• <div class="header-image" style="background-image: url(/live/image/gid/4/2897_V6N9_Header.rev.1540219621.jpg);">​</div><div class="header-background-color"/>

The Ambiguities of Brexit

March 08, 2017
The United Kingdom has always had a tenuous relationship with the supranational European Union. Protective of national sovereignty and parliamentary inviolability, the United Kingdom has had a ‘natural’ enmity toward continental power.

The Present Situation

The United Kingdom only approached the European Project after the rapid disintegration of the British Empire, when federalism appeared to be the only path to sustain national relevance. Nonetheless, British membership was twice vetoed by the French, and when the United Kingdom finally ascended to the European Economic Community, continued membership was domestically divisive. From the right, conservatives rebuked the European Community’s infringement on national sovereignty, while trade-unionists in the Labour Party feared supranational corporate power and free-trade agreements.

Across the political spectrum, Euroscepticism has been a persistent factor in British politics. The European Community’s reputation in the United Kingdom has not been aided by events; British membership in the EEC failed to provide the promised economic remedy of the 1970s, Black Wednesday caused billions of dollars of losses to taxpayers, immigration intensified to record highs, unpopular Brussels directives made front-page headlines, and the Great Recession tainted Europe’s financial record. Whether these accusations were justifiably attributed to the European Union or not, the European Union became the catch-all boogeyman of the United Kingdom. The combination of these public disasters, compounded by widespread discontent with the so-called “London elite,” created a predictable backlash against the supposed embodiment of these discontents: the European Union. In June 2016, the British public backed British departure from the European Union by a vote of 52% - 48%. [1] Despite recent accusations to the contrary, there is little indication of “Bregret” — promises of restored sovereignty and reduced immigration remain foremost in the public mind. [2]

<p>Image: Results of the UK vote to leave the European Union. Source: <a href="http://www.bbc.com/news/politics/eu_referendum/results">BBC News</a></p>

Image: Results of the UK vote to leave the European Union. Source: BBC News

In the aftermath of the referendum and the resignation of David Cameron, Prime Minister Theresa May resolved the controversy over whether Britain’s exit would be a soft-or-hard Brexit with the definitive answer that “Brexit means Brexit.” But even that assertion proved to be short-lived. A few weeks afterwards, the Her Majesty’s High Court ruled that Prime Minister May could not trigger Article 50 [the mechanism for EU departure] without the consent of Parliament. [3] Beyond the legal reality, the political results of the referendum have demonstrated a clear disconnect between the pro-Remain Parliament and the pro-Leave public. A recent map of the UK indicates that many MPs will have to cautiously maneuver next election as to not upset their constituents and lose their seats. [4] The issue is compounded by the marginality of the election result; the same source indicates that several MPs face a slim divide among constituents as to whether they wish to leave or stay in the European Union. Conservative MP Byron Davies of Gower, who supported Remain, presides over a constituency that voted 51.5% for Leave and 48.5% for Remain. The division in the political class will compound departure from the European Union; Theresa May will have to maneuver around internal party factions, a pro-Remain parliament, and European negotiators.

Trade Ambiguity and Opportunity

As the world’s ninth-largest exporter and the eleventh “most complicated” trade country, the United Kingdom already had a unique trade situation before Brexit. [5] But the recent vote for British departure from the European Union has caused ambiguity across trade lines. After the United States, the next four major importers from the United Kingdom are all constituent members of the European Union. [5] As current EU trade relations with the United Kingdom are uncertain, the British economy is languishing between economic opportunism and financial trepidation.

The biggest question for many exporters and importers is the possibility of a renewed enactment of tariffs on a considerable portion of the $473 billion (USD) that constitutes British exports. While exporters would prefer to see the continuation of the tariff-free European Single Market, the issue is complicated by supranational regulations. [5] If the United Kingdom maintains the tariff free trade-zone enshrined under the Single European Act (SEA), the free-trade preservation will cause a stir within the World Bank Organization, which highly discourages so-called favoritism of trading partners. [6] The British Government will therefore be compelled to participate in lengthy trade negotiations to ensure that the United Kingdom can benefit from favorable trade agreements without violating the regulations of the World Trade Organization.

