Countries band together to promote trade, defend human rights, protect the environment and repel threats. They sign treaties and join international groups, and each time they do, they give up a bit of independence. That happened in a big way with the creation of the European Union, a free-trade zone and global political force forged from the fractious states of Europe. The question always was, could this extraordinary experiment hold together? The people of the United Kingdom gave their answer in a June 2016 referendum, shocking the world by voting to leave the bloc they'd joined in 1973. The way many Britons saw it, the EU was expensive, out of touch and a source of uncontrolled immigration. They chose what's become known as Brexit.
Voters supported the split by 52 percent to 48 percent after a rancorous 10-week campaign that exposed anxieties about globalization and raised questions about the consequences for a united Europe. Prime Minister David Cameron, who had pushed for the U.K. to remain in the 28-nation bloc, resigned and was replaced by fellow Conservative Theresa May. The vote jolted financial markets, sending the U.K. currency tumbling on the prospect of years of uncertainly about how Brexit will work. Britain has two years to negotiate the terms of its separation after it triggered the legal steps in March 2017 to leave the bloc, with talks to unwind agreements in areas as diverse as fishing quotas, financial services and safety standards. Younger voters and residents of cosmopolitan London voted overwhelmingly to remain in the EU. So did voters in Scotland. Cameron had agreed to hold the ballot after rising euroskepticism fed support for the anti-EU U.K. Independence Party, which won 13 percent of the vote in the 2015 general election.
The U.K. waited 16 years to join the European Economic Community after it was formed in 1957, and some people immediately argued that it should pull out. Prime Minister John Major’s government almost fell in 1993 when some of his party’s lawmakers voted against him over the signing of the Maastricht Treaty, which deepened cooperation and created the EU. The same euroskepticism kept Britain from adopting the single currency when it was launched in 1999. The bloc added eight eastern European countries in 2004, triggering a wave of immigration that strained public services. In England and Wales, the share of foreign-born residents swelled to 13.4 percent of the population by 2011, roughly double the level in 1991. In the years before the Brexit vote, migrants were lured by Britain's economy, which had been growing at twice the pace of the euro zone. Because the free movement of citizens is a basic tenet of EU law, leaving the bloc is the only sure way for the U.K. to stem the flow of people. Before the vote, the U.K. was the second-biggest EU country by economic output and the third-largest by population, after Germany and France. There's still a queue of countries waiting to join the bloc.
Brexit campaigners used worries about immigration to create a populist backlash against Europe's political elite, overcoming concerns about the fallout from Brexit on trade and the broader economy. They argue that the EU is morphing into a sclerotic super-state that increasingly impinges on national sovereignty. The U.K. has global clout without the bloc, they say, and can negotiate better trade treaties on its own. The question now is whether the U.K. can strike a Brexit deal with Europe that gives it control over immigration and also retains sufficient access to the EU's tariff-free single market of 500 million people, the economic backbone of the world's largest trading bloc. There's a risk that global companies will cut investment or leave the U.K. German Chancellor Angela Merkel and other EU leaders want to prevent the bloc from splintering further. They insist the U.K. won't be allowed to "cherry-pick" the best bits of EU membership without bearing the costs. The trade deals struck by Norway and Canada — two countries that have never been part of the EU — may provide a guide, though the U.K. is a larger economy and more intertwined.
The Reference Shelf
- A Q&A explainer on why Canada's deal with the EU might offer a post-Brexit roadmap , plus a primer on bankers leaving London.
- The numbers behind Brexit and Bloomberg's special report page.
- Follow Bloomberg's @Brexit on Twitter for full coverage of Britain's exit from the EU.
- Bloomberg truth-squadded the Brexit arguments.
- Businessweek examined <a href=%
First published Dec. 12, 2014
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