Brexit

The term "Brexit"

Brexit (like its early variant, Brixit) is a portmanteau of "British" and "exit". It was derived by analogy from Grexit, referring to a hypothetical withdrawal of Greece from the eurozone (and possibly also the EU). The term Brexit may have first been used in reference to a possible UK withdrawal from the EU by Peter Wilding in a Euractiv blog post on 15 May 2012. The terms "hard Brexit" and "soft Brexit" are much used unofficially, and are understood to describe the prospective relationship between the UK and the EU after withdrawal, ranging from hard, that could involve the UK trading with the EU like any other non-EU-member country under World Trade Organisation rules but with no obligation to accept free movement of people, to soft, that might involve retaining membership of the EU single market for goods and services and at least some free movement of people, according to European Economic Area rules.

Historical background

Opinion polls taken after EC accession in 1973 until the end of 2015 generally revealed popular British support for EC or EU membership. Similarly, in the United Kingdom European Communities membership referendum of 1975, two-thirds of British voters favoured continued membership. A clear exception was the year 1980, the first full year of Prime Minister Margaret Thatcher's term of office, when the highest ever rejection of membership was measured, with 65% opposed to and 26% in favour of membership. After Thatcher had negotiated a rebate of British membership payments in 1984, those favouring the EC maintained a lead in the opinion polls, except during 2000, as Prime Minister Tony Blair aimed for closer EU integration including adoption of the euro currency, and around 2011, as immigration into the United Kingdom became increasingly noticeable. As late as December 2015 there was, according to ComRes, a clear majority in favour of remaining in the EU, albeit with a warning that voter intentions would be considerably influenced by the outcome of Prime Minister David Cameron's ongoing EU reform negotiations, especially with regards to the two issues of "safeguards for non-Eurozone member states" and "immigration". The following events are relevant.

Founding of the European Communities in 1957 and British applications for membership

The UK was not a signatory to the Treaty of Rome which created the then European Communities, which was the collective term for the European Coal and Steel Community (ECSC), the European Economic Community (EEC) and the European Atomic Energy Community (EAEC), in 1957. The country subsequently applied to join the organisation in 1963 and again in 1967, but both applications were vetoed by the President of France, Charles de Gaulle, who said that "a number of aspects of Britain's economy, from working practices to agriculture" had "made Britain incompatible with Europe" and that Britain harboured a "deep-seated hostility" to any pan-European project. Once de Gaulle had relinquished the French presidency in 1969, the UK made a third and successful application for membership. The question of sovereignty had been discussed at the time in an official Foreign and Commonwealth Office document (FCO 30/1048) that became open to the public in January 2002 under the rules for availability after thirty years. It listed among "Areas of policy in which parliamentary freedom to legislate will be affected by entry into the European Communities": Customs duties, Agriculture, Free movement of labour, services and capital, Transport, and Social Security for migrant workers. The document concluded (paragraph 26) that it was advisable to put the considerations of influence and power before those of formal sovereignty. The Treaty of Accession was signed in January 1972 by the prime minister Edward Heath, leader of the Conservative party. Parliament's European Communities Act 1972 was enacted on 17 October and the UK's instrument of ratification was deposited the next day (18 October), letting the United Kingdom's membership of the EEC, or "Common Market", come into effect on 1 January 1973. The opposition Labour Party, led by Harold Wilson, contested the October 1974 general election with a commitment to renegotiate Britain's terms of membership of the EEC and then hold a referendum on whether to remain in the EEC on the new terms.

1975 referendum

In 1975, the United Kingdom held its first ever national referendum on whether the UK should remain in the European Communities. All of the major political parties and mainstream press supported continuing membership of the EC. However, there were significant divides within the ruling Labour party, the membership of which had voted 2:1 in favour of withdrawal at a one-day party conference on 26 April 1974. Since the cabinet was split between strongly pro-European and strongly anti-European ministers, Harold Wilson suspended the constitutional convention of Cabinet collective responsibility and allowed ministers to publicly campaign on either side. Seven of the twenty-three members of the cabinet opposed EC membership.

On 5 June 1975, the electorate were asked to vote yes or no on the question: "Do you think the UK should stay in the European Community (Common Market)?" Every administrative county and region in the UK returned large majority "Yes" votes, except for the Shetland Islands and the Outer Hebrides which returned majority votes in favour of "No". With a turnout of just under 65%, the outcome of the vote was 67.2% in favour of staying in, and the United Kingdom remained a member of the EC. Support for the UK to leave the EC in 1975, in the data, appears unrelated to the support for Leave in the 2016 referendum.

Between referendums

In 1979 the United Kingdom opted out of the newly formed European Exchange Rate Mechanism (ERM) which was the precursor to the creation of the euro.

The opposition Labour Party campaigned in the 1983 general election on a commitment to withdraw from the EEC without a referendum. It was heavily defeated as the Conservative government of Margaret Thatcher was re-elected. The Labour Party subsequently changed its policy.

In 1985 the United Kingdom ratified the Single European Act, the first major revision to the Treaty of Rome without a referendum with the full support HM Government of Margaret Thatcher.

In October 1990 – despite the deep reservations of Prime Minister Margaret Thatcher but under pressure from her senior ministers – the United Kingdom joined the ERM with the pound sterling pegged to the deutschmark. In November 1990 Thatcher resigned as Prime Minister amid internal divisions within the Conservative Party arising partly from her increasingly Eurosceptic views. In September 1992 the United Kingdom was forced to withdraw from the ERM after the pound sterling came under pressure from currency speculators (an episode known as Black Wednesday). The resulting cost to UK taxpayers was estimated to be in excess of £3 billion.

