A comprehensive guide to the ins and outs of Brexit

The team at Systematics have been keeping a close eye on the progress of Brexit negotiations ever since Britain first voted to leave the European Union (EU) on Thursday 23 June 2016. Below, Systematics has compiled a summary regarding the ins and outs of Brexit so far, which draws together highlights and frequently asked questions (FAQ) brought to light by BBC News.

Brexit – a quick guide

(Source: Brexit: All you need to know about the UK leaving the EU, BBC News, 13 November 2017)

The UK voted to leave the EU on Thursday 23 June 2016 through a referendum. The ‘leave’ vote won, after 51.9 per cent of people voted ‘leave’, in comparison with 48.1 per cent who voted ‘remain’. Concerns have been raised that, during the referendum, the country which once worked so hard as a unit to pull out of the financial crisis was, quite literally, split in two.

Since triggering Article 50 on 29 March 2017, Britain’s official departure from the EU is now scheduled to take place at 11pm UK time on Friday 29th March 2019. This means that there is now only a short amount of time left to sort out what looks to be a long and difficult road of negotiations ahead. Plenty of discussions have already taken place in relation to how the UK will achieve a successful EU withdrawal process (if such a thing exists). Talks have cantered around:

  • What happens to the Northern Ireland border
  • What happens to UK citizens living elsewhere in Europe
  • What happens to European citizens living in the UK
  • Agreement on the amount of money the UK will need to pay on leaving – the so-called ‘divorce bill’

Amongst all the ‘fog’ hovering above our heads in terms of the more informal discussions constantly taking place in every corner of the UK and EU on the potential impact Brexit may have, one thing is clear – so far there is no clear direction nor clear policy on how the UK economy will be affected, or how businesses and individuals will be affected.

So how has the UK economy performed since the Brexit vote?

Well, David Cameron, the former Prime Minister and his now ex-Chancellor, George Osborne, and many other supporters from the Remain campaign, have predicted an immediate crisis for the UK economy ever since Britain first voted to leave last year.

Thankfully, these predictions of immediate doom were wrong. In fact, the UK economy actually grew by 1.8 per cent in 2016, only second to Germany (which achieved 1.9 per cent growth) in terms of all the G7 nations. Since then, however, weak growth has been predicted for the UK going forward.

Inflation has risen to three per cent, but unemployment has continued to fall, now standing at a 42-year low of 4.3 per cent.

What is Article 50?

Article 50 is a plan for any country wishing to leave the EU. The article was created after an agreement was signed by all EU states governing what should happen should an EU member state wish to leave. This agreement, known as the Treaty of Lisbon, became law in 2009. Before this, there was no formal mechanism for a country to leave the EU.

In essence, Article 50 states that any EU member state may decide to quit the EU but, in order to do that, they must notify the European Council and negotiate their withdrawal within two years of triggering Article 50, unless all members agree to extend beyond the standard two year period.

EU Law into UK Law?

The UK Parliament has passed and approved a plan to initially incorporate EU legislation into English law in one ‘lump’, after which the Government will decide which parts to keep, which parts to change – or even remove – at a later date. This is currently known as the ‘Great Repeal Bill’.

Some of the sticking points that have formed part of Brexit since the referendum are:

  • Control on immigration
  • No longer wish to concede power to EU
  • No longer wish to contribute to EU Budget

Control on immigration

The UK Government has stated on several occasions that the main message taken from the Leave voters, is that the British people (51.9 per cent of the 71.8 per cent of voters) want to see greater controls on immigration.

The Brexit supporters want Britain to take full control of its borders and reduce the number of people coming to live and work in UK from foreign countries, amid concerns that such individuals put extra pressure on the country’s resources.

Meanwhile, those who campaigned for the UK to stay in the EU tend to hold the opinion that EU membership has provided a boost to the UK, as it has made exporting to other EU countries easier, and created a steady flow of immigrants whom are mostly young and keen to work, thus helping to fuel economic growth and pay for public services.

