The Five W’s of Brexit

What exactly is Brexit?

Brexit, which comes from the words ‘Britain’ and ‘exit’, is a shorthand way of talking about the United Kingdom’s separation from the European Union. The decision to leave the EU was made when a referendum was held, and the government called the British people to vote. Two options were presented: Remain or Leave.

A Timeline of What Has Happened So Far

So, how did we get here? When and how did it all start?

David Cameron, the Prime Minister at the time, said in 2013 that he would be in favor of having a referendum about remaining or leaving the European Union. Two years later Cameron won a majority in the general election with a manifesto that also mentioned the referendum, which was held a year later. The result of the referendum was a slight win to the Leave side with 51.9% voting to Leave and 48.1% voting to Remain in the EU. David Cameron had been sure that most would vote for Britain to stay in the European Union and after the results were in Cameron resigned almost immediately.

In 2017 Theresa May became the Prime Minister of the United Kingdom and picked up where Cameron left off. May released Article 50, which started the clock for the UK to leave the EU. That day, the 29th of March 2017, is recognized as the start of Britain exiting the European Union. In early 2018 the European Union has made progress on the negotiations with the United Kingdom about their departure and have agreed on several things – like the transition period. One of the things still in the wind is the border between Northern Ireland and the Republic of Ireland. Later, the EU set a date when the negations must be complete: 31st of October 2019. 29th of March in 2019 was set as Brexit day, when the UK would have left the EU, however, because of disagreements about the Irish border Brexit didn’t happen and it was postponed.

Theresa May tried numerous times to propose deals to the Members of the Parliaments (MPs) that the EU had agreed on, nonetheless, all these proposals were rejected. After many denials of her deals, May stepped down as the Prime Minister in July 2019 and was succeeded by Boris Johnson. When Johnson held his first speech as the Prime Minister, he promised that “the United Kingdom will leave the European Union on 31 October 2019 with or without a deal”.

The biggest issue with negotiating a deal with the EU was the Irish border. All the deals that the EU had presented to the UK had included a backstop on the border between the UK and the EU. The Prime Minister wants the backstop removed, however, so far the EU has not agreed to do so.

In October 2019, Boris Johnson negotiated a new rectified deal based on May’s original one. The Prime Minister and the EU member states came to an agreement on the deal unanimously and approved the new Withdrawal Agreement. Now it falls to Johnson to get the deal pass the Members of the Parliament and into effect. It looks like that will not be an easy feat since many MPs have said that they will not support Johnson’s new Brexit deal and would like to hold another a referendum. This referendum would call for the people to vote for the new deal or choose to remain in the EU. Moreover, if this new deal gets rejected by the MPs, Johnson is required by law to request another extension to the Brexit deadline.

What Does Britain Stand to Gain?

First of all, we cannot talk about Britain leaving the European Union without knowing what they would be giving up by leaving.

The European Union consists of 28 countries – soon to be 27 – who have agreed on the European Single Market, which includes the four freedoms. Freedom of people, goods, services, and capital. This means that all these elements can move freely between the EU member states and additional regulations do not need to be added, for example, taxes, visas, and customs. The EU also has a monetary union, and some of the EU members have opted to join the Eurozone where all the countries have the euro as the official currency.

So, why did most of the voters in Britain want to leave the Union?

When answering this question there are three words which seem to come up frequently: economics, immigration & identity.

A point raised a lot in the campaigning for leaving the EU, was the amount of money that the UK is required to provide to the EU, which then gets divided between other countries in the European Union. Because of the freedoms inside the EU member countries, anyone who is an EU citizen can relocate to another EU country to live, work or study in. Meaning, non-UK citizens can come into Britain, which in the opinion of some, is taking up too many public resources that should be more available to British citizens. Overall British people did not see themselves as European citizens, somehow always having been separated, and they feel like they could maybe get by better on their own. Being part of the EU was not a part of their identity.

Impacts for Industries

Supermarkets and pharmacies have been stockpiling food and medicine since the first date for Britain leaving the European Union was given. Thousands of troops are held at readiness and there has been talk about calling up Army reserves and maybe needing to declare martial law.

However, what could the impacts of a no-deal be, for example, the container industry? Are all the worries warranted?

