Introduction. At midnight CET on Friday 31 January the United Kingdom of Great Britain and Northern Ireland will relinquish its membership of the European Union, amid some disagreement over how to mark the historic event. Even in departing the EU, the divisions within Britain remain visible. So how did it come to this, where are we now, and where are we headed?

The long road to Brexit. Brexit sentiment had been a long time in the making even before the 2016 referendum. Post-war and post-industrial decline in parts of the UK saw the gradual disappearance of many traditional industries, fostering employment insecurity and a sense of resentment. The reduction or disappearance of accessible public transport, and perceived pressure on struggling public services compounded a sense of alienation. A services-based economy generated a gravitational pull towards London and the South-East, exacerbating a feeling of geographical/prosperity divide. Much of the mainstream media  - with some notable exceptions including the Guardian, the FT and the Independent - has long adopted a consistently hostile approach to the EU/EEC, that, since 1973, has become something of a focus for popular discontent (for a detailed study by King’s College London of the role of the mainstream media in the referendum, please see here). Many Britons regarded EU membership as the surrender of British sovereignty to Brussels, and sought to take back control (of fiscal matters, laws and borders) when offered a referendum in 2016 by then-Prime Minister David Cameron.

Referendum and beyond. The pro-Brexit Leave campaign’s 52% - 48% referendum victory highlighted a deep split in public opinion. In the aftermath, it became clear that there was little agreement about what form Brexit should take. Without a governing majority after the 2017 general election, Prime Minister Theresa May found herself unable to command the support of Parliament for her negotiations on the Withdrawal Agreement. The resultant stasis in British politics led to May’s replacement by Boris Johnson, who succeeded in removing the contentious Irish backstop from the Withdrawal Agreement (by, in effect, conceding the original EU position of no hard border in Ireland). He then led the Conservatives to a resounding election victory, winning a majority of 80 seats in the 650-seat House of Commons in December 2019, so breaking the logjam in Parliament and passing the necessary legislation to leave the EU on 31 January 2020.

What next? In addition to reasserting British sovereignty by taking back control of immigration, laws and finances formerly contributed to the EU but now earmarked for UK public services, Brexiteers see Brexit as the opportunity for the UK to become an independent global trading power. Trade ambition is therefore a top priority for Johnson’s government. The next phase of talks between UK and the EU will get under way at the end of February 2020; discussions will cover a wide span of subjects, primarily trade, but also foreign affairs, security cooperation, access to fishing grounds, data sharing, cultural exchanges, educational and research collaboration etc. Johnson insists that talks be concluded by 31 December 2020, foreshortening the time available for agreements to be reached.  In turn, the EU is indicating that the timescale is insufficient to conclude detailed agreements. It envisages skeletal accords for the priority topics of trade and security, and possibly fishing: already the two sides differ in scoping the art of the possible. 

This raises the possibility of the UK departing without any form of trade agreement, a prospect that alarms many economists, businesses, and industry leaders. Both sides want tariff-free and quota-free movement of goods between the UK and the EU, but the UK’s insistence on not necessarily aligning with EU standards will complicate matters, as the EU seeks to maintain the integrity of its current trade regime. We should also watch for early arguments over access to fishing waters, and the operations of London’s financial sector, where trade-offs appear to be on the horizon.

London will also seek to expand its trade interests beyond Europe, most notably with the United States. Here, however, significant disagreements have recently emerged, including US opposition to British plans to introduce digital taxes affecting US tech giants, as well as the British decision to permit Huawei involvement in the introduction of 5G broadband across the UK.  The Trump administration is likely to reflect its displeasure in subsequent trade negotiations.

Conclusion. In terms of current planning, if no trade deal with the EU is concluded by the end of the year, the UK will revert to WTO terms, which will generate shockwaves for the country’s economy. On the Government’s own estimates, GDP over the next fifteen years will be almost 10% lower than in an agreed deal scenario.  Industries such as car manufacturing would be hit with tariffs and quotas, as well as the added costly delays of sourcing components in a “just-in-time” logistics world; exporters affected thus would be less competitive in pitching to the European market, and would incur additional costs in administrative terms as well as in seeking new markets.  The cost of imports is also likely to rise under a no-deal scenario, generating a rise in the cost of living.  It is difficult to assess the impact on the pound, which steadied and rallied following Johnson’s election victory, but which remains some 12% down on its immediate pre-referendum value.  The currency faces turbulence in 2020 as the course of the trade negotiations develop. However, the terms of the Withdrawal Agreement will still hold good. Johnson now has a strong majority and will seek to make good on his Brexit promises to voters. After the UK’s three and a half years of societal division, investor uncertainty and anxiety, bitter parliamentary in-fighting, procedural stagnation, and government paralysis, the difficult part is about to begin.

Disclaimer: The views, information and opinions expressed in the written publications are the authors’ own and do not necessarily reflect those shared by the Geneva Centre for Security Policy or its employees. The GCSP is not responsible for and may not always verify the accuracy of the information contained in the written publications submitted by a writer.