Brexit Project Report

Introduction to Strategic Studies
Project Report: Brexit
Submitted By: Fatima Zubair Warriach
(BS- 4th
Semester)
Date: 2-12-2019
Department of Leadership and Management Studies
Faculty of Contemporary Studies
NATIONAL DEFENCE UNIVERSITY, ISLAMABAD

[FINAL PROJECT: BREXIT] December 10, 2019
2
Contents
Introduction................................................................................................................................... 3
Background ................................................................................................................................... 4
Current status of the issue............................................................................................................ 9
European Movement International ............................................................................................. 9
Economic Consequences ......................................................................................................... 9
International standing of the UK ........................................................................................... 12
The Withdrawal Process........................................................................................................ 12
Big Implications at the UN for Brexit ....................................................................................... 13
United Nation Conference on Trade and Development (UNCTAD) Research Paper, April 2019
................................................................................................................................................... 14
Evaluation.................................................................................................................................... 17
Recommendations....................................................................................................................... 17
References.................................................................................................................................... 18

3
Introduction:
For last few years, Brexit has become a
point of contention for the whole world.
Following a June 2016 Referendum in
which 51.9% people voted to leave the
European Union. The British leaders
feared to hand over much authority to the
European Union Council that can in turn
inflict upon decisions and coerce the
states to follow.
In the recent time, the emphasis of the international world is diverted from the further delay of
deadlines given to the UK’s government to carry out an orderly Brexit and a possibility of
referendum in future that can promote the chaos in the world to the consequences of Brexit.
Furthermore, it creates another argument that defines what a no-deal Brexit is? And what
economic effects it can produce? The recent researches have verbalized the detrimental outcomes
of EU membership that supports United Kingdom’s decision to leave the union but majorly have
centered their researches to figure out the possible changes that cause a drastic revolution in the
global economy that means the Brexit not only has an effect on UK’s future but also is going to
effect the countries that are trading members with the United Kingdom especially those that
either have a continuity agreement with the UK government or they have a large trading market
existing in UK. Also the business groups are rethinking over their investment in UK, companies
like Airbus are increasing their inventories to prevent shortage and Banks are already moving
staff out of Britain.
United Kingdom out of European Union has to bring many reforms to sustain its internal
sovereignty also its position in the international world. The most critical part of discussion is to
know whether the UK government will be able to compose an adequate exit agreement or not
and the migration that UK wants to put a stop to will create a problem for them as they have to
accommodate the British citizens residing in other EU member states so how will UK manage to
bring about so many changes in a period of two years that is determined by EU for the exiting
countries?

4
Background:
The European Union (EU) is a partnership between 28 member states aiming towards the social,
economic and political stability and prosperity of the states. The eligibility criteria for the
countries to gain its partnership involves a democracy that is to be prevailed also a functioning
market economy along with the implementation of the laws and policies developed by EU.
Summits that are held for about four times a year gathers the head of the states and the
government of EU at a place to discuss the possible amendments required to be made in the laws
and to decide the future budget to cover its operational activities followed by the discussion of
the collection of enough funds and setting out EU’s long-term spending priorities and limits.
The platform while following bigger agendas of forming trade and security policies also focus on
the everyday human rights related to employment, housing, health, education, social protection
and welfare through schemes like “ The Youth Guarantee” originated by the European Social
Charter. Since the inception of EU, the member states have joined hands to promote the concept
of “Single-market” that allows the capital, goods, services and people to move freely at the
defined customs tariff decided by the European Commission and the Council of Ministers
(Known as the “ Four Freedoms”). The strategy progressed when a “Euro-zone” was generated
through a monetary union of 19 out of 28 EU states. The common trade policy was devised to
improve the trade in services, intellectual property rights and most importantly to promote FDI.
Since the mid-1990s, EU states have focused to ameliorate their political integration by
developing Common Foreign and Security Policy (CFSP) that centered in developing
common policies and pursue strategies in the area in which they can reach consensus. The
nations also ensure that their national policies are not contrasting the EU’s decisions and
policies. CFSP remains a work in progress. Some view it as a striving attempt by EU that might
not be able to achieve a successful outcome because forging common policies contemplating the
international issues have to regard the differential viewpoints among the multitude of countries
due to varying cultures, histories and relationships. Often national interests compel to alter the
commitments made by the nations when considering their foreign policy. Besides that, European
Union is facing trouble in improving their military capabilities due to declining European
defense budget.