Some argue that this has inadvertently created a ‘skills gap’ within the UK economy, while others argue that, regardless of Brexit, the UK economy has been attempting to close the gap on skills for years without a successful solution so far.

No longer wish to concede power to EU

The UK Government has “vowed” that Britain will not be under the “direct” jurisdiction of the European Court of Justice (ECJ) – the EU’s highest legal authority – after Brexit. However, it has not ruled out remaining under its jurisdiction during the Brexit transition period that is planned for March 2019 onwards.

The ECJ is one of the primary institutions of the European Union, which administers EU law. So, while it might have a role in supervising a future trade deal, part of the goal of Brexit was arguably always to remove the UK from the ECJ’s jurisdiction.

The ECJ is an entirely separate entity from the European Court of Human Rights (ECHR), which the UK is a part of together with 46 other members, including Russia and Ukraine.

The ECHR is perhaps more controversial, as it is a body set up not by the EU but by member states of the Council of Europe, a separate institution which contains 47 countries including Russia and Ukraine – who are not actually members of the European Union. It is this Court which has handed down many judgments that have been viewed as controversial in the UK in recent years, including blocking the extradition of Abu Qatada and establishing the right of serving prisoners to vote in elections. It is important to note that Britain leaving the EU will not change anything here.

No longer wish to contribute to EU Budget

The UK is one of the 10 EU member states which pays more into the EU budget than what it effectively gets out. In fact, only France and Germany contribute more. In 2014/15, Poland was the largest beneficiary, followed by Hungary and Greece.

The UK also gets an annual rebate and money back via regional development grants and payments to farmers.

Although the UK clearly wants the above to be addressed, there are many benefits to being an EU member state which the UK Government largely wishes to keep hold of following Brexit, such as:

  • Free access to the single market
  • Free flow of financial services
  • UK citizens having the right to live and work in the EU

Free access to the single market

The single market is arguably the EU’s biggest achievement and one of the main reasons it was originally set-up. The main objective was to create the biggest free trade area in the world, where countries can trade with each other without paying tariffs and without merging their economies into one.

The EU single market, was first set-up and completed in 1992. It allows for the free movement of goods, services, money and people within the European Union, i.e. as if all EU member states were together a single country. For many years, this has made it possible for anyone setting up a business or taking up a job to do so anywhere within the EU member states, with the view of boosting trade, creating jobs and lower prices, hence generating growth.

Free flow of financial services

London has long been seen as the financial centre of Europe, and the UK is keen to preserve the City’s reputation after Brexit. Currently, concerns are rife regarding whether jobs may be lost to other up-and-coming financial hubs elsewhere in the EU, such as Frankfurt, if this factor is overlooked during negotiations.

Some leading financial institutions are reportedly already working on alternative business arrangements ahead of Brexit – for example, Wall Street bank Goldman Sachs is already looking into having not one but two of its EU hubs set-up in Frankfurt and Paris, as opposed to London. Simply put, all financial institutions need to ensure that they will continue to be able to serve EU clients once Britain leaves.

UK citizens to retain the right to live and work in the EU

The issue of free movement and the rights of EU citizens to live and work in the UK and vice versa, has been one of the main issues regarding Brexit. In fact, the UK Government has already stated that securing the status and rights of EU nationals in the UK – and UK nationals in the EU – is one of the main priorities. However, no guarantees have been delivered.

So, generally speaking, how might Brexit impact the UK? Many believe that there are chances Brexit will result in:

  • Further depreciation of the pound – this may result in higher costs for imported goods and services
  • Potential tariffs imposed on imported goods, which could potentially be five per cent, ten per cent, or even more
  • A new legal framework, which could, for example, impact Mutual Recognition Agreements in terms of UK-only spec vs EU spec products – as it is hard to imagine a company would want to produce two batches of the same products
  • Ireland/Northern Ireland borders
  • Longer lead times for deliveries
  • Production – skills shortages
  • Inflation may rise

Uncertainty is building up quickly, which many believe is bad for the British economy and therefore for all those industries and companies operating within it.

