Impact of Brexit on the European Union


The impact of Brexit on the European Union (EU) will result in social and economic changes to the Union, but also longer term political and institutional shifts. The extent of these effects remain somewhat speculative until the precise terms of the United Kingdom's post-Brexit relationship with the EU becomes clear. With the EU's policies on freedom of movement and the economic benefits and drawbacks which the UK and the EU provide each other with, there will be a clear impact with consequences for both institutions.

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Size and wealth

As of 2016, the UK has the fifth highest [absolute] GDP in the world and the second largest in the EU.[1][2]

Comparison Population
Area (km²)
GDP (PPP)
(Trillions of US$)
European Union (with the United Kingdom) 511,805,088 4,475,757 20.9
European Union (without the United Kingdom) 445,996,515 4,232,147 18.28

Budget

Part of a series of articles on
Brexit
(Withdrawal of the United Kingdom from the European Union)
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The UK's contribution to the EU budget in 2016, after accounting for its rebate, was €19.4 billion. After removing about €7 billion that the UK receives in EU subsidies, the loss to the EU budget comes to about 5% of the total. Unless the budget is reduced, Germany [already the largest net contributor] seems likely to be asked to provide the largest share of the cash, its share estimated at about €2.5 billion.[3]

To help fill the gap, the European Commission has looked at reductions in regional spending of up to 30%, which has concerned some of the poorer member states which rely heavily on the regional funds. However the EU has been under-spending on regional funds to the extent that €7.7 billion of unpaid funds was paid back to member states in 2017 (in addition to several billion more that came in due to cartel and anti-trust fines). The result may be that most of the savings in the EU budget could be located in regional funds which are being under-spent regardless.[4]

Policy changes

The years are over when Europe cannot follow a course because the British will object. Now the British are going, Europe can find a new élan.

Christine Lagarde, Director of the IMF, [5]

The UK has been a major player in the EU which has both been an asset to the Union, but also a hindrance to those who supported a direction firmly opposed by the British government.[5]

Ideological shift

As the EU's third most populous state, with over 12% of the Union's population, the UK is an influential player in the European Parliament and the Council of the European Union. Its absence will impact the ideological balance within the EU institutions.[1]

In the Council, during the UK's membership there have been two blocs, each capable of forming a blocking minority against the other; the protectionist bloc of mainly southern states and the liberalist bloc of mainly northern states. As a member of the latter, the UK's departure would weaken the liberalist bloc as the UK has been a sizeable and fervent proponent of an economically liberal Europe, larger trade deals with third countries and of further EU enlargement. While weakening the liberal bloc, it would also strengthen Germany's individual position in the Council through the loss of a key counterweight. However, Germany remains uneasy about this role lest other member states uneasy about German dominance may be more tempted to ally against it.[1][6]

UK seats in EP groups highlighted in red (seat numbers based on EP groups in December 2017

Similarly, a majority of the UK's representatives sit with right-leaning groups, namely the European Conservatives and Reformists and the Europe of Freedom and Direct Democracy, both of which are built around, and led by members of, the British Conservative Party and UKIP. The Progressive Alliance of Socialists and Democrats would also lose its members from the UK's Labour Party, but on the whole would be left strengthened by the greater loss to the right, and thus able to form majorities without seeking support from the (conservative) European People's Party. This may lead to a Parliament which may:[1]

Defence and foreign affairs

The UK has been a key asset for the EU in the fields of foreign affairs and defence given that the UK is (with France) one of the EU's two major military powers, and has significant intelligence capabilities, soft power and a far reaching diplomatic network. Without the UK, EU foreign policy could be less influential.[1] The US saw the UK as a bridge between the US and Europe, and the UK helped align the EU positions to the US and provide tougher responses to Russia.[6]

However, Brexit also produced new opportunities for the European defence cooperation, as the UK has consistently vetoed moves in this direction, arguing it would undermine NATO. It attempted to do so again   even after its withdrawal referendum, in relation to the establishment of a military HQ.[7] With the UK's withdrawal and a feeling that the US under Donald J. Trump may not honour NATO commitments, the European Council has put defence cooperation as a major project in its [post-Brexit vote] Bratislava and Rome declarations and moved forward with setting up a European Defence Fund and activating Permanent Structured Cooperation (a defence clause in the Lisbon Treaty).[8][9]

