Consequences of Brexit for the prospects of the UK-EU relations

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Leading Research Fellow of the Institute of World History

National Academy of Sciences of Ukraine

National Academy for Public Administration under the President of Ukraine

Consequences of brexit for the prospects of the UK-EU relations

Fesenko M.V. Doctor of Political Sciences, Senior Research Fellow

Mukha V.V. PhD Student

Abstract

The article analyzes the main consequences of Brexit for socio-economic and political development of the UK and the EU. The issues of British identity, security, migration crisis, as well as the financial and economic crisis have turned to be the key factors that have, in some ways, led to the Brexit referendum and its results. Brexit means a crisis of a single European identity, European integrity and unity. The United Kingdom joined the EEC and then the EU on special terms, which it consistently defended in the future, staying away from most of integration processes. Brexit has political and socio-economic consequences for the development of both the UK and the EU. A drop in GDP and in the pound sterling rate, rising unemployment, the outflow of migrants, real estate crash may be the possible consequences of Brexit. A further fragmentation within Britain itself can also be the consequence of Brexit. In London today, there are many contradictions in relations with Scotland, Wales and Northern Ireland, and the unity of the autonomous regions of Great Britain may be threatened by the strengthening of nationalist movement there.

Today, Brexit is considered to be an irrational event that occurred due to a combination of factors and circumstances. Britain is the only country where the ruling party raised the question of EU membership. In other EU countries, similar proposals do not come from the majority parties, but from the semi-marginal far-right ones. Brexit has revealed a deep rift in British society on regional, age, social, educational and in general on a class basis. Negotiations on the terms of Brexit were tough and the possibility of Brexit without an agreement was not ruled out. With the exit of the UK, the EU loses its second union economy and the EU budget revenues will be significantly reduced. The rupture of economic ties with the UK will have a mirror effect on EU countries and their businesses.

Key words: Brexit, EU, Great Britain, Referendum, Economy, Politics, Law, Eurozone.

Анотація

НАСЛІДКИ БРЕКЗІТУ ДЛЯ ПЕРСПЕКТИВ РОЗВИТКУ ВІДНОСИН ВЕЛИКОБРИТАНІЇ ТА ЄС

Фесенко М. В.

Доктор політичних наук, старший науковий співробітник, провідний науковий співробітник ДУ «Інститут всесвітньої історії НАН України»

Муха В. В.

Аспірантка Національної академії державного управління при Президентові України

У статті проаналізовано основні наслідки Брекзіту для соціально- економічного та політичного розвитку Великобританії та ЄС. Питання британської ідентичності, безпеки, міграційна та фінансово-економічна криза стали ключовими чинниками, що певним чином зумовили проведення референдуму з Брекзіт та забезпечили його результати. Брекзіт означає кризу єдиної європейської ідентичності, європейської цілісності і єдності. Великобританія увійшла до ЄЕС, а потім до ЄС на особливих умовах, які вона послідовно відстоювала у подальшому, перебуваючи осторонь від більшості інтеграційних процесів. Брекзіт має політичні та соціально-економічні наслідки для розвитку, як Великобританії, так і для ЄС. Серед наслідків Брекзіту виокремлюють можливе падіння ВВП і курсу фунта стерлінга, зростання безробіття, відтік мігрантів, падіння цін на нерухомість. Одним із наслідків Брекзіту може стати подальша фрагментації в межах самої Великобританії. У Лондона на сьогодні існує багать протиріч у відносинах з Шотландією, Уельсом та Північною Ірландією і єдність автономних регіонів Великобританії може опинитися під загрозою через зміцнення там націоналістичних настроїв.

На сьогодні Брекзіт розцінюється як ірраціональна подія, яка відбутися завдяки поєднанню низки чинників та обставин. Тільки у Великобританії питання про членство в ЄС поставила правляча партія. В інших країнах ЄС подібні пропозиції виходять в основному не від партій більшості, а від напівмаргінальних ультраправих. Брекзіт виявив глибокий розкол в британському суспільстві за регіональною, віковою, соціальною, освітньою та в цілому класовою ознаками. Переговори про умови Брекзіту були жорсткими і не виключалася можливість Брекзіту без угоди. З виходом Великобританії ЄС втрачає другу економіку об'єднання і надходження до бюджету ЄС значно скоротяться. Розрив господарських зв 'язків з Великобританією дзеркально позначиться на країнах ЄС і їх бізнесі.