5
Justice and Home Affairs (JHA) were initiated to foster common internal security measures.
The border control policies and rule for the Schengen area of free movement in which twenty
two states participated, agreeing to eliminate their internal border control and to follow common
rules on visas, asylum requests, and border checks. But vigorous turns of events like 2001
terrorist attacks on US & subsequent attacks in Europe made the nations to rethink their
decisions to follow the common border policies afraid that would affect their national
sovereignty and enfeeble the legal systems.
20 years back, 19 states along with the European Union formed an international platform so that
the central bank governors and finance ministers can coordinate their responses regarding the
emerging economic dilemmas that can influence the global economy called G-20. In subsequent
years, they have expanded their focus to acknowledge the areas like environment, food security
and African development.

6
The council of European Union has always aimed to regulate the processes in a sustainable
manner. The Lisbon treaty was also signed for the same purpose, perceiving it will give more
authority to the council and thus concluded the rules for countries who wanted to leave the
union. Although many view the union as an absolute, considerable system to sustain harmony in
the region, however potential issues in the recent times have proved to be detrimental for the
whole system. But majorly Brexit stands as the prominent setback for the council.
United Kingdom (UK) has always been considered as the Eurosceptic state. The British leaders
and citizens feared to hand over much authority to the Brussels. Becoming a member doesn’t
come cheap. The per-head cost varies between £300 and £873, which explains why the UK
government spending reached £6.883 billion excluding the regulation cost. A research shows that
the member- states of EU have less democracy (“democratic deficit”, a feeling that ordinary
citizens have no say over decisions taken in faraway Brussels) with an extra layer of Government
that EU had added that has taken away the decision power of individual countries to some extent.
In fact, they removed the elected candidate of Greece just because they felt it was necessary. EU

7
supports welfare of the entire union and not the individual countries. They designed their
regulations such that it will protect the smaller nations, that proved beneficial for the smaller
states as they perceived that in this way the stronger nation won’t be able to dominate the EU
decisions, and the wealthier nation will be obliged to share their wealth with the smaller nations,
which is why UK objects to the majority of the policies made by EU because those policies have
a certain effect on the nation’s development. Moreover, the EU has prohibited the nations from
restricting the immigration that resulted in over-crowding. Some statistics shows that over the
next decade the immigrants will cause an increase of about 70 million in the UK population. But
it is not the only point of concern for the UK government because the Britons living in other
European states are also proving a difficulty for the countries’ governments to accommodate
them. The Eurozone was aimed to reduce the exchange rate risk for the development of
businesses and financial institutions. Unfortunately, the Euro is causing problems that range from
un-employment, slow economic growth to the unsuitable interest rates in the Eurozone area. And
this situation is visibly contrasting the actual vision of the Eurozone. Good for UK for not opting
the single-currency, when it was suggested back in 1997 by the EU, the then Prime Minister of
UK, Tony Blair, declared that UK will only consider following the concept unless the Eurozone
fulfills the “Five Economic-Test” policy, which it didn’t also the British Government had not
wanted to abdicate control of its own interest rate policy that could eliminate the comfort of
pound sterling exchange rate.
Overtime, the Eurosceptic response of United Kingdom led to the “Brexit”- The British Exit
which was the declared result of 2016 referendum in which the leave votes won by 52% to 48%
of the stay votes. Theresa May resigned after the Brexit deal was rejected three times. People
criticized the plan saying it will further complicate the UK’s position in EU and UK will not be
able to maintain the future relationships on talking terms with both the EU and other states. They
considered no deal a better exit option then the one suggested by her. Since then the new elected
candidate, Borris Johnson has attempted to put his revised deal to parliament however the vote
did not go ahead and yet again, he had to submit a request for another delay to the EU.
The European Union (EU) has agreed to extend the Brexit deadline until 31 January 2020. (Source: BBC News, 5th
December,
2019)
Most economist and business groups believe that “No-deal Brexit” will lead to economic
disparities.

8

9
Current status of the issue:
The current focus of international world is diverging from the delay of Brexit and the possibility
of a referendum to the consequential future of European Union and the United Kingdom. Also,
the question arises whether this exit has to be through an acceptable agreement or what effects
would “No- Deal Brexit” will have on the European trade market concerning the security
challenges and future political integration of UK within the Europe. Another point of view in the
recent times has alerted the business world which studies the sustainability of the rest of EU after
UK’s exit. Some have concluded from their experience that this exit will have an everlasting
effect on European Union that will prove to be un-recoverable eventually resulting in dissolution
of EU. Although most experts consider a complete dissolution of the union as a bluff, advocates
worry for the first time in the EU’s history; some aspects of integration could be stopped or
reversed.
Discussed below are the statistics presented by European Movement International, The European
Movement is the UK’s largest pro-European Network, campaigning for a People’s Vote on
Brexit. And have a passionately believe that any form of Brexit will be harmful for Britain.
Economic Consequences:
EU-UK Trade Relationship:
The UK is more dependent on the EU than vice versa given that 12.6% of UK
GDP is linked to exports to the EU whereas only 3.1% of GDP among the
European Movement
International
https://www.europeanmovement.co.uk/

