On June 23, 2016 17,410,742 United Kingdom (UK) citizens decided the fate of one the biggest association of compound states and quite possibly shattered all hopes of UK’s participation towards a deeper European integration. While a lot will depend on UK’s negotiations for withdrawal from the European Union (EU), there will be ramifications not only for UK's and other EU economies, but also other global financial markets that use UK as a bridge to the EU.
In his last visit to the UK, Prime Minister Modi highlighted the significance of UK as an “entry point” to the EU. The British capital has long been considered as the biggest financial hub connecting world economies with the continental Europe. The ‘Brexit’ decision may potentially weaken London's affluence in the world market. Simultaneously, the decision to leave the EU could lead to scepticism and uncertainty among the local and international businesses.
With the “strategic partnership” between the EU and India in place since 2004, currently, India's biggest trading partner in the world is the EU. Till now India has been successful in maintaining strong alliance with UK as well, however, with the Brexit verdict, it will be interesting to see India’s stance towards its trading partners from Europe.
From the legal perspective, the biggest challenge for the UK would be to draft the new policies between the UK and EU which will impact trade and market access. These agreements would have to be decided upon in a short and intensive period of just two years. The UK had adopted EU law in a number of sectors, including public health, transport, anti-trust law, intellectual property and human rights. The Brexit would make all those laws redundant leaving the UK Parliament with the herculean task of formulating and passing new legislations prior to the formal withdrawal of UK from the EU. The biggest threat, which this transition period for formalising new laws poses, is the rather long period of uncertainty which will make international companies restless. This may end up stalling a certain level of mergers and acquisitions activity, possibly for an indefinite period.
For effectuating the withdrawal from the EU, the UK will have to invoke Article 50 of the Treaty on European Union (TEU) which sets out the procedure to be followed if a Member State decides to leave the European Union. As soon as a Member State decides to withdraw from the EU, following its constitutional requirements (the referendum in the case of the UK), such Member State shall notify the European Council of its intention to withdraw from the EU. The EU shall then, following the guidelines stipulated by the European Council, negotiate and conclude an agreement with that Member State, setting out the arrangements for its withdrawal and formulating a framework for future relationship of the EU with such Member State.
The stance of some of the senior EU leaders like Angela Merkel indicates that the road for the UK to re-forge its ties with the EU could be really bumpy. The German Chancellor has stated that EU will not become UK’s friends with benefits and that the advantages of an association with the EU come hand in hand with certain obligations, which shall be embraced by the UK along with the benefits. Another senior Member of European Parliament has suggested that if the UK is not part of the EU, English shall no longer be an official EU language. Now, whether these statements are just an spontaneous outbursts on the UK’s decision to withdraw or whether EU will be staunch in negotiating the future relationship with the UK, only time will tell, but one thing is for sure, the next 2 years or so will be really testing for the UK.
For the legal fraternity, Brexit has generated a sudden flurry of advisory work, as there are a lot questions from the companies about what Brexit would mean for their business in the UK and Europe. The newly separated UK will now be required to negotiate new trade deals with independent EU nations which would invariably increase regulatory red tapism and complicated disputes settlement mechanism. This will also open avenues for strategic legal advice, thereby generating work for law firms with large dedicated trade practices across the globe.
In next few months there will be lot of discussions and speculations to gauge the exact impact of Brexit on the economy and trade relations of the world with the UK, but it seems that the overall impact on the Indian professionals residing and working in the UK will be negative. There are close to 850 Indian companies operational in the UK which generates nearly £26 billion in turnover. Any lapse in the harmony between the UK and the EU will have direct effect on the business models and operational structure of the Indian companies which may result in significant loss for most of these Indian companies.
The Brexit is bound to bring about profound changes on the immigrants affecting not only immigrants in the UK but also the British expats living in other EU Member States. One of the pillars of the EU’s Single Internal Market model i.e., free movement of persons including workers will be redundant with respect to the UK. This would lead to an adverse impact on the movement of professionals from and to the UK, which in turn could increase the operational costs for the companies. For the Indian community living in the UK, Brexit may have other implications as well. Brexit would lead to a weaker currency for the UK, which would in turn affect the millions of Indians sending remittance home. All in all, the decision of the UK withdrawing from the EU may have severe implications especially on the migrants and in ways, which are probably not yet anticipated.
The example of the economic and political harmony of the EU in the international community would no longer instil confidence for a communion. Brexit might culminate in destruction of hopes and aspirations for the economic unity of Europe, and the world too.
Disclaimer: Views are personal