Ключові слова: Брекзіт, ЄС, Великобританія, референдум, економіка, політика, право, Єврозона.

Аннотация

ПОСЛЕДСТВИЯ БРЕКСИТА ДЛЯ ПЕРСПЕКТИВ РАЗВИТИЯ ОТНОШЕНИЙ ВЕЛИКОБРИТАНИИ И ЕС

Фесенко М.В.

Доктор политических наук, старший научный сотрудник, ведущий научный сотрудник ГУ «Институт всемирной истории НАН Украины»

Муха В. В.

Аспирантка Национальной академии государственного управления при Президенте Украины

В статье проанализированы основные последствия Брексита для социально-экономического и политического развития Великобритании и ЕС. Вопрос британской идентичности, безопасности, миграционный и финансово-экономический кризис стали ключевыми факторами, которые определенным образом обусловили проведение референдума по Брекситу и обеспечили его результаты. Брексит означает кризис единой европейской идентичности, европейской целостности и единства. Великобритания вошла в ЕЭС, а затем в ЕС на особых условиях, которые она последовательно отстаивала в дальнейшем, находясь в стороне от большинства интеграционных процессов. Брексит имеет политические и социально-экономические последствия для развития, как Великобритании, так и для ЕС. Среди последствий Брексита выделяют возможное падение ВВП и курса фунта стерлинга, рост безработицы, отток мигрантов, падение цен на недвижимость. Одним из последствий Брексита может стать дальнейшая фрагментации в пределах самой Великобритании. В Лондоне на сегодня существует много противоречий в отношениях с Шотландией, Уэльсом и Северной Ирландией и единство автономных регионов Великобритании может оказаться под угрозой из-за укрепления там националистических настроений.

На сегодня Брексит расценивается как иррациональное событие, которое могло произойти благодаря сочетанию ряда факторов и обстоятельств. Только в Великобритании вопрос о членстве в ЕС поставила правящая партия. В других странах ЕС подобные предложения исходят в основном не от партий большинства, а от полумаргинальных ультраправых. Брексит обнаружил глубокий раскол в британском обществе по региональному, возрастному, социальному, образовательному и в целом классовому признаку. Переговоры об условиях Брексита были жесткими и не исключалась возможность Брексита без соглашения. С выходом Великобритании ЕС теряет вторую экономику объединения, и поступления в бюджет ЕС значительно сократятся. Разрыв хозяйственных связей с Великобританией зеркально отразится на странах ЕС и их бизнесе.

Ключевые слова: Брексит, ЕС, Великобритания, референдум, экономика, политика, право, Еврозона.

Problem statement. Both negative and positive consequences of Brexit for the political and socio-economic development of Great Britain and the EU will be revealed in the tangible future, what in turn, will affect the transformation processes within the entire system of international relations. Today, many scientists and politicians declare the irrationality of Brexit, which, in their opinion, turned out to be an extremely rich in the events. The political and economic sphere, personal and social, national and international plans and expectations are in a state of commotion. The field of uncertainty has expanded significantly, making it extremely difficult to make rational decisions. More than ever, the high need for a fundamental change in institutions, in particular the regulation of political and socio-economic processes - from making important political decisions to issues related to trade legislation and cross-border movement of labour, is transforming the contemporary system of international relations.

Review of the main researches and publications. In the context of the study of historiography, it should be noted that the domestic historiography of British Brexit is only being formed and therefore an insufficient amount of qualitative research on this issue is stated. Basically, there are isolated studies on the subject of Brexit in scientific periodicals, however, the absence of monographs and other fundamental studies is stated.

Research on this topic is available in English historiography that makes it possible to comprehensively consider various aspects and approaches of the authors to the issue of Britain's accession, first to the EEC, and later to the EU. Among the scientific achievements devoted to the analysis of the problems of European integration in Great Britain are the works of D. Watts and K. Pilkington [Watts, Pilkington, 2005], J. Young [Young, 1993], etc.