Freedom of movement

Freedom of movement for workers is an integral part of EU policy and is a foundation of European Union ideals. In addition, the Schengen agreement removes the necessity for passports and visas for travel within the Schengen Area, thus allowing the free movement of people.[10] This concept is designed to benefit the various member states' economy and society by allowing for business to thrive in Europe and also for the EU to be more culturally interconnected.[11] (Visitors from outside the Area are subject to the usual passport and visa controls at the external border of any Area member state. Not all members of the EU are members of Schengen, and not all members of Schengen are members of the EU).

Eurozone

EU GDP by currency group[12]

  Eurozone (72.9%)
  Non-Eurozone (Minus UK) (12%)
  United Kingdom (15.1%)

The relationship between euro and non-euro states has been on debate both during the UK's membership (as a large opt-out state) and in light of its planned withdrawal from the EU. The question is how Brexit might impact the balance of power between those in and out of the euro; namely avoiding a eurozone caucus out-voting non-euro states.

The UK had called for the EU treaties to be amended to declare the EU to be a "multi-currency union", which sparked concerns that to do so might undermine the progress of euro adoption in remaining countries.[13][14][15][12]

Professor Simon Hix contends that Brexit would strengthen the Eurozone, which may well replace the single market as the EU's core and driving force.[citation needed] In the pre-referendum negotiation, David Cameron emphasised the importance (in his view) of keeping the Eurozone clearly distinct from the EU. Following a British withdrawal, such pressure may well dissipate.[1]

Economic impacts

Trade with UK

While the trade impact of Brexit on the UK is likely to be significantly negative, its impact on the EU is also expected to be negative, but small. The UK and the EU would become each other's biggest trading partner but some member states, notably Belgium, Cyprus, Ireland, Germany and the Netherlands, are more exposed to a Brexit-induced economic shock. The economy of the Republic of Ireland is particularly sensitive due to its common land border with the United Kingdom and its close agribusines integration with Northern Ireland[16] The reintroduction of a customs border would be economically and politically damaging to both sides,[17][18] particularly because of the risk to the Northern Ireland peace process that a physical border presents.[19] Despite protestations of good will on both sides, it is not obvious how border controls can be avoided unless the UK has a Customs Union with the EU.[20][21] Arising from the agreements made at the Phase 1 negotiations (after the DUP intervention), any arrangements to be made to facilitate cross-border trade in Ireland will apply equally to cross-Channel trade but the details remain unclear.[22]

The sectors across the EU that would be most hit by the UK's withdrawal are motor vehicles and parts (the UK is a large manufacturer and depends on an EU chain of supply for parts), electronics equipment and processed foods. Export of raw materials from the Ruhr valley would also be impacted.[17]

Migration

The impact of this would be felt most on eastern European member states who have approximately 1.2 million workers in the UK by the end of 2015; the largest groups from Poland (853,000), Romania (175,000) and Lithuania (155,000).[3] A year after the Brexit vote, net annual immigration to the UK fell by 106,000 with most attributed to EU citizens leaving for other states, with the biggest drop among those from the western European states.[23]

The Polish government is encouraging its young emigrant workforce to return to Poland, but due to regulatory or political reasons many would either stay in the UK or move to other western cities such as Amsterdam or Berlin.[24] Other western European member states may see much of the flow coming from eastern states in future. The influx of workers from the east would be economically beneficial to countries such as Germany, but may be politically problematic.[3]

Institutional changes

Agencies located in the UK

In 2017, the UK was currently hosting the European Medicines Agency and the European Banking Authority. As an EU agency could not be located outside the Union, the Council began a process to identify new host cities for the agencies. Hosting an agency is seen as a valuable prize for a city, so the process was hotly contested by nearly two dozen cities not just on the objective criteria, but on political grounds. By November 2017, it was agreed that they would relocate to Amsterdam and Paris.[25]

The backup data centre for the security behind the Galileo satellite navigation system was also relocated from the UK to Spain due to Brexit.[26]