What do ‘soft’ and ‘hard’ Brexit mean?

There is no strict definition of either, but these terms are used to refer to how ‘close’ the relationship between the UK and the EU might be after Brexit.

So, at one extreme, “hard” Brexit could involve the UK refusing to compromise on issues like the free movement of people – even if this meant leaving the single market. At the other end of the scale, a “soft” Brexit might follow a similar path to Norway, which is a member of the single market and has to accept the free movement of people as a result of that.

How are the talks going?

There have been agreements on some technical points so far, but the Chief EU Negotiator, Michel Barnier, has said there has not been any decisive progress on any of the main issues so far.

Contrary to this, the UK’s Brexit Secretary, David Davis, insists that progress has been made. The main sticking point at the moment is money – and the size of the bill the UK will pay to cover its outstanding obligations when it leaves. Most recently, the UK has offered to pay a potential ‘divorce bill’ of 50 billion euros (£44.1 billion).

Naturally, the UK wants the ‘divorce bill’ to be as low as possible, while all of the other countries in the EU want it to be as high as possible. This is because, when the UK leaves, there will be a hole in the EU’s budget, meaning that it will have to cover the shortfall.

So, why can’t the UK just cut all ties in March 2019?

The UK could potentially cut all ties, but the UK Government would like to avoid such a “cliff-edge” where cross-border trade and travel between the UK and the EU ends overnight, as this would no doubt cause much disruption, and even harm to the nation’s economy.

What happens if there is no deal with the EU?

The “no deal” scenario would mean that without an agreement on trade, the UK would have to operate under World Trade Organisation (WTO) rules. This could result in customs checks and tariffs on goods, as well as longer border checks for travellers.

To further complicate things, there are also questions about what would happen to Britain’s position as global financial centre and the land border between the UK and the Republic of Ireland, together with concerns that Britons living abroad in the EU could lose residency rights and access to free emergency health care.

What might happen to EU citizens living in the UK?

This is still yet to be agreed. The UK Government’s idea is that EU nationals lawfully resident in the UK for at least five years will be able to apply for ‘settled status’ – which means that they would be able to bring over spouses and children. But of course, any deal on the future legal status and rights of such individuals must be reciprocal and also give British expats living on the continent such rights after the UK leaves the EU.

The key proposals put forward by the UK so far, are:

  • Those granted settled status will be able to live, work, study and claim benefits just as they can now
  • The cut-off date for eligibility is undecided but will be between 29 March 2017 and 29 March 2019
  • Family members of EU citizens living abroad will be able to return and apply for settled status
  • EU nationals in the UK for less than five years at the specified date will be able to continue living and working in the UK
  • Once resident for five years, they will be able to apply for settled status
  • Those arriving after the cut-off point will be able to stay temporarily, but there should be ‘no expectation’ they will be granted permanent residence
  • A period of ‘blanket residence permission’ may apply to give officials time to process applications to stay in the UK
  • The Home Office will no longer require evidence that EU citizens who weren’t working held ‘comprehensive sickness insurance’

What happens to UK citizens working in the EU?

A lot depends on the kind of deal the UK agrees with the EU. If the Government opted to impose work permit restrictions on EU nationals, then other countries could reciprocate, meaning Britons would have to apply for visas to work.

What does the fall in the value of the pound mean for prices in the shops?

People travelling overseas from the UK have already begun to find that their pounds are buying them fewer euros, dollars or other currencies. This has been the case ever since the referendum vote, because the pound has depreciated in value quite significantly.

On a brighter note, however, this has already meant that exports have been boosted, as UK goods will are cheaper. Unfortunately, this also means that imported goods are now more expensive.

Will a visa be needed to travel to the EU?

The UK Government wants to keep visa-free travel to the UK for EU visitors after Brexit and it is hoping this will be reciprocated, meaning UK citizens will continue to be able to visit EU countries for short periods without seeking official permission to travel.