As a result of the Maastricht Treaty, the European Communities became the European Union on 1 November 1993. The new name reflected the evolution of the organisation from an economic union into a political union. As a result of the Lisbon Treaty, which entered into force on 1 December 2009, the Maastricht Treaty is now known, in updated form as, the Treaty on European Union (2007) or TEU, and the Treaty of Rome is now known, in updated form, as the Treaty on the Functioning of the European Union (2007) or TFEU.

The Referendum Party was formed in 1994 by Sir James Goldsmith to contest the 1997 general election on a platform of providing a referendum on the UK's membership of the EU. It fielded candidates in 547 constituencies at that election and won 810,860 votes, 2.6% of total votes cast. It failed to win a single parliamentary seat as its vote was spread out across the country, losing its deposit (funded by Goldsmith) in 505 constituencies.

The UK Independence Party (UKIP), a Eurosceptic political party, was also formed, in 1993. It achieved third place in the UK during the 2004 European elections, second place in the 2009 European elections and first place in the 2014 European elections, with 27.5% of the total vote. This was the first time since the 1910 general election that any party other than the Labour or Conservative parties had taken the largest share of the vote in a nationwide election. UKIP's electoral success in the 2014 European election has been documented as the strongest correlate of the support for the leave campaign in the 2016 referendum.

In 2014, UKIP won two by-elections, triggered when the sitting Conservative MPs defected to UKIP and then resigned. These were their first elected MPs. At the 2015 general election UKIP took 12.6% of the total vote and held one of the two seats won in 2014.

Euroscepticism

Euroscepticism is the criticism of and strong opposition to the European Union.

Euroscepticism has been increasing according to the NatCen Social Research and its British Social Attitudes (BSA) survey. Since 1983, the BSA survey has been collecting opinions in Europe whether UK should remain or withdraw in the European Union. In the 1990s, the BSA survey offered various choices to the respondents for the Britain's relationship with the European Union.

1. to withdraw from the EU
2. to remain within the EU and attempt to diminish its power
3. to leave things as they are
4. to stay within the EU and try to broaden its power
5. to work for the formation of a single European government

22% of the respondents agreed with option 1 and 43% with option 2. 65% either desire to break ties or decrease the EU's legislative influence and only 38% support both option 1 and 2. Euroscepticism has been increasing since 1993.

Negotiations for EU Reform

In 2012, Prime Minister David Cameron rejected calls for a referendum on the UK's EU membership, but suggested the possibility of a future referendum to gauge public support. According to the BBC, "The prime minister acknowledged the need to ensure the UK's position within the European Union had 'the full-hearted support of the British people' but they needed to show 'tactical and strategic patience'."

Under pressure from many of his MPs and from the rise of UKIP, in January 2013, Cameron announced that a Conservative government would hold an in–out referendum on EU membership before the end of 2017, on a renegotiated package, if elected in 2015.

The Conservative Party unexpectedly won the 2015 general election with a majority. Soon afterwards the European Union Referendum Act 2015 was introduced into Parliament to enable the referendum. Cameron favoured remaining in a reformed European Union and sought to renegotiate on four key points: protection of the single market for non-eurozone countries, reduction of "red tape", exempting Britain from "ever-closer union", and restricting EU immigration.

The outcome of the renegotiations was announced in February 2016. Some limits to in-work benefits for new EU immigrants were agreed, but before they could be applied, a country such as the UK would have to get permission from the European Commission and then from the European Council.

In a speech to the House of Commons on 22 February 2016, Cameron announced a referendum date of 23 June 2016 and commented on the renegotiation settlement. Cameron spoke of an intention to trigger the Article 50 process immediately following a leave vote and of the "two-year time period to negotiate the arrangements for exit."

Campaign groups

The official campaign group for leaving the EU was Vote Leave. Other major campaign groups included Leave.EU, Grassroots Out, Get Britain Out and Better Off Out.

The official campaign to stay in the EU, chaired by Stuart Rose, was known as Britain Stronger in Europe, or informally as Remain. Other campaigns supporting remaining in the EU included Conservatives In, Labour in for Britain, #INtogether (Liberal Democrats), Greens for a Better Europe, Scientists for EU, Environmentalists For Europe, Universities for Europe and Another Europe is Possible.

Referendum result

The result was announced on the morning of 24 June: 51.9% voted in favour of leaving the European Union and 48.1% voted in favour of remaining a member of the European Union. Comprehensive results are available from the UK Electoral Commission Referendum Results site. A petition calling for a second referendum attracted more than four million signatures, but was rejected by the government on 9 July.

Political effects

After the result was declared, Cameron announced that he would resign by October. He stood down on 13 July 2016, with Theresa May becoming Prime Minister. George Osborne was replaced as Chancellor of the Exchequer by Philip Hammond, former Mayor of London Boris Johnson was appointed Secretary of State for Foreign and Commonwealth Affairs, and David Davis became Secretary of State for Exiting the European Union. Labour leader Jeremy Corbyn lost a vote of confidence among his parliamentary party and a leadership challenge was launched, while on 4 July, Nigel Farage announced his resignation as head of UKIP.

Outside the UK many Eurosceptic leaders celebrated and expected others to follow the UK example. The right-wing Dutch populist Geert Wilders said that the Netherlands should follow Britain's example and hold a referendum on whether the Netherlands should stay in the European Union. However, opinion polls in the fortnight following the British referendum show that the immediate reaction in the Netherlands and other European countries was a decline in support for Eurosceptic movements.