10
other 27 member states is linked to exports of the UK. The EU is the
destination of
Further, it is not convenient to ignore the fact that UK is a service-based economy with service
sector making up almost 80% of its economy and having EU as its biggest partner that
accommodates about 36% of the total UK service export. The membership of EU has expanded
the market of UK and as Market size is one of the major FDI flow in the country determinant
thus UK has certainly gained benefits from the membership of EU. Outside EU, UK will be
become an unlikely place for the investor because the non-tariff barriers are of great importance
to them and by UK losing the access to the single market, Investors have to rethink their
investments in the UK.
Growth Prediction (By 2030):
There are about four factors that are considered while predicting the economic growth after
Brexit:
1. Reforms made by EU (whether they decide to announce the necessary reforms in the
future or not)
2. The outcomes of trade agreements that EU negotiates
3. UK’s decision to turn Britain into a de-regulated free trading economy and
4. The future relationship of UK with EU members after possible Brexit
Giving an absolute insight of the economic and political future of Europe is nearly impossible
since the criteria is such that turns the conclusion of the business world with every changing
circumstances that are occurring as the result of further delay of Brexit.
The pessimistic opinion about Brexit presents the numbers which indicated that UK will face an
income loss of between 3.1% i.e. 50 Billion pounds and 9.5% of GDP. The main purpose of the
Brexit clarifies its mission to reduce migration but in fact can bring about economic disturbance
in UK due to deteriorating inter-state relationships that effects UK’s decision to opt a
considerable trade agreement to maintain its position in the Single market. And the only
plausible model that UK can opt to restrict the free- movement by also gaining an access towards
single market is the bilateral “EU-Canada Comprehensive economic and trade agreement

11
(CETA)”. However according to the UK treasury such agreement can result in a 6.2% smaller
UK GDP in 2031, £4300 decrease in house-hold income and an annual £36 Billion Black hole to
face in the tax receipts and other NHS budget.
Another scenario “pie in the sky” evaluates and declares that UK can achieve 1.6% benefit in
GDP by 2030, if only they can bring economic reforms that will help them in:
1. Opening up towards China, USA, India and Indonesia
2. Pursuing a liberal policy for labor migrations
3. Regulating the process of control over climate change, social and employment, also
financial services rule.
Brexit effect on seven main sectors of UK:
In total the seven most effected industries employ 20.79% of the UK labor
force and generate 53.2% of the UK total export.
The Financial services and Insurance sector stands as the key sector. The financial services
sector employs about 3.6% of the UK labor and represents a share of 9.6% of the total UK export
in which 41% is destined towards EU. Meanwhile, Insurance sector has a share of 4.3% in UK
exports from which 18% is certain part for EU. The Insurance companies have more of a global
scope which is why they are less at risk. However, financial sector are the most exposed sector
and out of EU, the firms won’t be able to enjoy the freedom of opening branches anywhere in
EU without paying for additional regulations.
The other six sectors that have to face the effects are Automobile, Chemical and
pharmaceuticals, Aerospace, Capital goods and Machinery, Food-Beverages and Tobacco sector,
Professional service sector. The national market access regulations and increase in tariff can be a
bigger problem unless UK is able to present a negotiable agreement to EU.
Effect on UK citizens:
The UK citizens have to face a loss of many public services that are acquired by them also the
UK government will bring home more expenses to pay especially to the pensioners.

