Monday, 10 Dec 2018
Business

Confused about Brexit? Here is what you need to know

The leaders of the United Kingdom and the European Union have agreed on the terms of Brexit. But this is not the end. Prime Minister Theresa May has to get approval from the British Parliament, where she faces an almost certain defeat. It does not say what it would do if its plan to exit the bloc was rejected, but this result would probably usher in a period of unprecedented political chaos. Here's a guide to what comes next – the most perilous part of Brexit.

1. What is the problem?

It is the most important international agreement concluded by Great Britain since the end of the Second World War. Negotiated over 17 months, the agreement sets the conditions for separation allowing the UK to leave the EU on March 29 in an orderly manner – and provides for a 21-month grace period to allow everyone to adjust. Alongside this, there is a political declaration that specifies that both parties want close economic and trade ties, even if the details will take years.

2. What would change under the agreement?

If the agreement is approved, nothing will change until January 2021, when a grace period ends. Even this could be extended for a year or two. Life in the UK will continue as before, with all EU rules in force – including the free movement of goods and people across borders – but the UK will only have more his say when making the rules. We do not yet know how much life will change radically after the transition period. This is because the details of the future relationship have yet to be solved. But as things stand, the free movement of people will come to an end and the UK will leave the single market of the EU. It means that the trade becomes more difficult. EU citizens who were already in Britain before Brexit will be able to stay and vice versa.

3. What happens next?

The agreement will be submitted to Parliament on December 11 – unless the government decides to postpone or withdraw the vote. There is opposition from all parties: Conservative Party Brexit supporters in May, EU Conservatives, Northern Ireland Party supporting the government and almost all of the opposition parties in the Labor Party. The main objection concerns the guarantees that May offered to ensure that a new physical border does not emerge on the island of Ireland, divided between the United Kingdom and the Republic of Ireland, which remains within of the EU. Critics say the promises may forever bind the UK to EU rules. They argue that it has yielded to the EU and betrayed the electorate's call to regain sovereignty, while treating Northern Ireland differently from the rest of the country.

4. What happens if Parliament votes no?

Things would become obscure. The Labor Party would push for a general election, but it is not clear that the party will succeed. The chaos that ensues would offer legislators the best opportunity to attempt to trigger a second referendum at a new meeting of the June 2016 vote in favor of the EU's exit. For the moment, Parliament does not have enough support for that, but that could change. May could be ousted by her own party, she could call an election or announce a series of measures in favor of a Brexit "without agreement" and refer the agreement to Parliament a second time. The cabinet could decide to adopt a new Brexit approach, with the goal of winning the majority of votes for an agreement in the House of Commons. This would almost certainly mean trying to maintain closer ties with the block. Investors are banking on the fact that May can do it after a second vote, possibly after an adverse market reaction.

5. What is a Brexit "No Compromise"?

If the agreement is rejected, Britain will withdraw without any agreement on March 29. This would leave the UK with no legal arrangement to regularize trade and other transactions with its neighbors, harassing cross-border trade and frozen markets. Choke bottlenecks could lead to shortages of everything from foods to drugs and manufacturing components. But this scenario is likely to become less likely as Parliament asserts itself more and more in an attempt to prevent it.

6. What will the EU do?

May could return to Brussels to try to extract what would probably be only symbolic concessions. A summit on 13 and 14 December, where she could plead her case to European leaders, but they made it clear that they did not want to reopen negotiations.

7. Can we be evicted?

Until now, the efforts to remove her as party leader and therefore prime minister have failed, but she would have a new impetus if she lost the confrontation with Parliament. The rebels need 48 of the 315 Conservative legislators to send letters calling for a vote, which should follow as soon as possible. A greater number of them – 158 – would then need to vote to replace it. This is different from the government's vote of no confidence in Parliament, which could pave the way for general elections.

To contact the reporter about this story: Emma Ross-Thomas in London at erossthomas@bloomberg.net

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Rosalind Mathieson at rmathieson3@bloomberg.net, Leah Harrison Singer, Steve Geimann

© 2018 Bloomberg L.P.

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