Quite a lot of scientific works are devoted to the influence of the Brexit factor on the nationalist movement in Scotland. The first one to raise this issue back in 2015 was a journalist S. Erlanger, who predicted that in case of success of Brexit supporters, Scottish separatists will strengthen their positions, increase the likelihood of a new referendum on independence and the victory of supporters of secession from the United Kingdom [Erlanger, (2014/2015): 38-42]. After the 2016 referendum, E. Tannam formulated the thesis that “Brexit is not the cause of Scottish nationalism, but it greatly strengthened the positions of nationalists” [Tannam, 2016:13]; Brexit “catalyzed nationalism in Scotland”, although a third of the supporters of the Scottish National Party (SNP) supported Brexit [Tannam, 2016:8]. migration economic referendum brexit

In 2019 R. Ashcroft and M. Bevir expressed the opinion that “Brexit and calls for Scottish independence are intertwined with current discontent over multiculturalism” [Ashcroft, Bevir,2019:26]. British identity, the authors are convinced, “is more strongly associated with Euroscepticism than the Scottish, Welsh and Northern Irish ones, and this may be due to different views on the threat of immigration and multiculturalism of any national identity” [Ashcroft, Bevir,2019:37],

At the same time, X. Rioux drew attention to the similarity of economic nationalism between Brexit supporters and Scottish separatists. Its essence is not in the desire for autarchy, but in the diversification of trade relations and preservation of control over economic policy due to the weakening of dependence on some large political communities (respectively, the EU and the United Kingdom) [Rioux, 2020]. However, so far there has been no serious study of the impact of Brexit on the Scottish electorate and its constituent social groups, or on the electoral evolution of Scotland in 2017-2019 [Кривушин, Миронова, 2020].

A very wide selection of Western European research literature devoted to the analysis of the economy of contemporary Great Britain. In this area, it is important to note the presentation of monographs by M. Pugh [Pugh, 2003], as well as collections of analytical studies edited by R. Flow [The Cambridge Economic History of Modern Britain, 2003]. The importance of the monograph by D. Gillingham lies in the fact that the author studied a wide range of issues related to the development of internal relations in the structures of the European Economic Community, as well as to the distribution of power and influence between the main “players” of Europe - France, Germany and Great Britain [Gillingham, 2003].

Studies by D. Dinan [Dinan.,2004] and D. Watts [Watts., 2008], focus on the analysis of the position of Great Britain in the European Union. Their monographs thoroughly analyze both past and up to date political events, which makes it possible to more accurately highlight the issues related to the development of an optimal European course by Great Britain. The evolution of British policy in relation to continental unions - economic and monetary ones - was reflected in the work of the British professor E. Verdun [VerdunA., 2002].

The purpose of the article. The main purpose of the article is to clarify the significance and consequences of Brexit for the prospects for the development of relations between the UK and the EU.

The main results of the study. Most research works today focus their attention on the short-term effects of Brexit. Among the main questions, the following ones stand out: the extent of GDP fall in the UK and on the continent, the unemployment rate rise; the pound will continue to weaken and the Swiss franc will strengthen its positions; whether Scotland and Northern Ireland will secede; how many immigrants from Eastern Europe will leave the UK; how much real estate prices in London will fall, etc. [14].

Short-term issues are certainly important, but we would like to draw attention to an issue that is more important in the context of the transformation of the system of international relations, international order, the world economy and the future of the whole world. The secession from the EU of such a large country as Great Britain is a big problem and a serious test for both sides. In this regard, it should be emphasized that the UK accounts for 13% of the population, 12% of the budget of EU institutions, and the British economy is one of the three leaders in Europe [14]. The most tangible consequences are expected for Britain and the EU in such areas as the financial sector, industry, employment, migration and international relations [15].

Of course, after Britain's exit from the EU, a necessity to develop new relations between the subjects of world politics is obvious. It is interesting that in this case analysts predicted several models of the possible development of events at once [The economic consequences of leaving the EU, 2014: 94]. Among them, the following models deserve special attention: - the Norwegian model, according to which the UK enters the European Economic Area and maintains full access to the single market, but accepts EU standards and rules with only a small right to influence decision-making, and the United Kingdom continues to make a significant contribution to the European budget, unable to change immigration restrictions; - the Turkish model, according to which internal tariff barriers for the UK are eliminated if EU regulation is adopted, but the UK does not gain access to all EU market sectors; - the Swiss model, according to which the UK and the EU develop a set of bilateral agreements regulating British access to the single market in specific sectors, while the UK accepts EU legal provisions in specific sectors, but negotiates separately on participation in the free trade zone [17].