12
Effect on migration and the economy:
The UK’s office for Budget Responsibility (OBR) in its annual Economic and
Fiscal Outlook report found that net migrations has a positive impact on
British economy
According to the calculations, the high migration variant would increase the UK’s budget surplus
by about £4.3Bn by 2019-20, while the low migration variant would reduce it by the same
amount. The positive relationship between economic growth and migration indicates adult
population growth, higher employment rates and increased tax income.
Furthermore, it’s worth noticing that from year 2005 to year 2015 the UK has been
accommodating more non-EU migrants.
International standing of the UK:
A recent Chatam house report indicates that UK enjoys a stable international standing through
three channels:
1. The European Union,
2. Its economic and security partnership with USA,
3. Bilateral relationship at the international organizations and platforms like G7, G20,
NATO and it being permanent member of UN Security Council.
Having said that, UK is losing its influence over the international world due the subsequent
challenges that they are facing that ranges from a more assertive Russia to Middle-East
disintegration also the world-wide issue like of Climate Change. Additionally, US has started to
focus on Asian region more and that is threating the UK’s position, while EU is the only way to
retain the importance the bigger part of UK is adamant towards Brexit.
The Withdrawal Process:
Article 50 of the Lisbon Treaty imposes a formula which comprises following directives:
1. Negotiation would involve the 27 remaining member states, the commission and UK.
2. A withdrawal agreement would need the consent of the European Parliament and
unanimous agreement of the council.

13
3. The UK would need to negotiate a withdrawal and post-exit agreement within two years.
4. After two year the negotiation can only be delayed with the consent of all 27states
5. EU will continue to apply to the departing Member state unless the withdrawal agreement
has entered into force.
The current situation of UK is an unresolved one; if UK is unable to come up with a passable
trade agreement then EU has no choice but to precede the exit with no deal negotiations that will
hugely impact the next ten years economy of UK.
Also the EU’s ability to veto agreement can open up the possibility of any member states to
object an agreement before council to extract a higher price from the state that has decided to
leave. And the recent UK government’s report that a renewed membership of UK with the EU
will highly unlikely be able to replicate the current position of UK in EU.
Big Implications at the UN for Brexit:
The European Union is the largest contributor of international development aid
and humanitarian assistance worldwide, disbursing about $16 billion over the last
three years. Beyond aid and development, there are areas in which the EU directly
confronts global security issues. As Kevin Watkins, executive director of the UK-
based Overseas Development Institute writes in Devex:
Today, the EU operates 16 civilian and military missions under the Common
Security and Defence Policy. In Mali and Niger, combined European civilian and
military missions are protecting civilians, and building national security
capabilities in the face of threats from Islamic extremism. An EU mission —
NAVFOR — has contributed to a dramatic reduction in piracy off the Horn of
Africa, depriving al-Shabab of a major source of finance: Only two attacks were
reported in 2014, with no ships and just 30 hostages held by pirates, compared to
176 attacks in 2011, with 32 ships held and 730 hostages. The marine mission is
headquartered in the U.K. Meanwhile, EUCAP Nestor, an EU civilian mission, is
training regional forces to counter piracy.

14
UN declares that not much will change for UK after its exit from EU. It will still be considered a
potential veto- wielding member in the Security Council however UK will no longer be able to
take part in EU contribution at General Assemble or other UN platforms.
Moreover, though it is highly unlikely that UK will opt to leave UN as well and as it comprises
no formal way for the exit of countries it can be a possibility that UK in the future will refrain
from paying UN membership dues that stands as a very small part of what they give to the EU on
weekly basis as declared by the leave campaign (about 350 million pounds), thus losing vote.
Furthermore the Brexit has made them to considering whether midsized country- UK would try
to eschew the outsized influence they have over UN by exercising the veto power.
United Nation Conference on Trade and Development (UNCTAD) Research
Paper, April 2019:
The research paper indicated that the trading partner will have to consider two aspects for
prolonging their trade with UK after Brexit,
1. Tariff the government will impose and
2. Preferential Margin i.e. the difference between the tariff faced by the country and tariff
applied to competitor.
The paper also discussed that the UK market access conditions would depend on whether UK
and EU agrees to an orderly Brexit and its impact on the developing countries, also mentioned
that the countries that have signed continuity agreement with UK like Bangladesh are less likely
to face a change in tariff s and other regulations. But that can influence the countries with
continuity agreement if the UK decides to pursue trade with lower tariffs, it will cause loss for
those countries as compared to their competitors.