A week after the referendum, Gordon Brown, a former Labour Party leader and the Prime Minister who had signed the Lisbon Treaty in 2007, warned of a danger that in the next decade the country would be refighting the referendum. He wrote that remainers were feeling they must be pessimists to prove that Brexit is unmanageable without catastrophe, while leavers optimistically claim economic risks are exaggerated.

The previous leader of the Labour Party and Prime Minister (1997–2007), Tony Blair, in October 2016 called for a second referendum, a decision through parliament or a general election to decide finally if Britain should leave the EU. Former leader of the Conservative Party and Prime Minister John Major (1990 to 1997) argued in November 2016 that parliament will have to ratify whatever deal is negotiated and then, depending on the deal there could be a case for a second referendum.

Advisory status of the referendum

As was the case with the 1975 referendum, the 2016 referendum did not directly require the government to do anything in particular. It does not require the government to initiate, or even schedule, the Article 50 procedure. The UK government stated that they would expect a leave vote to be followed by withdrawal, not by a second vote. In a leaflet sent out before the referendum, the UK government stated "This is your decision. The Government will implement what you decide." Although Cameron stated during the campaign that he would invoke Article 50 straight away in the event of a leave victory, he refused to allow the Civil Service to make any contingency plans, something the Foreign Affairs Select Committee later described as "an act of gross negligence." Following the referendum result Cameron announced before the Conservative Party conference that he would resign by October, and that it would be for the incoming Prime Minister to invoke Article 50. He said that "A negotiation with the European Union will need to begin under a new Prime Minister, and I think it is right that this new Prime Minister takes the decision about when to trigger Article 50 and start the formal and legal process of leaving the EU."

In the legal case over who has the power to give a notification under Article 50, the Secretary of State did not contend that the Referendum Act 2015 supplied a statutory power for the Crown to give notice under Article 50. The Court observed that he was right not to do so, because any argument to that effect would have been untenable as a matter of statutory interpretation of the 2015 Act and stated:

... a referendum on any topic can only be advisory for the lawmakers in Parliament unless very clear language to the contrary is in the referendum legislation in question. No such language is used in the 2015 Referendum Act. Further, the 2015 Referendum Act was passed against a background including a clear briefing paper to parliamentarians explaining that the referendum would have advisory effect only.

Article 50

Since the Lisbon Treaty came into effect in December 2009, the process of withdrawal from the European Union has been governed by Article 50 of the Treaty on European Union. No member state has ever left the EU. Article 50 provides an invocation procedure whereby a member can notify the European Council and there is a negotiation period of up to two years, after which the treaties cease to apply – although a leaving agreement may be agreed by qualified majority voting. Unless the Council of the European Union unanimously agrees to extensions, the timing for the UK leaving under the article is two years from when the country gives official notice to the EU. The assumption is that new agreements will be negotiated during the two-year window, but there is no legal requirement that agreements have to be made. Some aspects, such as new trade agreements, may be difficult to negotiate until after the UK has formally left the EU. Under Article 50, the withdrawal must be in accordance with the member state's constitution, and uncertainty exists as to the constitutional requirements in the UK.

An EU Parliament motion passed on 28 June 2016 called for the UK immediately to trigger Article 50 and start the exit process. There is no mechanism allowing the EU to invoke the article. As long as the UK Government has not invoked Article 50, the UK stays a member of the EU; must continue to fulfil all EU-related treaties, including possible future agreements; and should legally be treated as a member. The EU has no framework to exclude the UK as long as Article 50 is not invoked, and the UK does not violate EU laws. However, if the UK were to breach EU law significantly, there are legal provisions to allow the EU to cancel membership of a state that breaches fundamental EU principles, a test that is hard to pass. These do not allow forced cancellation of membership, only denial of rights such as free trade, free movement and voting rights.

Alan Renwick of the Constitution Unit of University College London argues that Article 50 negotiations cannot be used to renegotiate the conditions of future membership and that Article 50 does not provide the legal basis of withdrawing a decision to leave.

On the other hand, the constitutional lawyer and retired German Supreme Court judge Udo Di Fabio has stated that

A February 2016 briefing note for the European Parliament stated that a withdrawal from the EU ends, from then on, the application of the EU Treaties in the withdrawing state, although any national acts previously adopted for implementing or transposing EU law would remain valid until amended or repealed, and a withdrawal agreement would need to deal with phasing-out EU financial programmes. The note mentions that a member withdrawing from the EU would need to enact its own new legislation in any field of exclusive EU competence, and that complete isolation of a withdrawing state would be impossible if there is to be a future relationship between the former member and the EU, but that a withdrawal agreement could have transitional provisions for rights deriving from EU citizenship and other rights deriving from EU law that the withdrawal would otherwise extinguish. The Common Fisheries Policy is one of the exclusive competences reserved for the European Union; others concern customs union, competition rules, monetary policy and concluding international agreements.

In oral evidence to a Select Committee of the House of Lords in March 2016, one of the legal experts (Sir David Edward) stated that the German text of Article 50 could be taken to mean that the structure of future relations between the UK and EU will already have been established at the point when withdrawal takes place, which could be taken as a difference from the English text "the Union shall negotiate and conclude an agreement with the withdrawing state setting out the arrangements for its withdrawal and taking account of the framework for its future relationship with the Union".

Invoking Article 50

Immediately after the referendum, Cameron declared his belief that the next Prime Minister should activate Article 50 and begin negotiations with the EU. During a 27 June 2016 meeting, the Cabinet decided to establish a unit of civil servants, headed by senior Conservative Oliver Letwin, who would proceed with "intensive work on the issues that will need to be worked through in order to present options and advice to a new Prime Minister and a new Cabinet".