If the United Kingdom leaves without a deal then the country will fall back on World Trade Organization (WTO) regulations that would control trade tariffs and set other rules. However, WTO regulations are not perfect. Several ‘black holes’ would be left for Britain to deal with. Even if Britain would leave without a deal they might still be able to negotiate a standstill arrangement which would give the country more time to adjust to leaving and in fixing the black holes.

Some experts have predicted that following a no-deal Britain would fall into a recession at the end of 2019 – if they hold on to the current deadline. The pound is said to drop in value almost immediately by 10% and the amount of unemployed would increase. The country’s GDP would fall by 2% in one year, which would be about the same amount as in the early 1990s and a third of what the financial crisis of 2008 was. As a consequence of Brexit international firms that have offices in the United Kingdom might want to relocate. Airbus has said that they may want to move if a no-deal happens.

There are different opinions though.

Other articles have proposed that Britain leaving the EU would not change the transportation industry much.

It would mostly result in higher costs to tariffs, quotas and different customs which would be an inconvenience to the different players. For instance, trucks could be on hold at ferry-ports because of delays – even a few minute delay per truck would lead to a huge traffic jam. We should note that European ports have been preparing for this for a while now, so it is unlikely to happen on a huge scale. New technology has been installed to avoid delays and a very small percentage of British cargo would be checked when crossing the border to the EU. So, concerns about border checks might be unfounded.

According to the National Audit Office, only 3% of all imports coming into the UK get checked while the EU average is 9%. Some reports claim that this would be unlikely to change even under a no-deal Brexit. Moreover, almost all goods entering Britain are cleared through the border electronically and only agriculture and food would be hit hard. Moreover, if you are a fresh supplies importer you can be registered as an Authorized Economic Operator (AEO), meaning that you would be pre-cleared and not be held up at the border for further checks.

Many UK business that export to the EU also export to the rest of the world – so most are already familiar with the regulations applicable to them. Only a very small percentage of exporters will have to get used to a brand new, unfamiliar system.

Regarding the possible difficulties at the land border of the United Kingdom, the European Parliament has done a study which found that “international standards and best practices and technologies’ can be used to avoid a border” in Northern Ireland. This would not be the first time that a country that is not with the EU shares a border with an EU member country. For example, Norway and Sweden share a low friction border. Also, Switzerland shares a border with multiple Union countries.

No one can be absolutely sure of what will happen in case of a no-deal scenario since this entire scenario of a country leaving the European Union is unprecedented.

However, you can be registered as an Authorized Economic Operator (AEO), meaning that you can be pre-cleared and will not be held up at the border for further checks.

Key Takeaways about Brexit

If Britain leaves the EU without a deal it will become a so-called ‘third country’, which can have close relations with the Union and perhaps even influence in Brussels – the European Union headquarters. Being a ‘third country’ simply means that countries in the EU will treat goods and services coming from the United Kingdom as alien. Member states will do business with the UK as they would with, for example, the United States or China.

The regulations affecting vessels would be the same whether it arrives from an EU port or not. The most affected firms will be the ones who have only done business inside the European Union market and if they want to continue to do business in the UK they will have to start following customs procedures and other regulations. Doing business with countries outside the EU might be new territory.

A backstop could keep the UK in an EU customs union for a long time, which would mostly affect vessels and cargo. The UK is looking to replicate the rules and regulations under the EU’s Union Customs Code in order to operate domestically and ensuring that UK importers or EU exporters can continue business as usual.

Electronic customs clearance is already used in the British Isles borders and under WTO regulations unnecessary checks prohibit. Businesses dealing with meat, dairy, and other fresh products would be most affected because of possible delays. For those who are not yet familiar with the new possible regulations, the British government has published a guidance regarding a no-deal scenario. If businesses, mainly EU importers, act well in advance they should not have to deal with any delays upon entering the United Kingdom.

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More info:

https://www.gov.uk/guidance/exporting-and-importing-goods-if-the-uk-leaves-the-eu-with-no-deal

https://www.bbc.com/news/uk-politics-43546199

https://www.bustle.com/articles/168688-why-does-britain-want-to-leave-the-eu-understanding-the-brexit-beef

https://www.bbc.com/news/uk-politics-32810887

https://tulli.fi/yritysasiakkaat/brexit

https://www.mirror.co.uk/news/politics/what-no-deal-brexit-what-13419829

https://inews.co.uk/news/politics/brexit/brexit-deal-latest-boris-johnson-struggle-quotes-brussels-dup-row-816343

 

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