15

16

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Evaluation:
Analyzing the current situation of Brexit and concluding it with absolute remarks is somewhat
proving it to be a difficult task. There’s a new turn of event to encounter almost every other day
comprising either an opposition from the sources within UK or from the international world that
have their focus centered on the economic effect of possible alternative trade agreement UK will
present after an orderly Brexit or even worse considering the circumstances of no-deal Brexit.
Mentioned in the report are both the advantages and disadvantages that come with the
membership of EU. Taking into consideration the stumbling blocks for example the expense of
continuing the membership of EU certainly supports UK’s decision to have a safe exit from EU.
However, in the world record this issue is considered with such sensitivity that one slightly
wrong move can produce the after-effects for 10 years lasting to cripple the economy of not only
UK but also the developing nation especially those that have a continuity agreement signed with
UK government.
Apart from trade, the Brexit has a huge impact of UK standing in the international world. The
political integration within and outside the EU is not only effecting the migrants in UK also the
British citizens residing in the other EU member –states. The restrictions that UK want to apply
on free movement to save the country from over-leading migrants can also force the UK
government to revise the whole budget for the future.
Furthermore, If UK government is considering the worth of paying the EU membership fees then
certainly they should start considering the £32.8 billion, if that is too worth it or not.
Recommendations:
By now we have followed the fact that the Brexit is not only as they simply put it the “British-
Exit”. It comprises the turn of events that can diverge the global economy. Boris Johnson’s new
deal has considerably added new regulations related to customs duties to be applied on Northern
Ireland border. Nevertheless, the business groups and the council member would prefer a no-deal
Brexit over it. That is why it is recommended for the British Government to formulate an exit
deal that will not only ensure to maintain their internal sovereignty and country’s development
but also signifies UK’s position in the international world and forums.

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References:
o Congressional Research Service. (n.d.). The European Union: Ongoing Challenges and
Future Prospects. The European Union: Ongoing Challenges and Future Prospects (pp.
2–30).
o Congressional Research Service. (n.d.). The European Union: Questions and
Answers. The European Union: Questions and Answers (pp. 2–24).
o Europa.eu. (n.d.). PDF.
o Anonymous. (2019, November 21). How the EU budget is spent. Retrieved from
https://europa.eu/european-union/about-eu/eu-budget/expenditure_en.
o Eurozone. (2019, November 12). Retrieved from https://en.wikipedia.org/wiki/Eurozone.
o G20. (2019, December 4). Retrieved from https://en.wikipedia.org/wiki/G20.
o Kenton, W. (2019, November 18). Lisbon Treaty. Retrieved from
https://www.investopedia.com/terms/l/lisbon-treaty.asp.
o Chief, E. in. (2015, July 8). 9 Foremost Advantages and Disadvantages of the European
Union. Retrieved from https://greengarageblog.org/9-foremost-advantages-and-
disadvantages-of-the-european-union.
o Segal, T. (2019, November 19). The U.K. and the Euro: Why Don't They Use It?
Retrieved from https://www.investopedia.com/ask/answers/100314/why-doesnt-england-
use-euro.asp.
o Alderman, L. (2018, July 19). How E.U. Is Getting Ready for Chaos in a Worst-Case
Brexit. Retrieved from https://www.nytimes.com/2018/07/19/business/europe-brexit-
contingencies.html?module=inline.
o Mueller, B. (2019, January 24). What Is Brexit? A Simple Guide to Why It Matters and
What Happens Next. Retrieved from
https://www.nytimes.com/interactive/2019/world/europe/what-is-brexit.html.
o EU Referendum Results. (n.d.). Retrieved from
https://www.bbc.com/news/politics/eu_referendum/results.
o Brexit deal: What does it mean? (2019, October 18). Retrieved from
https://www.bbc.com/news/uk-politics-50084090.
o Brexit: All you need to know about the UK leaving the EU. (2019, December 5).
Retrieved from https://www.bbc.com/news/uk-politics-32810887.

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o What is a 'no-deal Brexit'? (2019, October 19). Retrieved from
https://www.bbc.com/news/uk-politics-48511379.
o Sandford, A. (2019, July 29). What's in Theresa May's Brexit deal and why is it so
unpopular? Retrieved from https://www.euronews.com/2018/12/07/what-is-in-theresa-
may-s-brexit-deal-and-why-is-it-so-unpopular.
o European Movement International. (n.d.). The consequences of a British exit from the
European Union. Retrieved from https://europeanmovement.eu/wp-
content/uploads/2016/05/EMI_16_PolicyPosition_Brexit_17_VIEW_FINAL.pdf
o Goldberg, M. L. (2016, June 24). Big Implications at the UN for Brexit. Retrieved from
https://www.undispatch.com/implications-un-brexit.
o Nicita, A., Koloskova, K., & Saygili, M. (n.d.). Brexit Implication for developing
countries. In Brexit Implication for developing countries (SER.RP, Vol. UNCTAD, pp.
1–14). UNCTAD. Retrieved from https://unctad.org/en/PublicationsLibrary/ser-rp-
2019d3_en.pdf
o Full Fact. (2019, July 25). The EU "divorce bill". Retrieved from
https://fullfact.org/europe/eu-divorce-bill/.

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