Prime Minister Theresa May made it clear that discussions with the EU would not start in 2016. "I want to work with ... the European council in a constructive spirit to make this a sensible and orderly departure." she said. "All of us will need time to prepare for these negotiations and the United Kingdom will not invoke article 50 until our objectives are clear." In a joint press conference with May on 20 July 2016, Germany's Chancellor Angela Merkel supported the UK's position in this respect: "We all have an interest in this matter being carefully prepared, positions being clearly defined and delineated. I think it is absolutely necessary to have a certain time to prepare for that."

In October 2016 the UK Prime Minister, Theresa May, announced that the government would trigger Article 50 by "the first quarter of 2017".

After some legal disputes, the House of Commons on 1 February 2017 formally authorised the Prime Minister to trigger Article 50.

Need for parliamentary approval

Opinions differed on whether Article 50 notification could be given for the United Kingdom by the government exercising the Crown's foreign affairs prerogative without an explicit Act of Parliament to authorise it. The Constitution of the United Kingdom is unwritten and it operates on convention and legal precedent: this question is without precedent and so the legal position is arguably unclear.

A House of Commons briefing paper titled EU Treaty change: the parliamentary process of bills, dated 15 June 2015, stated that, while ratification of international treaties is a matter of royal prerogative, the ratification of treaties amending existing EU treaties is controlled by a requirement for a prior act of Parliament; the paper made no mention of notification of withdrawal from existing treaties. A week after the referendum, a columnist for The Times, David Pannick QC, asked whether parliamentary approval is needed before notification is given of the UK's intention to leave, and answered that an act of parliament is required. The Government argues that the use of prerogative powers to enact the referendum result is constitutionally proper and consistent with domestic law whereas the opposing view is that prerogative powers may not be used to set aside rights previously established by Parliament.

On 24 January 2017, the (United Kingdom) Supreme Court ruled that the government may not trigger Article 50 without parliamentary approval to do so.

Legal challenges

Three groups of citizens brought a case before the High Court of England and Wales to challenge the government's interpretation of the law. On 3 November 2016, the court ruled that the UK requires a Parliament vote before formally starting the process to leave the EU. The court described the passing of the European Communities Act 1972 as the major step of "switching on the direct effect of EU law in the national legal systems", and reasoned that it is implausible that Parliament's intention was that the Crown should be able to switch it off unilaterally by exercise of its prerogative powers. The Supreme Court of the United Kingdom heard the appeal in December. The circumstances in which the royal prerogative may be used is regarded as of great constitutional significance.

Applications of other parties challenging the government in legal proceedings in Northern Ireland's High Court were dismissed on 28 October, but the court was prepared to grant leave to appeal in respect of four out of the five issues. Law officers of Northern Ireland, Scotland, and Wales were able to take part in the appeal on behalf of their governments. The BBC reported that Scotland's Lord Advocate would be addressing the Court on Scots law and the Welsh Counsel General's submissions would be on the rule of law and parliamentary sovereignty.

The Supreme Court's decision on the appeal heard in December was given on 24 January 2017. The Supreme Court upheld the judgment of the High Court, finding that an Act of Parliament was required to invoke Article 50. The Supreme Court also ruled that devolved legislatures in Scotland, Wales and Northern Ireland have no legal right to veto the act.

In January 2017, the claim of several people in fresh legal proceedings against the Secretary of State centred on the UK's links with the European Economic Area. The following month, The High Court rejected their application for judicial review.

Article 50 bill

On 1 February 2017, the House of Commons voted to approve the second reading of the European Union (Notification of Withdrawal) Bill 2017 to authorise the Prime Minister to give the Article 50 notice. On 1 March 2017, the House of Lords, in Committee, made an amendment for protecting EU nationals living in the UK, regardless of the rights of UK nationals continuing to live in member states of the EU.. The amendment adds to the bill a requirement that the government will introduce proposals within three months of the withdrawal notification to ensure EU citizens in the UK have the same residence rights after Brexit as before. Published statistics show many more EU nationals live in the UK (the greater numbers coming from Poland and the Republic of Ireland) than UK nationals living in other EU member states (the greater numbers in Spain and the Republic of Ireland).

"Great Repeal Bill"

In October 2016, Theresa May promised a "Great Repeal Bill", which would repeal the European Communities Act 1972 and restate in UK law all enactments previously in force under EU law. This bill will be introduced in the May 2017 parliamentary session and enacted before or during the Article 50 negotiations; it would not come into force until the date of exit. It would smooth the transition by ensuring that all laws remain in force until specifically repealed.

Such a bill is likely to cause issues constitutionally in terms of the devolution settlements throughout the UK nations. The Scottish Government's approach to the "Great Repeal Bill" is that it would require legislative consent from the Scottish Parliament, as it will legislate on Scottish matters. It is also in the Scotland Act 1998 that any legislation passed by the Scottish Parliament has to comply with European Law. Without an alteration to this, Holyrood would still need to follow European Law, or Westminster will need to alter this aspect of the Scotland Act – though whether the UK Government will follow convention to gain legislative consent from the Scottish Parliament (for changes to that Act) remains to be seen.

Replying to questions at a parliamentary committee about Parliament's involvement in voting on the outcome of the negotiations with the EU, the Prime Minister said that "delivering on the vote of the British people to leave the European Union" was her priority. The opposition shadow Brexit secretary, Keir Starmer, commented that the government did not want a vote at the beginning of the process, to trigger Article 50, nor a vote at the end.