European Parliament seats

The UK is allotted 73 seats in the 751 seat European Parliament, which may become vacant just before the 2024 elections. Under normal procedures, these seats would be re-distributed between the remaining members according to the standard formula, but there have been a number of alternative proposals. The Parliament has proposed that 22 seats would be redistributed and the remaining 50 would be reserved either for new members, or an additional trans-national list of MEPs which would be elected across the Union in an effort to deepen a direct democratic link. This has been a long-standing proposal, notably supported by the European Green Party and French President Emmanuel Macron. However, due to the legal uncertainty around Brexit, any bold moves are opposed by constitutional affairs committee chair Danuta Huebner.[27][28]

Computations were proposed in a paper titled "The Composition of the European Parliament" on 30 January 2017.[29]

Public opinion

In the wake of the UK's vote to withdraw, opinion polls showed that support for the EU surged across Europe. Surveying shows that the EU has the highest support in 35 years.[30] The UK has also seen a resurgence of EU based support with polls showing that in September 2018 more UK residents thought Brexit would be wrong rather than the original August 2016 polling data that showed more support for Brexit rather than remaining.[31][32][33][5]

However, Euroscepticism across Europe has also increased heralded by a 'wave of populism'[34] notably during the campaign of Marine Le Pen in the 2017 French presidential election. In the 2018 Italian general election, the populist Five Star Movement and the right wing Lega Nord, both Eurosceptic, received 32% and 17% respectively.

Languages

Danuta Hübner, the head of the European Parliament Committee on Constitutional Affairs, has argued that after Brexit, English would no longer be an official EU language: "We have a regulation … where every EU country has the right to notify one official language. The Irish have notified Gaelic, and the Maltese have notified Maltese, so you have only the U.K. notifying English ... If we don’t have the U.K., we don't have English."[35]

However, this statement has been contradicted by the European Commission Representation in Ireland, whose spokesperson argued that changing the current language regime would require a unanimous vote by the Council,[36] as well as by President Jean-Claude Juncker in an answer to a Parliamentary Question on 9 August 2017.[37] However, Juncker has also stated that despite this, in the wake of Brexit, English is losing its importance in Europe[38] and members of the German Bundestag have called on staff in EU institutions to use German more often.[39]

When the United Kingdom and Ireland joined the EU's predecessor in 1973, French was the dominant language of the institutions. With the addition of Sweden and Finland in the 1990s, and the Eastern European states in the 2000s, English slowly supplanted French as the dominant working language of the institutions. In 2015, it was estimated that 80% of legislative proposals were drafted first in English. The role of English as a lingua franca is believed to be likely to continue, given how heavily staff rely on it,[40][35] and that in European schools, 97% of children learn English as an additional language, compared with 34% learning French and 23% learning German.[41]

Dr Marko Modiano has suggested, in an academic paper, that Euro English could be codified in a similar way to native English varieties following Brexit.[42][43]

Language rules are currently covered, amongst others, by: Article 55 of the Treaty on European Union (TEU) (which lists the 24 "Treaty languages" in which the Treaty is drawn up);[44] Articles 20 and 24 of the Treaty on the Functioning of the European Union (TFEU), which lay down the rights of citizens to petition the European Parliament and to address the institutions in any of the Treaty languages and to obtain a reply in the same language, and Article 342 TFEU, which states that "the rules governing the languages of the institutions of the Union shall, without prejudice to the provisions contained in the Statute of the Court of Justice of the European Union, be determined by the Council, acting unanimously by means of regulations";[45] and Council Regulation No 1/1958,[46] which lists the 24 official languages.