Scientists and analysts noted that the UK sought to choose its own option to continue cooperation with the EU. It was believed that the closest option for Great Britain is the Norwegian option - accession to the European Economic Area while maintaining access to the European market, except for part of the financial sector. In addition, in Great Britain there is an opportunity to maintain independence in the field of agriculture, law and home affairs, as well as fishing. The UK can also follow the example of Switzerland, concluding separate economic agreements with the EU it can enter into a customs union with the EU, following the example of Turkey, in order to maintain access to the European market for its industry, but the financial sector will not receive such access. The possibilities of breaking off relations with the EU were also analyzed, as well as options for concluding a free trade agreement in order to be able to influence the EU decisions [Irwin, 2015:14].

It should be noted that supporters of Britain's exit from the EU pointed out that with the exit from the organization, the UK would be able to trade with European countries on the same terms as the USA, China, Japan, India and other countries that are active on the European market. However, the British, in their opinion, can more actively and independently develop trade and economic relations with these countries. In addition, large transnational companies are associated with the European market, and small and medium-sized businesses will revive with the exit of the UK from the EU, the supporters of Brexit argued [Irwin, 2015:24].

Geopolitically and economically, the EU is losing an important partner, one of the key EU members. The international authority of the organization will undoubtedly decline. However, there are still opportunities and prospects for reforms, transition to other forms of unification. Free trade agreements with Britain can provide an opportunity to enter new rounds of integration both in Europe and in Britain [17].

With the exit of Great Britain, the European Union will lose its second economy of unification, and the EU budget will lose one of the largest net contributors. The severing of economic ties with the UK will mirror the effect on the EU countries and their businesses. Absence of the UK in the EU will change the balance of powers in the union. The influence of supporters of liberal approaches to the economy will decrease. Germany will lose a powerful ally in the fight against protectionist-oriented EU countries, and the Scandinavian countries and the Netherlands will be the locomotive that drives their innovative aspirations within the EU. The traditional political and trade allies of the United Kingdom - Denmark, the Netherlands, Sweden, Ireland, Portugal - will find themselves in a difficult position. Without the UK, the European Union expects an obvious transformation. Two directions of change are possible. The first is the creation of a more flexible structure than at present, with the provision of greater opportunities for member states to realize their interests. In this regard, the question arises about the effectiveness of such a union. The second option is that the intensification of integration and progress towards a “closer union” is obvious. Without Great Britain, such a development path becomes highly probable, since there will be no permanent troublemaker in the EU which undermines internal unity and disrupts the forward movement of integration [19].

The UK, leaving the EU, is dropping out of the Transatlantic Trade and Investment Partnership (TTIP). The UK was one of the most interested countries in the EU in it. And in this respect, it should be stated that, at the moment the already difficult negotiations have stalled. The ability to trade independently with the world according to WTO rules is another argument of supporters of leaving the EU. However, the UK does not currently have separate agreements from the EU within the WTO, as trade policy is the exclusive competence of the union. Thus, the UK still has to hold multilateral and multilevel negotiations within the WTO to conclude its own trade agreements, which takes time [19].

The UK ranks the first place in Europe in terms of foreign direct investment (FDI). However, almost half of total FDI comes to the UK from EU countries. With the exit from the European Internal Market (Single Market), the United Kingdom will cease to be so attractive to investors. Restrictions on freedom of movement within the European Union, as advocated by supporters of leaving the EU, will affect not only, for example, Poles who came to work in the UK, but also two million Britons living in EU countries. Students from EU countries studying in the UK will also have difficulties, which will indirectly hit the country's educational services sector. British participants in EU education and science and technology programs will be also affected. Brexit will hit security and counter-terrorism co-operation, as it will lead to withdrawal from EU police forces, where the British are very active. EU commitments to the UK under EU immigration policy will cease to apply, leaving the French authorities no longer required to protect the English Channel tunnel from the influx of illegal immigrants seeking to enter the British Isles [19].

