Quick Recap: Why Leave In The First Place?
Before we get into recent history, let’s take a step back and refresh ourselves on the source of all this drama. Why did Britain want to leave the European Union (EU) in the first place?
The union of European nations came to fruition after the end of World War II, a time that made clear countries were better united than divided. Belgium, France, Germany, Italy, Luxembourg, and the Netherlands ended up creating an economic coalition in the 1950s which continued to grow as other European nations wanted a piece of the action, officially becoming the European Union through the Treaty of Maastricht in 1993. Great Britain, first hesitant to join and then rejected, officially became part of the group in January 1973. Over the following decades, the union evolved to coordinate politically as well as economically, but as the group expanded to include former Soviet nations and more financially needy neighbors, disagreements on core values began to form cracks in the surface.
With many among Great Britain’s ruling politicians believing the country was giving more than it was getting, the United Kingdom held a country-wide referendum in June 2016, in which 52% voted in favor of leaving the EU and 48% voted to remain. Then-Prime Minister Theresa May notified the bloc of the country’s intention to withdraw in March of 2017 — beginning years of struggle, taking us to today.
What’s Happening Now?
First of all, it’s important to note that Great Britain did officially leave the European Union in January of this year (news which may have been drowned out by the burgeoning coronavirus crisis). However, since then, the country has been stuck in a “transition period,” where essentially nothing has changed from when Britain was a part of the union. Plus, it’s still following all the EU’s rules. The reason for this is that Great Britain has not been able to come to an agreement with the EU at large over the terms and conditions of its withdrawal — aka how a future relationship between the two of them will look.
The key source of disagreement in negotiations between the two parties is Great Britain wants the best of both worlds, but the EU won’t let up. The EU is making Britain choose to either have regulatory freedom and limited trading with the bloc, or less freedom through following the EU’s rules but the ability to trade more freely. Obviously, Britain doesn’t want to follow the union’s rules anymore, but also doesn’t want its trading relationships to suffer. This is where the deadlock comes in, complicating recent talks about State Aid and fishing rights.
Everything got significantly more complicated last month when the issue of Northern Ireland arose once again. Having never agreed to leave the EU itself but technically tied to Great Britain, Boris Johnson came up with a solution in January entitled the Northern Ireland Protocol. This essentially stipulated that goods moving from Ireland to Northern Ireland could do so without requiring a customs check, but goods moving from Northern Ireland and the rest of the UK could — meaning Great Britain’s exit from the EU would have a less direct impact on Northern Ireland’s trade.
However, as part of the Withdrawal Agreement, Johnson effectively passed over to the EU the responsibility to set the rules in Northern Ireland, which the prime minister has since backtracked on, signing an Internal Market Bill which declares the British government can set rules over State Aid in Northern Ireland. This set off a firestorm of backlash from the EU and drove negotiations further into stalemate, with compromise appearing to be far away.
This Concerns Business Owners How?
British business owners — and business owners in other European countries — will be heavily impacted by whatever is decided by Britain and the EU over the next couple of months. If Britain opts for more freedom over trade, British businesses’ pre-existing relationships will likely be compromised and could result in diminished international imports/exports. Without a deal, the country will be treated the same as any others that lack trade agreements for tax, customs. and the movement of goods. Other questions arise around unknown impacts like the employment of EU citizens.
“If no trade deal is reached by the end of 2020, the World Trade Organization (WTO) rules go into effect, which would mean tariffs on exports to the EU, and customs checks at the border (and vice versa),” per a Trusted Shops blog post.
Though the long-term impact of Brexit is not known because the conditions of departure aren’t yet decided, British business has already been affected. For example, Tesla CEO Elon Musk cited Brexit uncertainty as a factor in why he chose to build a new factory in Germany instead of the United Kingdom. Other major companies, like Airbus, have considered moving their Airbus operations from the UK, and new companies have been deterred from planting new roots there.
What Happens Next?
Discussion can’t stay in limbo for much longer, however, because a dramatic deadline is approaching. Britain and the EU have to come up with an agreement by 11 p.m. on the 31st of December, the day the transition period officially ends, otherwise the relationship between the two will be officially over.
About the Author
Jemima is a journalist who enjoys reporting on business, particularly small business and entrepreneurship.