References

  1. Brexit: The Consequences for the EU’s Political System, Oliver Patel and Christine Reh, University College London (UCL) Constitution Unit, (undated, but probably Spring 2016 as it describes itself as "intended to inform debate ahead of the UK referendum on EU membership on 23 June [2016]")
  2. "World Economic Outlook Database". International Monetary Fund. 24 October 2017.
  3. From trade to migration - how Brexit may hit the EU economy, Reuters 24 June 2016
  4. Brexit’s (minimal) impact on the EU budget, Politico Europe, 23 November 2017
  5. Brexit Consequences: For UK, EU, and U.S., The Balance 29 November 2017
  6. THE IMPACT OF BREXIT ON THE EU, Centre for European Reform - Charles Grant, 24 June 2016
  7. UK to veto EU 'defence union', EUObserver 17 September 2016
  8. Time for the Sleeping Beauty to wake, ECFR 15/NOV/17
  9. Angela Merkel: EU cannot completely rely on US and Britain any more, theguardian 28 May 2017
  10. Marzocchi, Ottavio (October 2018). "Free movement of persons". European Parliament. Retrieved 5 December 2018.
  11. Anonymous (2016-12-06). "Schengen Area". Migration and Home Affairs - European Commission. Retrieved 2018-12-05.
  12. The Eurozone seeks a post-Brexit balance, European Data Journalism Network 15 December 2017
  13. UK call for ‘multicurrency’ EU triggers ECB alarm, Financial Times 4 December 2015
  14. The Great British Euro Conundrum, Handelsblatt 20 June 2016
  15. What a fair relationship between ‘euro ins’ and ‘euro outs’ could look like, London School of Economics 26 January 2016
  16. Ireland: The forgotten frontier of Brexit Peter Foster, Europe Editor, The Daily Telegraph, 4 March 2017
  17. The Economic Impact of Brexit on UK and EU Trade, Richard Chen 14 June 2017
  18. Brexit: the impact on the UK and the EU, Global Counsel 23 June 2015
  19. Brexit 'puts NI peace process at risk' - Hain Mark Devenport BBC News NI Political Editor, 5 September 2017
  20. What are the options for the Irish border after Brexit?, Georgina Lee, Channel 4, 29 Nov 2017
  21. Brexit: Customs union would solve Irish border, Carwyn Jones says First Minister of Wales, Carwyn Jones, speaking to BBC Wales, 04 Dec 2017
  22. Brexit deal allows for three different types of Irish Border Katy Hayward, The Irish Times, 8 Dec 2017
  23. UK immigration latest: Net migration falls by more than 106,000 after Brexit vote as EU citizens flee, BBC 30 November 2017
  24. Poland hopes Brexit guides star natives home, Politico 2 January 2017
  25. EU agencies: The road to 'douze points', EUObserver 28 December 2017
  26. UK loses space data center to Spain amid post-Brexit security concerns, Politico 18 January 2018
  27. MEPs want to reduce the size of the European Parliament, European Parliament 12 September 2017
  28. EU parliament wary of pan-European lists, EU Observer 12 September 2017
  29. The Composition of the European Parliament
  30. "Eurobarometer survey: highest support for the EU in 35 years | News | European Parliament". www.europarl.europa.eu. 2018-05-23. Retrieved 2018-12-05.
  31. "How the public feel about Brexit options | YouGov". yougov.co.uk. Retrieved 2018-12-05.
  32. Support for the EU on the rise since Brexit vote … even in the UK, The Guardian 21 November 2016
  33. European support for EU surges in wake of Brexit vote, Financial Times 15 June 2017
  34. , Washington Post 11 March 2016
  35. English will not be an official EU language after Brexit, says senior MEP, Politico Europe 27 June 2016
  36. English language will NOT be banned from EU after Brexit, despite claims, independent.ie 28 June 2016
  37. Parliamentary Questions: Language in the EU, 31 May 2017
  38. Brexit: English is losing its importance in Europe, says Juncker, The Guardian 5 May 2017
  39. Bundestag MPs want EU staff to use German more after Brexit, Euractiv 10 August 2017
  40. English will remain the working language of the EU after Brexit, The Irish Times 18 July 2016
  41. Britain is leaving the EU, but its language will stay, The Economist 13 May 2017
  42. English in a post-Brexit European Union by Marko Modiano, World Englishes 19 September 2017
  43. Brexit could create a new ‘language’ – Euro-English, The Independent 20 September 2017
  44. Consolidated version of the Treaty on European Union, Eurlex
  45. Consolidated version of the Treaty on the Functioning of the European Union, Eurlex
  46. Regulation No 1 determining the languages to be used by the European Economic Community, Official Journal of the European Union