What does this mean for Scotland?

Scotland as an individual nation voted to remain in the EU, and therefore Scotland’s First Minister, Nicola Sturgeon, has said that it is “democratically unacceptable” that Scotland should face being taken out of the EU with the rest of the UK as part of Brexit.

Ms Sturgeon has officially asked for permission for a second referendum to be held. She has said that the vote should be held between the autumn of 2018 and spring 2019. However, after losing seats at the 2017 General Election, she has put her plans on hold with no referendum likely until 2021. Theresa May has also said that a second referendum should not be held during the Brexit process.

What does it mean for Northern Ireland?

Like Scotland, Northern Ireland voted to remain in the EU in last year’s referendum. The land border between Northern Ireland and EU member, the Republic of Ireland, is a key part of the Brexit talks, as there is currently a common travel area between the UK and the Republic which may cease to exist after Brexit.

The UK Government wants to avoid returning to a ‘hard border’ – i.e. physical infrastructure creating a border, such as customs posts. This cannot be achieved easily and there are already critics who have described efforts to avoid this as “a fantasy frontier”. In short, if the UK wants to stop migrant workers using Dublin airport as a ‘back door’ into the UK, then it is going to have to do something about the border.

To further add confusion to this already complex process, some have called for a separate referendum on Northern Ireland leaving the UK and joining the Republic of Ireland as soon as possible to create a ‘united Ireland’.

How will pensions, savings, investments and mortgages be affected?

Apparently, there is an agreement known as a “triple lock” by which pensions increase by at least the level of earnings, inflation or 2.5 per cent every year – whichever is higher. This means that pensions increases will most likely be safeguarded from any negative Brexit impact.

Over the last few years, low interest rates have helped mortgages and other types of borrowing to be offered to homebuyers and consumers at low rates. However, with the depreciation of the pound, inflation has risen of late, which, as a result, has influenced the Bank of England to increase interest rates. The Bank’s base rate was increased to 0.5 per cent in November, and it is thought that further increases are on the horizon. This means that mortgages and loans will become more expensive, resulting in less disposable income among British families. This is likely to have an impact on consumer spending. However, the interest rate rise brings with it some good news for savers, who will now get more interest from their investments.

Will EHIC cards still be valid?

If a UK citizen is already living in another EU country on the day the UK leaves the bloc, their EHIC card – which entitles travellers to state-provided medical help for any condition or injury that requires urgent treatment, in any other country within the EU, as well as several non-EU countries – will continue to work.

After that date, for EU citizens wishing to travel to the UK or UK citizens wishing to travel to the EU, it is unclear about what will happen because no deal has yet been reached.

Will cars need new number plates?

Probably not, says BBC Europe correspondent Chris Morris, because there’s no EU-wide law on vehicle registration plates, and the EU flag symbol is a ‘voluntary identifier’ as opposed to a compulsory one. The DVLA says there has been no discussion about what would happen to plates featuring the flag if the UK voted to leave.

Could MPs block an EU exit?

Technically speaking, the referendum result is not legally binding – and therefore Parliament still has to pass the laws that will get Britain out of the 28 nation bloc, starting with the repeal of the 1972 European Communities Act. The withdrawal agreement also has to be ratified by Parliament – and the House of Lords and/or the Commons could potentially vote against ratification, according to a House of Commons library report.

So, in theory, they could block the UK’s EU exit. But in practice, this is seen as very unlikely given that a majority of people voted for Brexit in the referendum.

Will leaving the EU mean we don’t have to abide by the European Court of Human Rights?

The European Court of Human Rights (ECHR) in Strasbourg is not a European Union institution. It was set up by the Council of Europe, which has 47 members including Russia and Ukraine. So, quitting the EU will not exempt the UK from its decisions.

Will the UK be able to re-join the EU in the future?

