WHEN the final votes on the “Brexit” referendum were tallied in Great Britain last Friday, the only sound anyone could hear for the rest of the day was the globe’s collective wailing and gnashing of teeth. No one, it seems, really expected the UK to leave the European Union, but there it was: The result in favor of Britain’s divorcing itself from the Continental bloc was close but decisive, and left everyone on both sides of the issue wondering what’s next.
The truth is that despite the volumes of commentary about what the Brexit means and what its possible consequences will be, no one actually knows what happens next. No one, not even the advocates of the “Leave” campaign, really ever considered an exit plan, and in the wake of the vote, very few are discussing it even in general terms.
The emotional rhetoric that seems to have fueled the campaign has, it seems, not yet been exhausted, with the victorious “Leave” advocates crowing about “taking our country back,” and the defeated “Remain” camp offering such helpful observations as “it was a vote for xenophobic racism,” and “I wish magic could change the result” (this last from J.K. Rowling, who ought to stick to being a noted author of tales involving pre-teen wizards rather than venturing into the very un-magical world of political punditry).
Because the Brexit is unprecedented, it may be difficult or impossible to anticipate what may happen, but if we understand exactly what the relationship between the EU and UK is—or at least was until June 23 – we might be better equipped to react to the inevitable changes, some of which will undoubtedly have a negative impact on all concerned.
Compiling information from various sources over the weekend—a task made more difficult by both sides’ penchant for bending statistics to fit their respective arguments for and against the Brexit—I was able to develop a broad picture of the depth of the relationship between the UK and the EU, and even in this rather cursory summary, it is quite apparent that the Brexit will be a painful period in the history of both Britain and Europe. Here are a few sobering facts:
According to a number of sources, most notably the UK Parliament, up to 60 percent of the non-legislative regulations in effect in Britain are from Brussels and not London; the implication is that a great deal of work lies ahead for Parliament and government ministries to replace these.
In terms of the UK contribution to the EU budget, the “Leave” campaign consistently overstated the impact of the annual payment, which is about 8.5 billion. While that is a considerable amount of money the government can now apply to other programs, it only represents about one percent of the UK’s annual budget; it will, however, have a big impact on the finances of the European Commission and EU administrative organization, according to comments from Brussels over the weekend.
Trade in goods will be one area that is likely to have a large-scale impact. About 60 of the trade in the overall UK economy involves the EU, which is the source of 53 percent of Britain’s imports and the destination of about 45 percent of its exports, according to statistics compiled by the US Council on Foreign Relations.
In terms of employment, about 10 percent of UK jobs—about 3 million—are trade-related, although what part of these can be specifically tied to UK-EU trade is not entirely certain. Assuming the proportion of UK-EU trade-related employment to total trade employment roughly corresponds to the proportions of trade itself, something like 1.8 million jobs in the UK may be affected.
Financial services will likewise be significantly affected, although perhaps not as much as analysts in the past few days have suggested, and the impact might be worse for the EU than the UK. About 10 percent of the UK economy is connected to EU-related financial services, with about 40 percent of the UK’s financial services exports going to the EU.
And finally, migration, which was the hot-button issue that seemed to finally tip the scales in favor of the “Leave” sentiment: According to census data, about 1.2 million British citizens live in the EU, while about 3 million citizens of other EU countries live in the UK.
The issue of immigration, which the “Remain” camp tried to paint as purely a social issue – a position that heavily implied that any sentiment in favor of controlling immigration was prejudicial, if not downright racist—is a significant economic concern, although the impact was not reliably quantified by either side during the long pre-voting campaign. Essentially, the free movement of people within the EU made it difficult for the UK to control in-migration from other EU countries, primarily the poorer countries of Eastern Europe, which was perceived to put a strain on the job market and availability of social services (like health care), which in turn was most keenly felt in the more depressed areas of the country such as central and northern England—areas that, unsurprisingly, voted heavily in favor of the Brexit.
About the only thing that is certain at this point is that a period of turmoil lies ahead, and it is probably a good bet that many of the outcomes are going to be stressful. But given that the outcome of the vote itself seemed to catch everyone by surprise, we might view anyone who claims to know where and how harmful the Brexit wounds will actually be with a bit of skepticism.