economic Community (EEC) back then. A crisis similar to Brexit happened in 1975, but Britons (67 percent of voters) at that time voted to stay in the consortium. However, Britain never used euro as its currency (for various economic and political reasons) and it also distanced itself from the Schengen Agreement – a controversial free movement EU treaty. In 1973, before the United Kingdom joined the EU along with Ireland and Denmark, the EU only had six member countries. In 2016, when the Brexit happened, there were 28 member nations.
Britain, unlike other EU member nations, doesn’t feel connected with the EU and believes there’s a fundamental difference between itself and other EU countries. Also, it does not see the limited and shared sovereignty a great requirement for itself. Apart from this, Brexit could have happened for the following reasons:
- Britain wanting complete control over its economic regulations and policies. It was supposedly not happy with Brussels calling the shots – Brussels is considered European Union’s de facto capital.
- Britain not being fascinated with the European Central Bank’s policies and decisions after the subprime mortgage crisis, which resulted in high levels of unemployment in Spain and Greece.
- Some leaders arguing immigrants snatching jobs from Britons. The increasing crime scene in Britain was also attributed to the immigrants. Resentment for immigrants from poorer EU nations such as Lithuania and Poland drove votes in Brexit’s favor.
- Britons’ desire to safeguard and restore UK’s identity, independence, culture and positioning in the world.
Simply put, Britain wanted control back into its hands.
Bremain (Remain) Camp
People against Brexit believed Britain was much safer, stronger in Europe. Though they recognized the issues with EU membership, they argued that British jobs and trade are linked with the EU, adding several billion dollars annually to Britain’s economy. Europe is the biggest export market of Britain, and also a major foreign direct investment (FDI) source.
According to them, immigration and related concerns were not more significant than the economic impact of leaving. Moreover, leaving the EU would mean Britain losing the immigrant labor force, resulting in decreased productivity and slower economic growth.
The United Kingdom is not just England – it’s made up of four nations: England, Scotland, Wales and Northern Ireland. However, the majority of Ireland is independent. Scotland was not much in favor of Brexit, with 62 percent of its voters wanting UK to stay in the EU. Northern Ireland also voted in favor of staying in the EU, with 55.8 percent of its voters against Brexit. According to Nicola Sturgeon – Scotland’s first minister – a Brexit could spawn “Scexit”, or Scotland exiting Britain and joining the EU as an independent country.
After the vote results were announced, the British pound depreciated and Prime Minister David Cameron resigned. Having exited the EU, Britain had to devise fresh trade agreements with countries across the world, and new environment and agriculture policies. But even if Britain happened to enter recession, the impact on global economic environment would be little since UK’s import numbers are relatively small – three to four percent of global imports. Moreover, major central banks across the world would spring into action to restrict any potential damage.
On the positive side, Britain no longer had to worry over allocating several billion pounds for the EU’s budget. Britain would gain increased control over immigration and who crosses its borders. In other words, people moving freely from Europe to Britain would no longer be the norm. EU made it quite easy for EU citizens to move across EU member countries, with little paperwork required. Both foreigners and Britons benefited from this policy.
Fall in Pound Value
After the decision to leave was finalized, the British pound was the first casualty since there are several factors in play – including interest rates, inflation and economic growth. Investors felt Brexit decreased Britain’s growth prospects. As a result, the pound fell down in value by 10 percent against the dollar – the lowest level since 1985. This meant imports for Britain becoming expensive and prices of domestic goods also going up, thanks to the depreciating pound.
For exporters, the decreased pound value was good news, as their products became competitive in the market within weeks. The weaker pound also meant more tourists visiting the country, since their euros and dollars were fetching them more value.
Economists in favor of Brexit believed the pound value decline was the rebound effect of a historic decision. They opined that Brexit, in the long term, would likely boost Britain’s economic growth and pound would regain its lost glory, or perhaps do even better than before.