Given the above, the importance of the UK's exit from the EU and the fact that this event will affect both actors of international political cooperation, we consider it necessary, within this research to analyze more deeply the implications of the UK's exit for the EU.

It is almost impossible to predict what the European Union will be like after Britain leaves. Now we can formulate only the most general considerations about the future of the European Union and the contours of the new relationship between the UK and the EU. The most obvious consequence of the referendum is the collapse of the ideology of constant and steady integration development. European integration must be constantly deepened, and integration is an irreversible process that has no reversal. This ideology no longer exists. The collapse of the EU Constitution in 2005 effectively put an end to the project of the European federation and made us think about the limits of deepening of integration. The events of recent years have provided several examples of the rollback of the integration process, the actual abandonment of the achieved level of interaction and the transfer of issues back to the national level (for example, the migration crisis). And after the referendum in Britain, it became clear that integration is not only an enlargement, but also a “narrowing” of the EU. The EU has finally transformed into an organization that has to prove its efficiency to member states, elites and societies every hour. And the latter, in turn, now evaluate the EU based primarily on national interests rather than regulatory criteria. The EU needs to be significantly transformed, as its current political and institutional system does not meet the requirements of the times [Kaveshnikov, 2016:26].

The exit of a country from the union, especially such a large and significant one as Great Britain, is an unprecedented phenomenon, which will hurt the EU image and bring reputational loss. The European Union, having lost the United Kingdom, will have to reconsider the vector of its development, define new goals and objectives. At the same time, Brexit is unlikely to cause a domino effect in the EU countries. In the short term, the EU expects a period of turbulence and some political relaxation due to the uncertainty of the future structure. It is not surprising that the EU leadership urged Great Britain to start the exit procedure as soon as possible, which, however, the latter was in no hurry to do. The British referendum has already led to a surge of Euroscepticism in the EU countries. Galls for similar referendums emerge in other countries, however the referendums themselves are scarcely probable. First, it became clear how unpredictable and illogical the results of such plebiscites can be. Secondly, only in Great Britain the question of EU membership was raised by the ruling party. In other EU countries, such proposals come mainly not from the ruling parties, but from the semi-marginal ultra-right ones. With the exit of Great Britain, the EU loses its second economy and the EU budget will lose one of the largest net contributors. The breaking of economic ties with Great Britain will have a mirror effect on the EU countries and their business [19].

One of the consequences of Brexit could be further fragmentation within the UK itself. In London today, there are many contradictions in relations with Scotland, Wales and Northern Ireland. Given the importance of this issue, we consider it necessary to dwell upon this issue in more details.

So, today it is safe to state that the unity of the autonomous regions of Great Britain in 2021 may be under threat due to the strengthening of nationalist sentiments in Scotland, Northern Ireland and even Wales against the backdrop of the coronavirus pandemic and Brexit. As noted, dissatisfaction with the status quo is growing in England, which is forced to finance other autonomous parts of the United Kingdom. The existing political and constitutional agreements between the four parts that make up the United Kingdom are a constant source of pain for any British leader. At the same time, the economic crisis associated with the spread of the coronavirus and the political crisis caused by Brexit have further complicated the already difficult situation in the UK [21].

Conclusions

The outflow of emigrants from Eastern Europe, that positively influenced on the development of the British economy and the restriction of freedom of movement, will affect both guest workers from Eastern Europe who came to work in the UK, and for the millions of Britons living in the EU. UK participants in EU education and science and technology programs will suffer, and vice versa. Brexit will hit security and counter-terrorism cooperation as it entails a withdrawal from EU law enforcement agencies. In the long term, Brexit can exacerbate the contradictions between the UK and the EU in all important areas of political and socio-economic interaction, as well as affect the development of the entire system of international relations and the formation of a new international order. In the long term, the UK's exit from the single European market will increase trade barriers with the EU and lead to a drop in trade turnover, which in turn will lead to a slowdown in economic growth and a drop in GDP. The UK financial sector, accounting for 80% of the country's GDP, is in a difficult situation. Interest in the UK from large multinational companies will decrease. European markets will respond with trade barriers as the UK will be forced to pay part of the funds to pay off pan-European obligations if the country wants to stay on European markets.

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