A new chapter has begun in the history of Britain’s relationship with the rest of Europe. As the clocks struck midnight marking New Year’s Day in Brussels and 11 p.m. Thursday in London, the United Kingdom finally cut its ties with the European Union.
Britain left the EU politically almost a year ago but remained part of its economic structures until the end of 2020. The European Union and Britain on Thursday (24 December) struck a post-Brexit trade deal to cushion the economic blow of the UK’s imminent departure from the single market after 10 months of tortuous negotiations.
“We have finally found an agreement,” said the president of the European Commission Ursula von der Leyen.
Britain formally left the EU in January after a deeply divisive referendum in 2016, the first country to split from the political and economic project that was born as the continent rebuilt in the aftermath of World War II.
What is changing?
The culmination of the Brexit process means major changes in different areas. These include:
- The free movement of people between the UK and EU countries has ended – and has been replaced in the UK by a “points-based” immigration system
- Anyone from the UK who wants to stay in most of the EU for more than 90 days in any 180-day period now needs a visa
- Duty-free shopping has returned, with people coming back to the UK from the EU able to bring up to 42 litres of beer, 18 litres of wine, four litres of spirits and 200 cigarettes without paying tax
- EU citizens wanting to move to the UK (except those from Ireland) face the same points-based system as people elsewhere in the world
- UK police have lost instant access to EU-wide databases on criminal records, fingerprints and wanted persons.
Consequences of Brexit for the U.K.
The U.K. has already suffered from Brexit. The economy has slowed, and many businesses have moved their headquarters to the EU. Here are some of the impacts on growth, trade, and jobs. There would also be consequences specific to Ireland, London, and Scotland.
Brexit’s biggest disadvantage is its damage to the U.K.’s economic growth. Most of this has been due to the uncertainty surrounding the final outcome.
Uncertainty over Brexit slowed the U.K.’s growth from 2.4% in 2015 to 1.5% in 2018.9 The U.K. government estimated that Brexit would lower the U.K.’s growth by 6.7% over 15 years. That’s if there is a trade agreement but restrictions on immigration.10
The British pound fell from $1.48 on the day of the referendum to $1.36 the next day. That helps exports but increases the prices of imports. The pound may strengthen once a deal is approved, depending on the trade terms.11
Brexit would eliminate Britain’s tariff-free trade status with the other EU members. Tariffs would raise the cost of exports. That would hurt U.K. exporters as their goods become more expensive in Europe. Some of that pain would be offset by a weaker pound.
Tariffs would also increase the prices of imports into the U.K. More than one-third of its imports comes from the EU.12 Higher import prices would create inflation and lower the standard of living for U.K. residents. The U.K. is already vulnerable because heat waves and droughts caused by global warming have reduced local food production.13
The U.K. would lose the advantages of the EU’s state-of-the-art technologies. The EU grants these to its members in environmental protection, research and development, and energy.14
Also, U.K. companies could lose the ability to bid on public contracts in any EU country. These are open to bidders from any member country. The most significant loss to London is in services, especially banking. Practitioners would lose the ability to operate in all member countries. It could raise the cost of airfares, the internet, and even phone services.14
Brexit would hurt Britain’s younger workers. Germany is projected to have a labor shortage of 3 million skilled workers by 2030.15 Those jobs will no longer be as readily available to the U.K.’s workers after Brexit.
Employers are having a harder time finding applicants.16 One reason is that the number of EU-born workers fell by 95% in 2017. This has hit the low-skilled and medium-skilled occupations the most.
Northern Ireland would remain with the United Kingdom. The Republic of Ireland, with which it shares a border, would stay a part of the EU. Johnson’s plan avoided a customs border between the two Irish countries.
A customs border could have reignited The Troubles.17 It was a 30-year conflict in Northern Ireland between mainly Catholic Irish nationalists and pro-British Protestants. In 1998, it ended with the promise of no border between Northern Ireland and Ireland. A customs border would have forced 9,500 commuters to go through customs on their way to and from work and school.18 Brexit would also affect the 2,100 workers who commute to Great Britain.
Brexit has already depressed growth in The City, the U.K.’s financial center.19 Growth was only 1.4% in 2018 and was close to zero in 2019. Brexit has diminished business investment by 11%.
International companies would no longer use London as an English-speaking entry into the EU economy.16 Goldman Sachs, JP Morgan, and Morgan Stanly have already switched 10% of their clients. Bank of America has transferred 100 bankers to its Dublin office and 400 to Paris.19
Scotland voted against Brexit.20 The Scottish government believes that staying in the EU is the best for Scotland and the U.K. It has been pushing the U.K. government to allow for a second referendum.
To leave the U.K., Scotland would have to call a referendum on independence. It could then apply for EU membership on its own.
EU citizens already resident in the UK by the end of 2020 — and Britons living on the continent — have the right to remain and retain existing rights, in areas including employment and social security. This comes under the binding terms of the Brexit divorce deal.
However, residence permits will be needed in the future. There have been many complaints about how the new arrangements are working out in practice for EU nationals in the UK, especially given the absence of any physical residency document provided by the British government.
The EU ban on additional mobile roaming charges will no longer be guaranteed for travellers between the UK and the continent, leaving British and EU operators free to slap on extra fees.
The UK government advises users to contact their operator. It adds that it has carried over an EU law capping roaming bills at €50 a month.
For EU phone users visiting the UK, it may depend on their national operators. The main UK networks have said they have no plans currently to change existing arrangements and charge extra fees.
However, it’s thought this may change over time, and may depend on charges levied by countries visited.
EU pet passports will no longer be valid after the end of the transition period for animals travelling from Great Britain into the EU and Northern Ireland.
Pets travelling from Northern Ireland into the UK or the EU can still travel on pet passports.
Instead, for entry from Britain into the EU, British pets will need an Animal Health Certificate (AHC) as the EU has granted Britain “Part 2 listed status”. These will start being issued from December 22.
The UK government advises pet owners to contact their vet at least four months in advance to allow for vaccinations and other requirements.
The UK applied for “Part 1 status” — allowing animals such as cats and dogs to travel without quarantine — as the EU has granted to some other non-member countries such as Switzerland.
Nevertheless, significant changes are here – whether on trade, travel, security or immigration.
And while coronavirus continues – for now – to shut down much of society those changes could well become more apparent in the months ahead.