Blog Post

The day after Brexit: what do we know?

With the UK referendum on EU membership on 23 June, Europe is contemplating the practical consequences of a vote to leave.

By: Date: June 22, 2016 European Macroeconomics & Governance Tags & Topics

Article 50 of the Treaty of the European Union (December 2009) sets out the procedural requirements for a member state to terminate its membership. Legal withdrawal would mean that EU Treaties and their Protocols would no longer apply, and EU financial programmes would be phased out.

If the UK votes to leave the EU on Thursday, legal experts at the UK’s Constitution Society argue that the result will not immediately have a binding legal effect. The UK government would need to launch a proposal to activate Article 50, and according to the lawyers at the Constitution Society this proposal would have to pass through Parliament. Once this proposal had passed, the UK could then formally notify the EU of its intention to withdraw.

Brexit-flowchart

What would Brexit mean for the EU budget?

The UK enjoys a special reduction in its contribution to the EU budget, known as the rebate. Even after this, the UK is the fourth largest net contributor (after Germany, France and Italy). In 2014, after application of its rebate, the UK contributed £13 billion to the total EU budget of £118.9 billion. This was 0.52% of its Gross National Income (GNI). However, out of that £13 billion, the UK received back around £4 billion in “public sector receipts” —mostly as subsidies to its agricultural sector. Therefore, if the UK votes to leave the EU, there will be consequences for the EU budget in both size and distribution. But the overall impact would depend on the agreement reached between the EU and the UK.

What are the UK’s capital contributions to the European Central Bank?

The national central banks of euro-area states have made capital contributions to the ECB amounting to €7.6 billion. Meanwhile, non-euro area central banks contribute €120 million to the ECB, of which the UK contributes €55 million. The nine non-euro area central banks are not entitled to receive any shares of profits, nor are they liable to fund any losses that the ECB incurs. However, the UK and other non-euro area central banks are required to contribute to the ECB’s operational costs by paying at least 3.75% of their subscribed capital. This means that the UK’s contribution to the ECB is tiny, and it should be easy to disentangle it.

What would happen to EU regulations in the UK?

An immense body of EU legislation has accrued during the 40 years of UK membership, which is both directly and indirectly applicable to the UK. The UK Government estimates that 50% of  UK legislation with a significant economic impact comes from the EU legislation. In the event of an exit, the UK would possibly need to re-examine the entire body of EU law to determine just how much influence EU legislation has had on UK domestic law. There are 6,987 directly applicable EU regulations, at least some of which would need to be replaced by equivalent UK laws.

How long do trade negotiations take?

The EU currently has Preferential Trade Agreements (PTAs) with 52 countries and is negotiating trade agreements with another 72 countries. If the UK exits it will need to renegotiate with the EU and with 124 other countries to redefine its own trade status (Huettl and Merler, 2016).

Moser and Rose (2012) estimate the average duration of trade negotiations (length of time from the start of talks to its application) for 88 regional trade agreements between 1988 and 2009. The authors conclude that regional trade agreements take 28 months on average. The EU experience is quite varied. The EU is currently in the midst of major trade negotiations with the US which started in 2013. It started negotiations with Canada in 2009, Japan in 2012 and India in 2007, which have not been concluded. Trade negotiations indeed take long to conclude.

What could happen to UK and EU migrants?

5.2 million people born in the UK are living outside the UK, of which 1.3 million are living in another EU member state. On the other hand, 8.3 million people born overseas are living in the UK and 3 million of these people come from another EU member state.

By the end of 2015, migration from the other 27 EU countries to the UK reached the same level as migration from the rest of the world to the UK. Conversely, around 300,000 UK nationals live in Spain, followed by Ireland with 250,000 and France 180,000.

If UK votes to exit the EU, UK citizens will no longer have EU citizenship status, as the status was created by EU Treaties. However, unlike the status, the rights derived from the EU citizenship are harder to determine, such as the rights to reside and terms of access to public services in the residing country. The rights that EU migrants enjoy in the UK and similarly the rights of UK migrants living in the EU will depend on the nature of the withdrawal negotiations and the final agreement.

Note: The original version of the article included an infographic with some small errors. This has now been corrected and updated.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article More on this topic More by this author

Blog Post

Silvia Merler

The economic effects of migration

What’s at stake: migration is currently a very hot topic in both the US and the EU. Immigration issues have come to the forefront due to the problem of rapidly ageing populations, the refugee crisis, and growing anti-immigration political rhetoric. But what do we know about the economic effects of migration?