Negotiating positions

Various EU leaders have said that they will not start any negotiation before the UK formally invokes Article 50. Jean-Claude Juncker ordered all members of the EU Commission not to engage in any kind of contact with UK parties regarding Brexit. In October 2016, he stated that he was agitated that the British had not developed a sense of community with Europeans during 40 years of membership; Juncker denied that Brexit was a warning for the EU, envisaged developing an EU defence policy without the British after Brexit, and rejected a suggestion that the EC should negotiate in such a way that Britain would be able to hold a second referendum. On 5 November 2016, Juncker reacted to reports of some European businesses seeking to make agreements with the British government, and warned: "I am telling them [companies] that they should not interfere in the debate, as they will find that I will block their path." Juncker stated in February 2017 that the UK would be expected to pay outstanding commitments to EU projects and pensions as part of the withdrawal process, suggesting such bills would be "very hefty."

On 29 June, European Council president Donald Tusk told the UK that they would not be allowed access to the European Single Market unless they accepted its four freedoms of movement for goods, capital, services, and people.

German foreign secretary Frank-Walter Steinmeier met Britain's foreign secretary Boris Johnson on 4 November 2016; Johnson stressed the importance of British-German relationships, whereas Steinmeier responded that the German view was that the UK should have voted to stay in the EU and that the German priority now was to preserve the remaining union of 27 members. There could be no negotiations before the UK formally gives notice. A long delay before beginning negotiations would be detrimental. Britain could not keep the advantages of the common market but at the same time cancel the "less pleasant rules".

The First Minister of Scotland, Nicola Sturgeon, stated that Scotland might refuse consent for legislation required to leave the EU, though some lawyers argue that Scotland cannot block Brexit.

Newly appointed PM Theresa May made it clear that negotiations with the EU required a "UK-wide approach". On 15 July 2016, she said: "I have already said that I won't be triggering article 50 until I think that we have a UK approach and objectives for negotiations – I think it is important that we establish that before we trigger article 50."

According to The Daily Telegraph, the Department for Exiting the European Union spent over £250,000 on legal advice from top Government lawyers in two months and has plans to recruit more people. Nick Clegg said the figures showed the Civil Service was unprepared for the very complex negotiations ahead.

In the wake of the United Kingdom's vote to leave the European Union, the Department for International Trade (DIT) for striking and extending trade agreements between the UK and non-EU states was created by Prime Minister Theresa May, shortly after she took office on 13 July 2016. It employs about 200 trade negotiators and is overseen by the Secretary of State for International Trade, currently Liam Fox.

On 17 January 2017, Prime Minister Theresa May, announced a series of 12 negotiating objectives in a speech at Lancaster House. These consist of an end to European Court of Justice jurisdiction, withdrawal from the single market with a "comprehensive free-trade agreement" replacing this, a new customs agreement excluding the common external tariff and common commercial policy, an end to free movement of people, co-operation in crime and terrorism, collaboration in areas of science and technology, engagement with devolved administrations, maintaining the Common Travel Area with Ireland, and preserving existing workers' rights.

The Government has stated its intention to "secure the specific interests of Scotland, Wales and Northern Ireland, as well as those of all parts of England". Through the Joint Ministerial Committee on EU Negotiations (JMC(EN)), the Government intends to involve the views of the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly in the process of negotiating the UK's exit from the EU. For instance, at the January 2017 meeting of the JMC(EN), the Scottish Government's proposal to remain in the European Economic Area was considered.

Relationship with remaining EU members

As a majority of UK voters supported leaving the EU, its subsequent relationship with the remaining EU members could take several forms. A research paper presented to the UK Parliament proposed a number of alternatives to membership which would continue to allow access to the EU internal market. These include remaining in the European Economic Area (EEA) as a European Free Trade Association (EFTA) member (alongside Iceland, Liechtenstein, Norway and Switzerland), or seeking to negotiate bilateral terms more along the Swiss model with a series of interdependent sectoral agreements. Britain has not negotiated a trade agreement since before 1973, and the government is looking to the private sector for assistance.

Were the UK to join the EEA as an EFTA member, it would have to sign up to EU internal market legislation without being able to vote on its content, although it would participate in its development. Indeed, the EU is required to conduct extensive consultations with non-EU members beforehand via its many committees and cooperative bodies. Some EU law originates from various international bodies on which non-EU EEA countries have a seat.

The EEA Agreement (EU and EFTA members except Switzerland) does not cover Common Agriculture and Fisheries Policies, Customs Union, Common Trade Policy, Common Foreign and Security Policy, direct and indirect taxation, and Police and Judicial Co-operation in Criminal Matters, leaving EFTA members free to set their own policies in these areas; however, EEA countries are required to contribute to the EU Budget in exchange for access to the internal market.

Under the EEA Agreement, the UK would not be subject to European Court of Justice rulings but instead the EFTA Court would resolve disputes between the EU, EU Member states, and the EFTA Member States.

The EEA Agreement and the agreement with Switzerland cover free movement of goods, and free movement of people. Many supporters of Brexit want to restrict freedom of movement; Liechtenstein has a de facto permanent limit on the free movement of persons, though the EEA Joint Committee said this was because of Liechtenstein's specific geographical situation. Also, an EEA Agreement would include free movement for EU and EEA citizens, as passport systems allow EEA institutions to access markets in EU Member States, for the most part, without having to establish subsidiaries in each EU Member State and incur the costs of full authorisation in those jurisdiction. Others present ideas of a Swiss solution, that is tailor-made agreements between the UK and the EU, but EU representatives have claimed they would not support such a solution. The Swiss agreements contain free movement for EU citizens. (The Swiss immigration referendum, February 2014 voted narrowly in favour of an end to the 'free movement' agreement, by February 2017. However, the bilateral treaties between Switzerland and the European Union are all co-dependent: if one is terminated then all are terminated. Consequently, should Switzerland choose unilaterally to cancel the 'free movement' agreement then all its agreements with the EU will lapse unless a compromise is found, compromise reached in December 2016).

