Story Of The Week

Westminster’s Fallout with EU

You can only negotiate the right Brexit deal from the position of strength; with the Prime Minister 100 percent commited to the cause, and a strong majority government, with a clear plan to see it through

-Theresa May

11th December is approaching and so is the big day for Britain. Britain is a step away to exit EU forever, also called as Brexit. BREXIT? Tired of listening to this word since the last two years, and kind of getting lost into what it actually means?

Well, let’s break it down for all of us.

Britain is a part of the European Union, which is a group of 28 countries. This union allows these member countries to trade freely, have a common currency and their citizens can move easily between countries to live and work. It allows smooth movement of capital, service, goods, and labor. EU was set up to ease trade by lifting trade barriers, they share a common currency to eliminate conversion costs. and share markets across borders.

EU membership entitles its members to the following, amongst other benefits.

  • Court of Justice of the European Union
  • Common Market
  • European Central Bank


So if it is all hunky dory then why do Britain wants to leave the union?

Trade freedom being one reason. Britain believes that de-associating itself with the union will give it the power to enter into bilateral trade agreements with countries like US, India, and China. This can significantly boost their economy.

Dwindling economic stability of EU being the other reason. Countries like Greece, Ireland, Italy, France, Spain etc are facing liquidity crunch and countries like Germany are helping them survive by pumping in money. Greece is facing severe austerity measures, due to its huge pile of debt. EU’s fiscal and monetary policies have loopholes and not all his member countries are playing by the rules, but that’s the story for another day! Currently, Britain does not want to be a part of this association, as it poses the risk of instability and a burden of economically weaker countries.

Being independent legally is another strong reason why Britain wants a way out. Britain wants to create its own laws and practice them with complete independence. The country wants to enjoy full control over its systems, financial, bureaucratic and more.

So Britain conducted a referendum and its people voted to exit EU. Britain wants to leave, EU has also agreed to it, but it can’t be that simple, divorces never are!

Britain has been a part of EU since 1973, that’s a pretty long time. Their trades, cultures people and lands have intertwined enough to differentiates who’s who? Separation has to be very meticulously thought and perfectly executed.  


Source: BBC

Where does Britain stand right now?

Short answer, in the middle of nowhere. Long answer, Theresa May is trying hard to get her MPs to back her “deal” with EU. The deal is to leave EU on 29th March 2019 and have a transition period till 31st December 2020. In this one, Britain will slowly pull the plugs and gradually take a separate way from EU. Labour unions are in favor of the deal as it gives them time to adjust, while the conservatives in the party want one strike, clear Brexit with no baggage.

So there are 2 ways to exit EU, the Hard Brexit and the Soft Brexit.

Hard Brexit

This would essentially mean that Britain will give up its access to a single market and customs union along with EU. This will enable Britain to have tighter controls over its territory and will be capable of making new trade deals and apply laws to its land.

This will also mean to rekindle its relationship with WTO rules for its trade with other countries.

A hard Brexit will also mean a 10 percent increase in the price of exported cars and other goods and services. While sectors such as agriculture could lose protections against cheap imports from other countries.

Ceasing to be a part of the customs union will also increase the paperwork and checks on goods passing through airports and ports, making trade deals a little unattractive.

Soft Brexit

The UK will cease to be a member of the EU and would not have a seat on the European Council. But it will keep the single market. Goods and services would be traded with the rest of EU states on a tariff-free basis.  Britain would remain within the EU customs union, which means that exports would not be subject to border checks.

Similar sort of deal is with Norway, Iceland, and Liechtenstein, who are are not members of the EU but access the single market by being part of the  European Economic Area.

This will also include the “four freedoms” ie, people, goods, services and capital. This is somewhere closer to the “deal” Theresa May is talking about.

11th December, the impending landmark decision

House of Commons will vote for “deal” or “no-deal” on 11 December after a five-day debate on the future of Britain.

Theresa May has pleaded her MPs to consider the interests of the country and vote in favor of her deal. She stresses that if they don’t take the deal, she has no plan B. Britain has to walk away with a painful separation.


What happens if Westminster votes for “No Deal”?


Source: The newsmaker

  • No Transition period

If there isn’t a deal, the British economy faces an edgy cliff, where it’s abrupt to begin again. The rules will change overnight and it will give little time for stakeholders to adjust to the new settings. Ie the laborers, the financial institutions, citizens living abroad in EU and vice versa, will face a situation like never before.

  • Tricky Trade

When without a transition deal, Britain will have to trade with EU following World Trade Organisation rules. This means that goods and services crossing between nations will have to be checked and taxed.

This will also trigger immediate levying of taxes on various sectors. One of the worst hit will be agriculture, where farmers exporting to EU will face higher tariffs.

  • Busy airports and ports

Apart from hitting the international trade, the increased checks and customs on borders will further clutter the ports and airports. Britain’s ports aren’t used to such traffic owing to its membership to EU. So when the membership ships away, the ports will harbor way more goods and services, it ever has.

The problem particularly crops up as Britain won’t get time to expand its infrastructure and manpower.

  • Shock waves in Britain’s economy

While we don’t have the exact numbers about the loss in trade UK is likely to face, it’s certain that it will be huge. Under the WTO rules scenario, the Treasury’s modeling expects unemployment to rise by 820,000 in two years, sterling to fall by 15 percent, and inflation to rise by 2.7 percent, all because of an abrupt end to years of association.


Effect of “No Deal” Brexit, Source: The Sun

All said and done, this event is an important one in modern history. It questions the stability of EU. It makes us ponder as to why Britain decided to separate? And how painful is this separation going to be? It will be interesting to see the impact of Brexit on EU, as Britain is one of its few economically strong countries. It will be a sight to see the rest of EU standing together firmly, or falling apart like a house of cards.

This will be the test of Westminster’s grit, power, and strategy. Most of all it will be an orchestration of a powerful women’s tactful resilience against decades-old of dependence. Will they succeed? MAY the odds be in her favor.



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