BBC Europe editor Katya Adler says that, in order to achieve this, the UK would have to start from scratch with no rebate and enter detailed talks with the EU. Every member state would have to agree to the UK re-joining.

She adds that, with elections looming elsewhere in Europe, other leaders might not be so generous towards any UK demands. Furthermore, new members are required to adopt the euro as their currency, once they meet the relevant criteria, although the UK could technically try to negotiate an opt-out.

Will Brexit harm product safety?

Probably not, is the answer. It would depend on whether or not the UK decided to get rid of current safety standards. Even if that happened, any company wanting to export to the EU would have to comply with its safety rules, and it’s hard to imagine a company would want to produce two batches of the same products.

Although the Mutual Recognition Agreements have already been discussed, it remains unclear how existing EU regulations will be affected going forward, and how they will be updated. To date, the UK has had a seat at the table and input into the drafting of the regulations, allowing us to apply some ‘breaks’ to some of the arguably ‘unworkable’ suggestions coming from the EU. Therefore, as an ‘outsider,’ the UK will effectively have to just accept whatever updates and changes the rest of EU decides.

What happens to the healthcare costs if a UK citizen decides to retire to another EU country, i.e. will the healthcare costs still be covered by the NHS?

Unfortunately, this is one of those issues where discussions will have to take place, as it all depends on the individual countries involved. In some countries, such as in Spain, for example, UK citizens get free access to Spanish GPs and their hospital treatment is paid for by the NHS. After they become permanent residents, Spain then pays for their hospital treatment.

In some other EU countries, however, such as France, UK citizens of working age are expected to pay the same healthcare costs as locals but, once they reach retirement age, their medical bills are paid by the NHS.

If Britain remains in the single market, or the European Economic Area as it is known, it might be able to continue with this arrangement, if “no deal” agreement has been reached then most probably, UK will have to negotiate these arrangements with individual member states, i.e. it may opt to continue paying for expats’ healthcare through the NHS or decide that they would have to cover their own costs if they continue to live abroad, if the country where they live declines to do so.

Will Britain be party to the Transatlantic Trade and Investment Partnership?

The Transatlantic Trade and Investment Partnership – or TTIP – which is currently under negotiation between the EU and United States, would create the biggest free trade area the world has ever seen. The TTIP would effectively make American imports cheaper and also boost British exports to the US. However, if the TTIP negotiations do not come to a satisfactory end when the UK quits the EU, it will not be part of TTIP and will have to negotiate its own trade deal with the US.

What impact will leaving the EU have on the NHS?

This first became an issue during the referendum debate, after the ‘Leave’ campaign said that the money Britain sends to the EU, which it claimed was £350 million a week, could be spent on the NHS instead.

The reality is that, since the referendum, spending on the NHS has continued at the same level as planned, so in reality the claimed £350 million a week may not actually end up in the NHS. Some are claiming that, as of now, the number of applications for medical staff from EU has reduced by 90 per cent, therefore we may see the number of foreign doctors and nurses working in the UK falling in coming months, which would inadvertently impact the NHS.

If a UK citizen living in another EU member state with a partner who is native to that country moved back to the UK, what benefits could they expect to receive?

At the moment, independently of Brexit, everyone has to pass what is known as a ‘habitual residence test’, which was introduced in the UK in 1994 and applies to British citizens just as it does to EU citizens. This means that, in essence, there is no ‘easy access’ to benefits as such.

The rules have been tightened up more recently, which means that, for some benefits, if a person has been out of the country for a significant period of time, they may be unable to apply to take a test for several months. For example, when it comes to Job Seeker’s Allowance (JSA), they cannot test to apply for such benefits until three months have passed. And that was done to stop EU citizens coming here and just getting on benefits straight away.

After three months, individuals coming to the UK can take a test which looks at their English language skills, what efforts they have made to find work before coming to the UK, how strong their ties with the UK, whether they have property or family in the country and what their intentions are in terms of staying and working, or leaving and later returning.

