Stunned: UK Votes to Remove Itself from European Union (EU)

Britain shocks world with “Brexit” Vote (52% leave versus 48% to stay)

T-shirt reading
Photo captured by a person in the UK while out walking. Photo Credit: fernando butcher

The news has rattled the world and roiled global financial markets:  the UK has left the European Union.  They are looking for a better future.  This is an outcome many of us in the United States, one of its largest trading partners, did not expect.  What does this mean for companies that do business with the UK?  Let’s take a look.

First, I wrote about this topic in March 2016 with, What Happens to SME Trade if Britain Leaves the European Union (EU) so I highly recommend you revisit that article for six key reasons:

  1. Why the vote was held?
  2. What is the European Union?
  3. Why the vote was needed?
  4. Who would have benefited from staying in the UK?
  5. What it means for US exporters if the UK leaves the EU, which it did.
  6. Would the UK still be party to the Transatlantic Trade and Investment Partnership (TTIP) upon leaving the EU?

If you are unfamiliar with Brexit, it means British exit from the European Union.

Now that the UK has left the EU, what happens next?

Plenty.   Since Prime Minister David Cameron failed to convince voters to stay in the union, he is stepping down by October 2016.  He believes that fresh leadership is needed to take the country in a new direction.  No other country has ever left the European Union.

According to FiveThirtyEight, while trying to make sense of the turmoil, says:

“The decision [for the UK to exit EU] could push Britain into a recession, spur the breakup of both the EU and the United Kingdom and trigger a global financial meltdown to rival the 2008 crash.

Or markets could settle down while the U.K. and the EU negotiate a sensible breakup agreement, and the wake-up call from British voters could push European leaders to make badly needed reforms. More likely, the outcome will fall somewhere between those two extremes.”  (Source:  http://fivethirtyeight.com/features/brexit-britain-votes-to-leave-european-union/)

US President Obama says:

"While the U.K.'s relationship with the EU will change, one thing that will not change is the special relationship that exists between our two nations -- that will endure," the president said Friday [6/24/16] at the Global Entrepreneurship Summit in Stanford University. "The European Union will remain one of our indispensable partners, our NATO alliance will remain a cornerstone of global security." (Source:  http://www.cbsnews.com/news/white-house-brexit-u-k-markets-u-s-markets/)

Inventing Another Europe?

The news on Brexit has traveled far and wide.  Reuters said:

“Quitting the world's biggest trading bloc could cost Britain access to the trade barrier-free single market and means it must seek new trade accords with countries around the world. A poll of economists by Reuters predicted Britain was likelier than not to fall into recession within a year.”

The Financial Times says:

“But as the first results came in from the north-east of England, it soon became clear that Leave voters had turned out in greater numbers. The vote reflected a roar of rage from those who felt alienated from London and left behind by globalisation [globalization].”  (Source:  https://next.ft.com/content/e404c2fc-3913-11e6-9a05-82a9b15a8ee7)

On global trade, Vox says:

"If you are Nissan or some other car producer with major production in the UK, today, the same safety standards and environmental standards allow you to sell everywhere in the European market," Jacob Funk Kirkegaard, an economist at the Peterson Institute for International Economics, told me. But if the UK leaves the EU, "you would no longer be able to sell into other European markets, not because you face a small tariff but because you'd have to go through another set of safety certifications. This kind of thing would be repeated in every industry you can think of."  (Source:  http://www.vox.com/2016/6/23/12021222/brexit-what-happens-next)

The positive news is that the people of UK now get to pass their own laws, set their own taxes and control their borders.  Yet, the biggest concern is that Brexit has consequences for Britain, Europe and the rest of the world – from global trade, to immigration, to shares in companies’ stocks (e.g., airlines, travel companies and media groups).

 All of this is yet to be determined and will take a long time – years – to see how it pans out.  Needless to say, this is a huge experiment, however painful the process may be.   

As an unnamed political leader in the UK said, “What doesn’t kill you, makes you stronger.”  The people of the UK have spoken and we should all respect their decision.