Brexit: Why Britain left EU and what will be the Consequences

The European Union (EU) is a politico-economic union of 28 countries in Europe which came into existence on 1st November 1993 and headquarted at Brussels, Belgium. The policies ensure the free movement of people, goods, services, and capital within the system and also maintain common policies on trade, agriculture, fisheries, and regional development.

A monetary union was established in 1999 and came into full force in 2002, and is composed of 19 EU member states which use the euro currency. The member countries are Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

The appealing part was that it made it easier for many member countries to share in one another's prosperity, but, as with any union, cooperation means weathering downturns together - and that hasn't always been so easy.

Seeing the EU in such crisis made some countries have second thoughts about being yoked to it and increased worry among wealthy countries (like the UK) that they might have to help bail out less wealthy countries (like Greece and Spain) down the line. All these issues made many Brits think like everybody thinks, The Freedom to Choose.

On 22nd June 2016 Britain voted to leave the European Union. Almost 52 percent of Britons voted in favor of leaving. The remain campaign (stay with European Union) was led by the Prime Minister David Cameron and had a wide support from the international community which includes US President Barak Obama.

The leave campaign (was led by former London Mayor Boris Johnson and Justice Minister Michael Gove).

Major reasons for this exit are listed below

1. Many EU agreements and treaties were shifting focus from Individual states to EU headquarters in Brussels. Many EU rules were overriding individual member countries laws. European Commission, which is the executive branch of EU is not directly accountable to the voters in member countries.

2. Euro is a disaster though EU was a good idea. The global recession had a bad impact on the world economy and was much worse in Eurozone. Unemployment rate shot up by more than 20% in some member countries like Greece and Spain, resulting in massive debt crisis.

Still these countries have not recovered and many economist blame the Euro. UK though part of EU, chose not to join the common currency, so there was little danger for the British economy. Many economists are in the view that there should be deeper fiscal and political integration for the Eurozone. They also require a common welfare and tax system which could extend an extra help for those countries faces down turns.

3. Member dividend can be saved. Every member country need to make an annual contribution towards the central EU budget. Currently UK contributes £13 billion ($19 billion) per year. Leave supporters are citing a larger figure. Much of this money is spend on services in UK, leave supporters argue that it will be better to keep the money and the government can decide how to spend the same.

4. EU's regulations have become increasingly onerous. The EU rules are sometimes ludicrous. Rules like you can't recycle a teabag, children under eight cannot blow up balloons have become a burdensome regulations. The leave supporters argue that it cost British economy around £600 million a week.

5. Too much power given to corporate elites. The leave supporters argue that EU's antidemocratic structure gives too much power to corporate elites and prevents the British from making significant gains.

6. EU allows too many immigrants. UK should have a rational system outside EU. According to EU law, citizens of one EU country have the right to travel, live, and take jobs in other EU countries. Since the financial crisis in 2008, the British have increasingly felt the impact of this rule.

Workers from Eurozone countries such as Ireland, Greece, and Lithuania (as well as EU countries like Poland and Romania that have not yet joined the common currency) have flocked to the UK in search of work. Thousands of Eastern European have come to UK for jobs, which undercut the native working population.

UK absorbed nearly 3, 30,000 new people in 2015 alone, which is a significant number when considering the size of the country. Leave supporters argue that UK should have a better system outside EU and should focus on admitting immigrants who can bring valuable skills and can integrate well into the culture.

What Next

On the negative side: Britain would be 'less attractive' for my cash after Brexit, world's richest man Bill Gates warns after spending $1bn there recently.

The reason behind such a comment would probably be the difficulty in finding best talent and the difficulty in raising investments which are much needed for public welfare and activities like research for new medicines, affordable clean energy solutions, for which scale of collaboration, knowledge sharing, and financial backing that combined strength of EU provides.

Unemployment will rise as companies move out of the UK. For those who decides to stay, there will be hiring freezes due to uncertainty. People nearing retirement will either have to delay retirement or live on less than they expected. Investors with UK-denominated assets will all lose money.

One of the most worrying factor is probably outside the economical front. The Scottish people may come up with fresh demand for independence from UK and shutter Her Majesty's Naval Base Clyde at Faslane on Scotland's west coast, which is the home port of four British submarines armed with Trident ballistic missiles that plays a key role in NATO deterrence against Russia.

There are no alternative sites for Faslane and Coulport in England, according to George Washington University analyst Hugh Gusterson, and building alternative sites and coming up with replacements for the aging Trident subs would cost upwards of $20 billion and take possibly 20 years.

When Britain is a non-EU country, the free movement of players and managers from EU countries will inevitably be restricted. The existing regulations about non-EU players are upheld, then around 400 players and other staff from across the English soccer will fall into a category which requires a work permit.

The work permits are assigned on a complex points system based on the FIFA rankings of the player's home country and the player's appearances for his national team.

On the positive side: A weaker pound will help exports and reduce the cost of visiting the country. A free-falling economy will also cause home prices to drop, enabling those who had been priced out to potentially buy at an affordable price if they can keep their jobs.

Prime Minister Cameron's decision to step down can ignore the will of the people or revoke Article 50 of the Lisbon treaty to begin the legal process of leaving the EU. Though a two year notice period is required for the exit process, many negotiations and agreements will have to be reached.

As we live in a heavily interconnected world, the fear of uncertainty in trade, currency, British investments abroad and investments in Britain and of course the rest of the EU, will take plenty of time to work themselves out.

About the Author:

The author is Managing Director at Mentor Max Incubation Services Private Limited

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