By: Silvia Merler Topic: European Macroeconomics & Governance Date: January 16, 2017
Read article More on this topic More by this author

Blog Post

Marek Dabrowski

How to balance sovereignty and integration in a voluntary EU

The principle of voluntary membership is a central value of the EU project, but it is also a source of many of its problems. How can the member states address those problems in order to repair the EU's integration architecture?

By: Marek Dabrowski Topic: European Macroeconomics & Governance Date: January 12, 2017
Read about event More on this topic

Past Event

Past Event

Can migration work for all in Europe?

On 9 January Bruegel together with the IMF organized a conference on migration and whether it can work for all in Europe.

Speakers: Michał Boni, Gianpiero Dalla Zuanna, Maria Demertzis, Samuel Engblom, Antje Gerstein, Anna Ilyina, David Lipton, Stefano Scarpetta, Alessandra Venturini and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: January 9, 2017
Read article More on this topic

Blog Post

dsc_0809
dsc_1000

The impact of Brexit on Northern Ireland: a first look

Following the proposal from the Scottish Government that Scotland remain in the Single Market, the differing “Brexpectations” of the UK’s four constituent countries are once again back in the news. Scotland is getting a lot of attention in the Brexit debate, but Northern Ireland is an equally interesting case.

By: Filippo Biondi and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: December 22, 2016
Read article More on this topic

Blog Post

Alicia García-Herrero
DSC_0160

Is the UK’s role in the European supply chain at risk?

Will tge UK’s engagement in European supply chains be at risk once the UK exits the EU?

By: Alicia García-Herrero and Jianwei Xu Topic: European Macroeconomics & Governance Date: December 20, 2016
Read article More on this topic More by this author

External Publication

9781785369315-thumb

EU economic governance: euro area periphery lessons for Central and Eastern European countries

An analysis of macroecnomic developments shows that Central and Eastern European (CEE) EU member states fared much better in the aftermath of the crisis compared to euro-area periphery countries. Furthermore, they have a better chance to avoid the problems that the euro-periphery countries faced before the crisis.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: December 9, 2016
Read article More on this topic

Blog Post

Alicia García-Herrero
DSC_0160

UK-China agreement on trade in services is no substitute for a UK-EU deal

The UK government has high hopes that new trade deals with non-EU states will offer an economic boost after Brexit. But how likely is this to materialise? The authors show that a FTA with China is unlikely to offer much to the UK's prominent services sector. Strong links with the EU will remain vital.

By: Alicia García-Herrero and Jianwei Xu Topic: Global Economics & Governance Date: December 6, 2016
Read about event More on this topic

Past Event

Past Event

Labour mobility after Brexit

What will Brexit mean for the free movement of workers between the UK and the EU?

Speakers: Lindsey Barras, Zsolt Darvas, Jonathan Portes and Klaus F. Zimmermann Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: December 2, 2016
Read about event More on this topic

Past Event

Past Event

Vision Europe Summit 2016

The 2016 Vision Europe Summit is titled "Redesigning European Migration and Refugee Policy" and will be held in Lisbon on 21-22 November 2016.

Topic: European Macroeconomics & Governance Location: Lisbon Date: November 21, 2016
Read article More on this topic More by this author

Blog Post

Schoenmaker pic

Stealing London’s financial crown would bring both benefits and responsibilities

After Brexit, several major cities across the EU27 are looking to take over London's financial activity. While there are plenty of benefits in hosting a major financial centre, it also comes with significant risks and responsibilities.

By: Dirk Schoenmaker Topic: Finance & Financial Regulation Date: November 17, 2016
Read article More on this topic

Blog Post

Giuseppe Porcaro
hsbeziyq

Tweeting Brexit: Narrative building and sentiment analysis

Public discourse on social media was already in favour of Brexit by early summer 2015, and stayed that way until the referendum. An analysis of more than 890 000 tweets posted since 2012 reveals clear trends in the mood of online discussion. Our new methodology captures something that betting odds and opinion polls were not able to reveal – but will it be useful in future elections?

By: Giuseppe Porcaro and Henrik Müller Topic: European Macroeconomics & Governance Date: November 16, 2016
Read article More on this topic More by this author

Blog Post

Silvia Merler

Brexit and the law

What’s at stake: last week, the UK High Court ruled that the triggering of Article 50 - and therefore the Brexit process - should involve the UK Parliament. The Government will appeal the decision but this has created a new wave of uncertainty about the timing of Brexit, and on what this involvement can mean in practice. We review the different opinions.

By: Silvia Merler Topic: European Macroeconomics & Governance Date: November 14, 2016
Load more posts