Several thousand British citizens resident in other EU countries have after the referendum applied for citizenship where they live, since they fear losing the right to work there.

Questions have been raised as to whether a state that withdraws from the EU automatically withdraws from the EEA or whether such a withdrawal requires notice under Article 127 of the EEA Agreement – and, if the courts so decide, whether such notice given by the UK would require an act of parliament.

Immigration

A Conservative MEP representing South East England, Daniel Hannan, predicted on BBC Newsnight that immigration from the European Union would not end after Brexit: "Frankly, if people watching think that they have voted and there is now going to be zero immigration from the EU, they are going to be disappointed. ... you will look in vain for anything that the Leave campaign said at any point that ever suggested there would ever be any kind of border closure or drawing up of the drawbridge."

In late July 2016, discussions were underway that might provide the UK with an exemption from the EU rules on refugees' freedom of movement for up to seven years. Senior UK government sources confirmed to The Observer that this was "certainly one of the ideas now on the table". If the discussions led to an agreement, the UK – though not an EU member – would also retain access to the single market but would be required to pay a significant annual contribution to the EU. According to The Daily Telegraph the news of this possibility caused a rift in the Conservative Party: "Tory MPs have reacted with fury .... [accusing European leaders of] ... failing to accept the public's decision to sever ties with the 28-member bloc last month."

According to CEP analysis of Labour Force Survey, immigrants in the UK are on average more educated than UK-born citizens. Citizens in the UK are concerned that immigrants are taking over their jobs since most immigrants are highly educated, however, they are actually helping the economy because they too consume goods, and produce jobs. Although immigrants to the UK help to mitigate the negative effects of the ageing British labour force and are believed to have an overall net positive fiscal effect, immigration does also have a dampening effect on wages due to the greater supply of labour. Theresa May believes that if immigration stops there will be no negotiation between the UK and the EU. While the process of dealing with Brexit continues there will be higher security from the UK in regulating who enters the UK, all of this to avoid new immigrants from staying in the UK. However, forecasts indicate that immigration flows to the UK will remain relatively high after Brexit.

Effect on trade and the economy

Prior to the referendum, the UK treasury estimated that being in the EU has a strong positive effect on trade and as a result the UK's trade would be worse off if it left the EU.

Supporters of withdrawal from the EU have argued that the cessation of net contributions to the EU would allow for some cuts to taxes or increases in government spending. However, Britain would still be required to make contributions to the EU budget if it opted to remain in the European Free Trade Area. The Institute for Fiscal Studies notes that the majority of forecasts of the impact of Brexit on the UK economy indicate that the government would be left with less money to spend even if it no longer had to pay into the EU.

On 15 June 2016, Vote Leave, the official Leave campaign, presented its roadmap to lay out what would happen if Britain left the EU. The blueprint suggested that Parliament would pass laws: Finance Bill to scrap VAT on tampons and household energy bills; Asylum and Immigration Control Bill to end the automatic right of EU citizens to enter Britain; National Health Service (Funding Target) Bill to get an extra 100 million pounds a week; European Union Law (Emergency Provisions) Bill; Free Trade Bill to start to negotiate its own deals with non-EU countries; and European Communities Act 1972 (Repeal) Bill to end the European Court of Justice's jurisdiction over Britain and stop making contributions to the EU budget.

European experts from the World Pensions Council (WPC) and the University of Bath have argued that, beyond short-lived market volatility, the long term economic prospects of Britain remain high, notably in terms of country attractiveness and foreign direct investment (FDI): "Country risk experts we spoke to are confident the UK's economy will remain robust in the event of an exit from the EU. 'The economic attractiveness of Britain will not go down and a trade war with London is in no one's interest,' says M Nicolas Firzli, director-general of the World Pensions Council (WPC) and advisory board member for the World Bank Global Infrastructure Facility [...] Bruce Morley, lecturer in economics at the University of Bath, goes further to suggest that the long-term benefits to the UK of leaving the Union, such as less regulation and more control over Britain's trade policy, could outweigh the short-term uncertainty observed in the [country risk] scores." The mooted importance of the UK's membership of the EU as a lure for Foreign Direct Investment (FDI) has long been stressed by supporters of the UK's continued involvement in the EU. In this view, foreign firms see the UK as a gateway to other EU markets, with the UK economy benefiting from its resulting attractiveness as a location for activity. The UK is certainly a major recipient of FDI. In 2014, it held the second largest stock of inward investment in the world, amounting to just over £1 trillion or almost 7% of the global total. This was more than double the 3% accounted for by Germany and France. On a per capita basis, the UK is the clear front-runner among major economies with a stock of FDI around three times larger than the level in other major European economies and 50% larger than in the US.

On 10 August the Institute for Fiscal Studies published a report funded by the Economic and Social Research Council which warned that Britain faced some very difficult choices as it couldn't retain the benefits of full EU membership whilst restricting EU migration. The IFS claimed the cost of reduced economic growth would cost the UK around £70 billion, more than the £8 billion savings in membership fees. It did not expect new trade deals to make up the difference.

On 5 January 2017, Andy Haldane, the Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England, admitted that forecasts predicting an economic downturn due to the referendum were inaccurate and noted strong market performance after the referendum.

