What is 'Brexit' anyway?
I started writing what is “x” anyway series to examine words that have become so ubiquitous as to render them useless. I began to review the source academic definitions and then layer in more recent observations to find a workable definition.
Last week I was asked to speak on a panel regarding Brexit and business. While I was well versed on Brexit in economic contexts, Brexit is now associated with textures of "Hard" vs. "Soft" and varied models and processes. So what does it mean today? Br-exit (Britain + Exit) was the outcome of an EU referendum held on June 23rd 2016. The twist was that no one thought it would happen. A historical precedent of leaving the EU did not exist so nobody had the foggiest* what Brexit in practice meant.
On each end of the spectrum is a soft or hard Brexit. A soft Brexit means that the UK would no longer have a seat on the European Council but it would keep access to the European single market. Goods and services would be traded on a tariff-free basis and financial firms would keep their "passporting" rights to sell services and operate branches in the EU.
Hard Brexit would mean the UK does not have access to the single market but would have full control over its borders, making new trade deals and applying laws within its own territory and essentially revert to WTO rules of trade. Considering that the EU accounts for 45% of UK exports of goods and service, retaining as much frictionless access to the single market is a priority for UK businesses. The big question for policy makers is if and how that can be balanced with the electorates concerns on immigration.
Contrary to what we may have heard in intervening months, there is no "a la carte" Brexit. The EU is based on the four freedoms of movement of labour, capital, goods and services. The four go hand in hand. It is also unlikely we will end up at the extremes of the spectrum, leaving a ‘middle child’ that is much harder to define.
The BBC provides a good rundown on the alternative Brexit models based on 5 parameters including single market memerbship and free movement. Norway has full membership to the single market and Switzerland partial - both accept free movement and make EU budget contributions.
In terms of the “Brexit” process, it is likely there will be three steps to be negotiated: the terms of the exit which Article 50 provides for; a transitional agreement, and then the final deal. Theresa May has indicated that Article 50 will be triggered in March 2017. Once set in motion, it cannot be stopped except by unanimous consent of all member states and any deal must be approved by a qualified majority of EU member states and can be vetoed by the European Parliament.
Brexit is a dark topic - abject shock has led to the journalistic pendulum swinging to doom. I am not discounting the shorter-term negative economic implications but over the longer term the UK economy and people have the flexibility and ingenuity to adapt. For one, entrepreneurial ecosystems have advanced rapidly with initiatives like Innovate UK, StartUp Britain and Tech North. And no matter what happens with immigration, the UK’s population diversity and vibrancy will remain a core strength.
Brexit was a rejection of the status quo primarily driven by rising inequality not racism. Seeing it as an opportunity to address its socio-economic roots, whether through public policy or new entrepreneurial forces can lead to better long term outcomes. Yes it is uncertain but the only things that are certain in our lifetimes are death and taxes.
Follow me on twitter @kajalnyclon and LinkedIn for more on the “what is x anyway” series. I am on a quest to help the best European entrepreneurs successfully expand their businesses in the US with Growth-hub.us
Note: "so nobody had the foggiest* is British for nobody had a clue
More in the “What is “x” anyway?” series:
· What is ‘Innovation’ Anyway?
· What is an 'Entrepreneur' Anyway?
Sources and Recommended Reading/Listening:
2. Brexit Blues - John Lancaster, London Review of Books
3. The EEA: A Safe Harbour in the Brexit Storm - Chatham House
4. Defining the Terms of Brexit - Goldman Sachs Podcast
"Unstoppable fintech maverick breaking banks, bending spreadsheets, and defying financial limits with ingenious solutions." - ChatGPT
8 年Nice article, thanks for the links too. I was predicting a Brexit and am (currently) in favour of a long term one which keeps trade ties with Europe, even though I voted Bremain. When Sir John Major made his appearance on the Marr show it became evident to me that even the political elite knew we were in for a Brexit vote [1]. There was a lot of misleading and borderline fraudulent information spread by the Brexit camp. That's not to say there aren't important underlying issues that need to be tackled, but Brexit doesn't help. For example, key NHS services and national infrastructure like rail will still be tendered off, and many services in finance such as compliance and quant teams were moving out of London anyway before the Brexit vote, which is subsequently expediting this. I think the FCA sandbox [2] should be mentioned here as a key component of the entrepreneurial ecosystem here. This has to be one of the most important financial initiatives started in the UK by the FCA to ensure London remains relevant and attractive in global finance post-Brexit. The Singapore regulator MAS and the Swiss regulator FINMA are following suite now with their own regulatory sandboxes, and one wouldn't bet against more regulators world-wide working with financial institutions and startups to encourage local innovation. [1] https://news.bbc.co.uk/1/shared/bsp/hi/pdfs/05061601.pdf [2] https://www.fca.org.uk/news/speeches/our-role-promoting-innovation