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UK’s hard take on Brexit

By Sarosh Zaiwalla, London
16/02/2017   0 Comments

The formation of the European Union was an epitome for the future unification of the world into one country with different individual States on the model of the EU. One of the achievements of the EU was to put an end to all wars between West European countries. Then why did Brexit happen in the UK?
 
Historically, there was a small minority of British Conservative Party MPs who always raked up the issue of Europe in Parliament and would trouble a Conservative Prime Minister. The former Prime Minister, David Cameron, in order to shut them from raising this issue included a referendum in the Conservative Party manifesto for the last general election. The facts at the time were different and the UK was content to be part of Europe. It is now recognised that the real cause of Brexit was the influx of refugees into Europe in early 2016, which frightened voters into thinking that many would in due course obtain the right of residence in the Schengen countries and then travel to the UK.
 
Another significant factor was the proposed agreement between the EU and Turkey to allow Turkish citizens visa-free travel to Schengen countries. Psychologically, this also affected British voters into thinking that in due course Turkish citizens would have a right of residence in the EU and then travel to reside in the UK. There were, of course, other reasons — like false messages that Britain would save £350 million a week which could be used for the National Health Service.
 
WHAT NOW?
There is now general recognition in the British establishment that the vote to leave the EU is going to retard the UK’s economic progress. The pound sterling — which was in the region of £1 = over $1.50 — slumped immediately upon the vote and today stands at £1 = $1.22. Nearly 50 per cent of UK exports go to EU countries. Although the British exports will become cheaper because of the devaluation of the sterling, it will be set off by a higher liability for import tariffs the EU is bound to impose. 
 
One should not be surprised if Britain bounces back as one of the strong economies, even after leaving the EU. There is, of course, a real risk of many businesses which wanted to do business with Europe, using the City of London as a centre, now thinking of dealing directly with European countries. This would be a loss for the City.
 
HARD BREXIT OR SOFT BREXIT?
There is another conundrum which the British Government will have to face and resolve. The underlying importance will be to regain the advantage under which exporters had to ship their goods to the EU. This benefit will be lost when Britain leaves the EU. Britain will have the opportunity to offset any such loss by developing stronger commercial ties with Commonwealth countries. The Indian Government, for example, would prefer to see a hard Brexit because New Delhi can then deal directly with London and get rid of the obstacles it has been facing over the years in exporting food products, which are restricted at present because of bureaucratic EU regulations.
There is also an understandable recognition in the British establishment that the only good option for the UK is to go in for a hard Brexit. This is because if London goes in for a soft Brexit, there will still be a very substantial obligation on the UK to pay large amounts to the EU every year.
 
A hard Brexit would mean hard immigration restrictions for those who wish to settle in the UK. However, since Britain does require quality immigration, London will be able to control immigration by allowing only such people coming to the UK.
 
(The author is the founder and senior partner of a UK-based international law firm, Zaiwalla & Co Solicitors.)

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