Financial services

On 4 October 2016, the Financial Times assessed the potential effect of Brexit on banking. The City of London is world leading in financial services, especially in currency transactions including foreign exchange of euros. This position is enabled by the EU-wide "passporting" agreement for financial products. Should the passporting agreement expire in the event of a Brexit, the British financial service industry might lose up to 35,000 of its 1 million jobs, and the Treasury might lose 5 billion pounds annually in tax revenue. Indirect effects could increase these numbers to 71,000 job losses and 10 billion pounds of tax annually. The latter would correspond to about 2% of annual British tax revenue.

By July 2016 the Senate of Berlin had sent invitation letters encouraging UK-based start-ups to re-locate to Berlin. According to Anthony Browne of the British Banking Association, many major and minor banks may relocate outside the UK.

Effect on academic research

Despite a persistently low research intensity by EU standards – 1.63% of GDP in 2013, compared to an EU average of 2.02% –, the UK has a reputation for scientific excellence: it produces 15% of the world’s most highly cited articles for a share of just 4% of the global research pool.

Brexit proponents have suggested that the UK's future relationship with the EU should be modelled on Switzerland's relationship with the EU. Switzerland is not a member of the European Economic Area but a bilateral agreement with the EU allows it to take advantage of the main EU instruments in place for research, including the seven-year framework programmes for research and innovation, the Future and Emerging Technologies programme, the grants of the European Research Council and the Erasmus programme for student exchange. In return, Switzerland adheres to the four cornerstones of the EU's single market: the free movement of people, goods, services and capital.

The EU's structural funds will be out of reach for the UK, once it leaves the EU. Structural funds are increasingly being used to finance research-related infrastructure. The withdrawal from the EU might also incite international firms to scale down their plans to invest in research and development in the UK.

UK universities rely on the EU for around 16% of their total research funding and are disproportionately successful at winning EU-awarded research grants, as demonstrated by the example of the European Research Council. This has raised questions about how such funding would be impacted by a British exit. Jamie L Vernon, Editor in Chief of American Scientist, says that the equivalent of about $1 billion of Britain's scientific discovery has been paid for by European funding programmes every year and that these resources will now be called into question. "EU officials are calling for an immediate separation, and British academics are already being asked to withdraw from EU-funded projects or to resign from leadership roles". Scientists in favour of staying in the EU have also noted that membership allows researchers to move freely between member states and to work with no restrictions.

The impact of a Brexit on science and innovation will depend heavily on the post-withdrawal relationship between the UK and the EU. Were the UK to remain an associated member of the European Research Area, like Norway and Iceland, it would continue participating in the EU framework programmes for research and technological development. These are considered increasingly important in the UK for funding research, training PhDs and exchanging ideas and people. However, the co-operation agreement for each framework programme would have to be negotiated separately, especially if the UK, like Switzerland, were not a member of the European Economic Area.

St George's, University of London professor and UKIP campaigner Angus Dalgleish has argued that Britain paid much more into the EU research budget than it received, and that existing European collaborations such as CERN and the European Molecular Biology Laboratory (EMBL) began long before the Lisbon Treaty, adding that leaving the EU would not damage Britain's science. London School of Economics emeritus professor (and founder of UKIP) Alan Sked pointed out that non-EU countries such as Israel and Switzerland signed agreements with the EU in terms of the funding of collaborative research and projects. He also suggested that if Britain left the EU, Britain would be able to reach a similar agreement with the EU, and said that educated people and research bodies would easily find some financial arrangement during an at least 2-year transition period which was related to Article 50 of the Treaty of European Union (TEU).

The UK government promised that Horizon 2020 funding would be funded by the UK for their remaining duration after EU exit for UK researchers. A July 2016 investigation by The Guardian suggested a large number of research projects in a wide range of fields had been hit after the referendum result. They reported that European partners were reluctant to employ British researchers due to uncertainties over funding.

Scotland, Northern Ireland, London, and Gibraltar

The constitutional lawyer and retired German Supreme Court judge Udo Di Fabio has stated that separate negotiations of the EU institutions with London, Scotland or Northern Ireland would constitute a violation of the Lisbon Treaty, according to which the integrity of a member country is explicitly put under protection.

Before the referendum, leading figures with a range of opinions regarding Scottish independence suggested that in the event the UK as a whole voted to leave the EU but Scotland as a whole voted to remain, a second Scottish independence referendum might be precipitated. Former Labour Scottish First Minister Henry McLeish asserted that he would support Scottish independence under such circumstances. In 2013, Scotland exported around three and a half times more to the rest of the UK than to the rest of the EU. In 2015, Scotland exported around four times more to the rest of the UK than to the rest of the EU. The pro-union organisation Scotland in Union has suggested that an independent Scotland within the EU would face trade barriers with a post-Brexit UK and face additional costs for re-entry to the EU.

The majority of those living in London and Greater London voted for the UK to remain in the EU. Scottish First Minister Nicola Sturgeon said she had spoken to London Mayor Sadiq Khan about the possibility of remaining in the EU and said he shared that objective for London. A petition calling on Khan to declare London independent from the UK received tens of thousands of signatures. Supporters of London's independence argued that London should become a city-state similar to Singapore, while remaining within the EU. Khan admitted that complete independence was unrealistic, but demanded devolving more powers and autonomy for London.

In 2015, Chief Minister of Gibraltar Fabian Picardo suggested that Gibraltar would attempt to remain part of the EU in the event the UK voted to leave, but reaffirmed that, regardless of the result, the territory would remain British. In a letter to the UK Foreign Affairs Select Committee, he requested that Gibraltar be considered in negotiations post-Brexit. Spain's foreign minister José García-Margallo said Spain would seek talks on Gibraltar, whose status is disputed, the "very next day" after a British exit from the EU.