Once they have taken this test, they should be eligible to apply for a range of benefits, as long as they meet the usual requirements in terms of income and being able to prove that they are actively looking for work.

What is still unclear, however, is how Brexit might impact how soon a British national living abroad can apply for benefits when they come back to Britain.

After Brexit, will a UK citizen need a new passport or driving licence, and will they have the rights to use them freely across Europe?

Currently, UK passports carry the words ‘European Union’ and British driving licences feature the internationally-recognised blue square symbol containing the yellow stars of the EU.

It is thought that these documents will need to change after Brexit, but exactly how remains unclear. Many assume that the change will be implemented in phases, i.e. each individuals’ new documents will come into place when the old ones expire.

In terms of whether UK nationals will retain the right to use their passports and driving licences freely across Europe, this will depend entirely on what is agreed during Brexit negotiations. If the UK Government imposes restrictions on the EU in that respect, then it can probably expect the same approach vice versa.

Will there be an impact on businesses after Brexit in relation to tariffs?

The UK has been part of the European Economic Area (EEA) for a long time and therefore has not been subject to tariffs because all trade within the EEA is tariff-free. With Brexit, future trade deals are a key part of the current negotiations.

Unless the UK is able to negotiate a potential trade deal with the EU, which could take several years, UK businesses will need to trade with the EU according to World Trade Organisation (WTO) rules.

The EU’s previous efforts to negotiate deals with the likes of Norway and Switzerland took many years. Some have suggested that one alternative arrangement would be for the UK to trade with EU member states on a ‘country-by-country’ basis – or even a sector-by-sector basis. However, it is thought that negotiations in line with this would also take a very long time.

Following the Brexit vote, are other countries likely to leave the EU?

It is always possible, but with the recent votes in Netherlands and in France, the prospect of this occurring seems unlikely.

The EU has brought peace and prosperity to European countries for decades, and although some argue that the EU is flawed, many politicians believe that the benefits of EU membership hugely outweigh the ‘irritations’.

Nevertheless, if the UK managed to agree a fantastic Brexit deal with the EU, other countries may be tempted to hold referendums with the intention of pursuing similar deals.

Can the UK form its own free trade area with other countries?

During the recent UK Government trips to Australia and India, the above type of agreements have been mentioned, although both are open to negotiations. One key aspect to be included in such deals would be a requirement for free movement of people between the countries involved.

There is an existing Free Trade Association which the UK could join. However, the UK would need to join under the existing rules which Norway, Switzerland and Lichtenstein currently adhere to.

What will happen to the pensions of EU nationals who have lived and worked in the UK after Brexit?

The UK state pension is dependent on how long (at least 10 years) and how much a person has paid in National Insurance Contributions (NICs). In short, it is not directly linked to which country a person initially came from before arriving in the UK.

Under existing rules, if an EU citizen has not paid NICs for 10 years, they can effectively point to any contributions they have made in their native country and say when asking the UK Government to determine their eligibility to receive a state pension. In most instances, this will be accepted.

A similar system is currently in place in other EU countries and in another 16 countries with which the UK has social security agreements.

Once the UK has left the EU, however, this may not apply unless the UK Government negotiates new reciprocal agreements. If no agreement is reached, then potentially anyone who has not made NICs for 10 years or more may not be entitled to a state pension.

Up until March 2019, are EU citizens still able to move to the UK?

The freedom of movement rules still apply across the EU and the UK until Brexit takes full effect, so, in short, yes.

Why shouldn’t British courts have full jurisdiction over the rights of EU citizens living in the UK? Wasn’t that the whole point of Brexit?

The UK Government says the European Court of Justice should not have jurisdiction over EU citizens’ rights. However, the EU demands that it should. This is a key area of disagreement in the ongoing Brexit negotiations.

How can a lifetime stay be guaranteed? Could a future Government change the law?

Once the UK leaves the EU, any future Government will, in principle, be able to propose amendments to existing laws, which would then need to be agreed by the UK Parliament.


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