The politics and economics of Brexit

Brexit may dominate in the UK but it is just one of several challenges to governance and integration facing the EU

The British referendum on continuing membership of the European Union (EU) in June 2016 represented a turning point in the relationship between the United Kingdom (UK) and the EU. In March 2017, the British government under Prime Minister Theresa May invoked Article 50 of the Treaty on European Union, officially beginning the negotiations for the UK’s withdrawal from the EU – the Brexit process.  In the first stage of Brexit negotiations, the main issues discussed were: the UK’s contribution to the EU budget, the winding down of spending programmes in the UK and the division of assets and pension liabilities; the acquired rights, healthcare and other social obligations for EU nationals living in the UK, and UK nationals living in EU, and border arrangements concerning Northern Ireland and Gibraltar. In December 2017, the negotiations were deemed to have made sufficient progress to move ahead with the second stage concerning future relations between the UK and the EU. Specifically, the issues to be discussed in the second stage were: the terms of any free trade/customs agreement between the UK and the EU, and the transition period. Agreement on the latter was agreed in March 2018 such that the transition will last from ‘Brexit day’ (29 March 2019) until the end of December 2020. The negotiations on future relations between the UK and the EU are ongoing.

The economic and political effects of Brexit are far-reaching for the UK and the EU. We recently guest edited a special issue of the Journal of European Public Policy on ‘The Politics and Economics of Brexit’ which investigates the implications of Brexit for the EU and the UK, placing this assessment in the context of the long-term evolution of Britain’s relations with the EU. It also draws some lessons from Brexit, relating it to long-standing debates within the literature on EU policy-making, comparative politics and political economy.

The articles in the first part of the special issue explore the implications of Brexit for key policy areas, namely the single market, finance and immigration. Specifically, the article by Kenenth Armstrong asks to what extent the UK regulatory policy will align with, or diverge from EU policy after Brexit, especially in the medium and long term. It cautions against assumptions that the dynamics of UK regulatory policy post-membership are reducible solely to EU influences because the global regulatory context will mediate EU influence over UK policy. The article by David Howarth and Lucia Quaglia investigates the ‘battle for finance’ in the context of Brexit, finding limited evidence of the formation of cross-national alliances in favour of the UK retaining broad access to the Single Market in financial services. By contrast, the main financial centres in the EU and their national authorities have competed to lure financial business away from the UK. The article by James Dennison and Andrew Geddes discusses immigration policy in the context of Brexit, arguing that Brexit exposed the debate about immigration to wider public scrutiny and, by doing so, raised important questions about the future shape of the British economy and the political model underpinning it.

The articles in the second part of the special issue explore important ‘horizontal’ or thematic issues, namely lessons from Brexit for theories of integration, the balance of power in the EU amongst the main member states post-Brexit, the evolution of the domestic political contestation in the EU, and the impact of Brexit on domestic politics in the UK. The article by Frank Schimmelfennig uses the theory of post functionalism to examine the process of differentiated disintegration, meaning the selective reduction of a member state’s level and scope of integration, triggered by Brexit. The article by Ulrich Krotz and Joachim Schild discusses Franco-German relations in the context of Brexit, outlining three basic future scenarios for the EU: German hegemony; the disintegration of the European project; or a rejuvenated Franco-German relationship as the EU’s engine. The outcome will partly depend on the strengthening of Germany’s relative standing and France’s ability to reform its economy. The article by Paul Taggart and Aleks Szczerbiak examines the sources of party based Euoscepticism across the EU, arguing that the sovereign debt crisis in the euro area had powerful effects in the party systems of those countries most affected by the bailout packages in the euro area periphery, whereas the migration crisis had a strong effect on party politics in the post-communist states of central Europe. By contrast, Brexit has had a very limited impact on national party politics in the EU-27 so far. Finally, Andrew Gamble explores the pathologies of British politics in the Brexit era, arguing that Brexit has brought about a rise of populism, some re-alignment of political parties, de-stabilised the territorial integrity of the UK and raised questions about the future of its foreign policy. Depending on the terms of Brexit, it may bring about significant economic change, too.

The UK’s Brexit negotiations come at a challenging time for the EU. The Eurozone and migration crises have not reached definitive resolution. The ‘rule of law’ challenges in Hungary and Poland pose questions around the EU’s core values. The rise of populist Euroscepticism has arguably made the EU and its policies more politicised than ever before. President Donald Trump is threatening trade sanctions. In different ways he and his Russian counterpart President Putin are challenging the view of the international order that the EU represents. The UK’s departure may remove one semi-detached member from the EU but Brexit is but one of several challenges to EU governance and integration that will be under scrutiny from EU scholars over the coming months and years.