Borders with the Republic of Ireland and France

The Republic of Ireland, Northern Ireland and the United Kingdom as a whole share, since the 1920s, a Common Travel Area without border controls. According to statements by Theresa May and Enda Kenny, it is intended to maintain this arrangement. After Brexit, in order to prevent illegal migration across the open Northern Irish border into the United Kingdom, the Irish and British governments suggested in October 2016 a plan whereby British border controls would be applied to Irish ports and airports. This would prevent a "hard border" arising between the Republic of Ireland and Northern Ireland. However, this agreement has not been officially ratified and has met opposition by political parties in the Republic of Ireland and there is still great uncertainty in relation to a 'hard border' between the Republic and Northern Ireland. A referendum for the reunification of Ireland was suggested by Sinn Féin leader Martin McGuinness immediately after the UK EU referendum results were announced. Creating a border control system between Ireland and Northern Ireland could jeopardise the Good Friday Agreement established in 1998.

The President of the Regional Council of Hauts-de-France, Xavier Bertrand, stated in February 2016 that "If Britain leaves Europe, right away the border will leave Calais and go to Dover. We will not continue to guard the border for Britain if it's no longer in the European Union," indicating that the juxtaposed controls would end with a leave vote. French Finance Minister Emmanuel Macron also suggested the agreement would be "threatened" by a leave vote. These claims have been disputed, as the Le Touquet 2003 treaty enabling juxtaposed controls was not an EU treaty, and would not be legally void upon leaving.

After the Brexit vote, Xavier Bertrand asked François Hollande to renegotiate the Touquet agreement, which can be terminated by either party with two years' notice. Hollande rejected the suggestion, and said: "Calling into question the Touquet deal on the pretext that Britain has voted for Brexit and will have to start negotiations to leave the Union doesn't make sense." Bernard Cazeneuve, the French Interior Minister, confirmed there would be "no changes to the accord". He said: "The border at Calais is closed and will remain so."

Consequences of withdrawal for the EU

Shortly after the referendum, the German parliament published an analysis on the consequences of a Brexit on the EU and specifically on the economic and political situation of Germany. According to this, Britain is, after the United States and France, the third most important export market for German products. In total Germany exports goods and services to Britain worth about €120 billion annually, which is about 8% of German exports, with Germany achieving a trade surplus with Britain worth €36.3 billion (2014). Should there be a "hard Brexit", exports would be subject to WTO customs and tariffs. The trade weighted average tariff is 2.4%, but the tariff on automobiles, for instance, is 9.7%, so trade in automobiles would be particularly affected; this would also affect German automobile manufacturers with production plants in the United Kingdom. In total, 750,000 jobs in Germany depend upon export to Britain, while on the British side about three million jobs depend on export to the EU. The study emphasises however that the predictions on the economic effects of a Brexit are subject to significant uncertainty.

According to the Lisbon Treaty (2009), EU Council decisions made by qualified majority voting can only be blocked if at least 4 members of the Council form a blocking minority. This rule was originally developed to prevent the three most populous members (Germany, France, Britain) from dominating the EU Council. However, after a Brexit of the economically liberal British, the Germans and like-minded northern European countries (the Dutch, Scandinavians and Balts) would lose an ally and therefore also their blocking minority. Without this blocking minority, other EU states could overrule Germany and its allies in questions of EU budget discipline or the recruitment of German banks to guarantee deposits in troubled southern European banks.

With Brexit the EU would lose its second-largest economy, the country with the third-largest population and the financial centre of the world. Furthermore, the EU would lose its second-largest net contributor to the EU budget (2015: Germany €14.3 billion, United Kingdom €11.5 billion, France €5.5 billion).

Thus, the departure of Britain would result in an additional financial burden for the remaining net contributors unless the budget is reduced accordingly: Germany for example would have to pay an additional €4.5 billion for 2019 and again for 2020. In addition the UK would no longer be a shareholder in the European Investment Bank, in which only EU members can participate. Britain's share amounts to 16% which Britain would withdraw unless there is an EU treaty change. After a Brexit, the EU would lose its strongest military power, one of its two members that possess nuclear weapons and are permanent members of the United Nations Security Council.

A report by Tim Oliver of the German Institute for International and Security Affairs expanded analysis of what a British withdrawal could mean for the EU: the report argues a UK withdrawal "has the potential to fundamentally change the EU and European integration. On the one hand, a withdrawal could tip the EU towards protectionism, exacerbate existing divisions, or unleash centrifugal forces leading to the EU's unravelling. Alternatively, the EU could free itself of its most awkward member, making the EU easier to lead and more effective." Some authors also highlight the qualitative change in the nature of the EU membership after Brexit: "What the UK case has clearly shown in our view is that for the Union to be sustainable, membership needs to entail constant caretaking as far as individual members' contributions to the common good are concerned, with both rights and obligations."

As of 15 November 2016 the President of the European Parliament is considering moves to exclude British MEPs from key committee positions ahead of the exit talks. The President has written to the head of the conference of committee chairs asking him to gather information on how Britain's imminent departure will impact various EU documents passing through the parliament's committees. Among the issues that should be considered, the letter states, are the possible impact of the British departure on the legislative files currently under discussion in various committees, the impact if the files are not concluded before Britain leaves, and whether any of the files are likely to feature in the EU-UK withdrawal agreement.

There has been debate about whether other member states will seek to follow Britain's example in leaving the European Union. However, it has been argued that most member states have a greater dependence on the EU than Britain, and that the economies of many of the smaller countries would struggle greatly to survive outside of the EU.