<p>Image: Economic significance of U.K. Source: <a href="http://atlas.media.mit.edu/en/profile/country/gbr/">MIT</a></p>

Image: Economic significance of U.K. Source: MIT

Alongside difficulties from the renegotiation of trade changes within the European Union, Britain will also have to barter with a concerned international community in order to preserve international exchange deals. [7] Rather than depend upon the European Union’s institutions for diplomatic support, the Foreign Office will have to subsume the obligations of trade negotiation and cease reliance on the European Union for the procurement of bilateral agreements. As the economic ramifications of Brexit remain unknown, the United Kingdom will not have the advantage at the trade negotiating tables; an advantage the British Government enjoyed whilst within the European Union. [7] This ‘independence’ does, however, afford the United Kingdom the opportunity to renegotiate unfavorable trade terms and take advantage of increased trade with non-EU countries that is presently regulated by European Union trade laws. [8] President Trump and Republican lawmakers, for example, will most likely pursue a bilateral trade deal with the United Kingdom to supplant previous arrangements with the European Union. [9] Other possible trade opportunities include agreements with India, which Prime Minister Theresa May recently courted in a November state visit to New Delhi. [10]

Social, Economic, and Governmental Effects

Amidst the disarray of Brexit that still plagues British Parliament, citizens of the United Kingdom now wonder whether the social implications of the political separation will have long-lasting effects. Recently, the former European Commission worker deemed that Brexit’s ramifications will be most strongly felt in employment and social policy, regional development, and education.

Brexit’s impact on employment and welfare legislation can be interpreted from the number of pro-Brexit conservative MPs that occupy labor and welfare-related positions in the cabinet. Over the past few years, the conservative government has embraced an austere stance towards social and welfare policies, including the rejection of the European Social Fund to ameliorate the pressure of migration on municipalities and the deployment of the ESF to “boost the capacity of the food banks.” [11] For the Government, the rejection of ESF support was advanced to reassure the fiscal-minded and anti-EU factions within the conservative Party. Despite the scrapping of former Chancellor George Osborne’s “surplus by 2020” motivation, it is indicative of past approaches that policy shifts after Brexit will be tilted toward entitlement reduction as a method of deficit containment. [12]

The European Union will also withdraw their institutional funding and support for the Department for Work and Pensions. Currently, many health and social care professionals in the UK are migrant workers from other European Union countries. The social care sector, for example, has an estimated vacancy rate of 5.4%. [13] Unless the United Kingdom can find ways either to keep migrant workers or ingratiate more British citizens in migrant-dependent sectors, the British economy will be forced to retract welfare benefits.

The welfare shifts are not confined to entitlements or social care. In fact, British universities are funded and provided for by the European Union in all aspects ranging from staff funding to research grants. As a result of EU funding withdrawal, British departure will alter both the admissions rate and the price of attending British universities. [14]

Conclusion

While there is plenty of uncertainty on the road ahead for the U.K., the ripple effects of the decision to depart from the European Union will be felt across several sectors. The U.K.’s complex economy, due to its integrated nature and the need to redraw trade agreements, will surely be dramatically impact the withdrawal. And surely, it cannot be underestimated how deeply U.K. citizens and laborers working in the United Kingdom will be affected; while it is certain that tuition to British universities will rise, it is uncertain what will happen to migrant workers coming in and out of the country from member countries of the European Union.

 

References

  [1] http://www.bbc.com/news/politics/eu_referendum/results

  [2] http://ukpollingreport.co.uk/blog/archives/9776

  [3] https://www.nytimes.com/2016/11/04/world/europe/uk-brexit-vote-parliament.html?_r=0

  [4] https://www.indy100.com/article/mp-brexit-vote-article-50-high-court-parliament-trigger-eu-referendum-latest-7395451

  [5] http://atlas.media.mit.edu/en/profile/country/gbr/

  [6] https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm

  [7] http://www.reuters.com/article/us-britain-eu-trade-analysis-idUSKCN11D1CH

  [8] https://fullfact.org/europe/uk-eu-trade/

  [9] http://www.politico.com/story/2016/06/brexit-us-britain-trade-deal-224776

  [10] http://money.cnn.com/2016/11/04/news/economy/theresa-may-india-trade/

  [11] http://ec.europa.eu/esf/main.jsp?catId=381

  [12] http://www.bbc.com/news/business-36684452

  [13] http://www.boeckler.de/pdf/v_2016_06_16_vortrag_andor.pdf

  [14] https://www.thecompleteuniversityguide.co.uk/international/eu-referendum-how-does-the-european-union-affect-universities-and-students/

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

PENN WHARTON PPI
RESOURCE SPOTLIGHT:

  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>