Britain has voted to leave the European Union after a divisive referendum campaign. In the coming months, British and European leaders will begin negotiating the terms of Britain’s departure. The consequences of Thursday’s referendum will be massive for its people and the global economy. Before one gets into the implications of the "Brexit", it would be helpful to understand what the European Union is all about. The idea for EU came after the Second World War when there was a desire to keep the continent from tearing itself apart. This idea culminated in the Maastricht Treaty or the Treaty on the European Union, which was signed in 1992 by the leaders of 12 member nations. Since then, it has evolved into an economic bloc of 28 countries, whose citizens can trade and move freely across borders to negotiate economic agreements as a bloc. In theory, the results of the referendum, which caught the world by surprise, are not legally binding and must be put to vote on the floor of the British Parliament. But with public opinion emphatically in favour of "Brexit", lawmakers would be committing political suicide, if they chose to ignore it.
For British Prime Minister David Cameron, this result is a setback of immense proportions. Only a year ago he was celebrating a triumphant re-election. To placate right-wing elements in his own party, he promised to hold a referendum. Standing aside from key leaders within his own government, Cameron chose to campaign against "Brexit" and staked his political career on a referendum, which he was confident of winning. Little surprise now that Cameron has announced his decision to resign from office in the next few months. In the short term, nothing much will change. “There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold,” Cameron said in his resignation speech after the ‘Brexit’ vote. “We must now prepare for a negotiation with the European Union.” The formal procedure for Britain’s exit will only begin when Article 50 is invoked, which will be triggered once it officially notifies the EU of its intention to leave. After that, there is a two-year period in which the terms of exit are negotiated. After Britain’s formal exit, there will be fresh negotiations with the EU for a new trade deal.
In the short term, uncertainty about the British economy will loom large, especially its future relationship with the EU. To the uninitiated, the EU is Britain’s largest trading partner. Both the British stock market and the Pound took severe hits on Friday. However, economists predict that the implication of "Brexit" in the long run could be a lot worse. Cameron has already announced that he will not steer Britain’s bid to negotiate its exit from the EU. The next incumbent will have a very tough job of negotiating a favourable trade deal with the EU. Experts contend that the EU will strike a hard bargain to discourage other countries from leaving the Union. It is a heavy net loss for businesses based in the UK. "If you are Nissan or some other car producer with major production in the UK, today, the same safety standards and environmental standards allow you to sell everywhere in the European market," Jacob Funk Kirkegaard, an economist at the Peterson Institute for International Economics, told Vox, an online American publication. “But if the UK leaves the EU, you would no longer be able to sell into other European markets, not because you face a small tariff but because you'd have to go through another set of safety certifications. This kind of thing would be repeated in every industry you can think of." Economists at the Centre for Economic Performance (CEP), which is part of the London School of Economics, calculated that UK stares at income falls of between 6.3 percent and 9.5 percent of GDP.
Such an analysis begs the question as to why the majority sought an exit from the European Union. Despite the initial shock to the economy, advocates of "Brexit" have argued that in the long run, Britain will be better off with complete sovereignty and control over economic regulations and immigration. "The risks of Britain staying in the EU far outweigh the risks of us leaving," argued British journalist and Brexit advocate Douglas Murray. "The eurozone (largely driven by failed austerity drives) has been a disaster, and it's very important for Britain to get control of our own borders." Of course, at the heart of the pro-Brexit push is the issue of immigration. EU law still requires members to admit an unlimited number of migrants from member countries. But the issue of EU immigrants taking up British jobs was largely driven by xenophobia instead of sane discourse. Instead of blaming poor economic policy, many in the pro-Brexit camp have blamed migrant workers from the EU for the job crunch. Meanwhile, the argument for sovereignty holds some legitimacy in the continent, but not in Britain’s context.
Britain has watered down and opted out of many EU agreements. For example, it refused to join either the Schengen Area, which eliminates internal border controls, or the common currency (Euro). But one hopes that the "Brexit" will compel EU leaders to make the economic Union more democratic and less big-business-centric. “The rise of nationalism throughout the continent is a direct result of anti-democratic European institutions, austerity, and economic policies that have completely left out rural populations and former industrial centers,” argues Raphael Mimoun, a political observer. “The European people have time and again rejected the direction taken by the EU. Now is an opportunity to take a new, democratic, social direction.” If the EU does not take the required steps, it will lead to its further disintegration. Meanwhile, Scotland may push for another referendum to break away from the UK. It voted decisively against "Brexit". Demands for another referendum are on the table so that an independent Scotland would be able to stay in the European Union. Larry Elliott, the economics editor of The Guardian, writes: “The result speaks volumes about the state of modern Britain. For the better off, a vote to remain was the obvious thing to do. For the less well-off, a vote to leave was their chance to protest about badly paid jobs, zero-hour contracts, bullying employers, and a sense that they had been forgotten. These economic problems are deep-seated and of long-standing. Most of them have little to do with Europe. But the referendum has given millions of unhappy people a chance to protest. This is a country divided by wealth, geography, and class.”