How did we get here?
The UK voted to leave the European Union on June 23rd 2016 by a majority of 51.9 to 48.1 per cent, with a turnout of just under 72 per cent. This set the UK on course to leave the EU, but left all the details of its exit still to be decided. The timetable was set the following March 29th, when British prime minister Theresa May took the formal step, required under EU law to start the exit process, of triggering Article 50 of the Lisbon Treaty. Under the two-year process the UK will leave the EU on March 29th, 2019. An extension to the exit period is possible if all 28 EU members agree. However negotiations have been taking place on the assumption that the UK leaves in March 2019.
The talks between the UK and EU started in June 2017 and so far have focused on the details of the UK’s withdrawal, which must be set down in a formal, legal agreement. Outline agreement has been reached on what the UK will pay the EU after departure – the so-called exit bill or divorce bill – and on the mutual recognition of the rights of UK citizens in the EU and EU citizens in the UK.
In November, agreement was also reached on a backstop for the Irish border, a way to provide a guarantee that there be no hard border on the island of Ireland no matter what future trade arrangements are agreed between the EU and UK. This cleared the way for a draft withdrawal agreement and final talks on a political declaration outlining the principles for future negotiations. This draft needs to be ratified politically by both sides.
Under the withdrawal agreement, a so-called transition period, a kind of standstill in current arrangements, would apply from March 2019 until December 2020, or 2022 if it is extended. This is to allow future trade arrangements and the wider ongoing relationship between the EU and UK to be negotiated. Read a full explainer on the transition period here) . The withdrawal agreement also contains a provision known as the backstop, but more on that later.
The key changes
For a country to leave the EU is unprecedented ‑ and the extent of the complications has slowly become evident in the last couple of years. EU membership is a central part of the economy and society of all its members and unscrambling this is very complex, before account is even taken of sketching out how the two sides will relate to each other in future.
Much of the discussion has been about the UK’s membership of the EU trading bloc. There are two elements to this. First, the UK is part of the EU customs union. This is a free trade area under which allows goods to circulate freely through the EU. Part of this is a commitment by all members to impose the same import tariffs – or taxes – on goods entering from outside the EU.
The UK is also part of the EU single market, the system of rules and regulations which allow free movement of goods, services, people and capital. Together, membership of the customs union and single market allows goods to move freely across the EU and also for free trade in services like banking. Common EU regulations also underpin trade in a host of different areas, for example pharmaceuticals and food.
The single market also allows free movement of people across the EU. The UK is also involved in common international policies co-ordinated at EU level, notably in foreign policy and defence and in trade deals with other countries.
The scenarios
Brexit talks between the UK and the EU are taking place in a sequenced order, which has led to no little confusion in the debate.
What has been agreed are the draft terms on which the UK leaves, contained in the withdrawal agreement. A political declaration on what the future relationship might look like has also been finalised. However, details of the future relationship between the EU and UK will be decided in talks after the UK actually leaves ‑ assuming the two sides are still talking.
In the short term the conclusion of the withdrawal agreement would mean that once the UK leaves in March 2019 a transition period, a kind of standstill, would commence and last until the end of 2020. The draft withdrawal agreement also suggests that this transition period could be extended until 2022. If the agreement is ratified and the transition period kicks in, not much will change on March 29th, except for the UK’s formal departure.
What’s a no-deal scenario?
If there is no withdrawal agreement, then the UK would leave the EU in a so-called “no-deal” Brexit in March 2019, which could be chaotic as barriers to trade would go up overnight and there would be uncertainties in areas ranging from aviation to pharmaceuticals to co-operation in nuclear regulation. There is speculation that the EU and UK would work together to try to avoid the worst of the chaos – though they could only do so much ‑ or even that there might be late moves to delay the UK’s exit date.
If a withdrawal agreement is finalised, then talks move on to how the two sides will relate in future in areas such as foreign policy, defence and security and, crucially for Ireland, trade. (Follow this link for an in-depth explainer on what a no-deal Brexitwould mean for Ireland)
Norway & Canada?
In terms of trade, the UK could have a close relationship with the EU – like Norway, which follows many EU rules and regulations and is in the single market – or have a free trade deal with the EU, like Canada. (Read our explainer on the Norway option)
The crunch point is that the EU insists that the UK must either be fully in the EU trading bloc and accept all the rules, or be out of it, and have a relationship similar to the EU and Canada. For the UK, the more closely aligned it remains with the EU, the less freedom it will have to set its own economic course after Brexit.
What's the Backstop?
The UK’s departure from the EU means Northern Ireland is leaving the bloc too so checks would be required along the 499-kilometre Irish Border as different trade rules would apply north and south after Brexit. The Border in Ireland will become the only land border between the UK and the EU after Brexit.
The 1998 Belfast Agreement laid the foundation for Northern Ireland’s peace process with many all-island rules and institutions. Neither side wants the return of border checks because of the risk to peace whereby a physical border infrastructure would be considered a potential target for paramilitaries.
The Backstop is an insurance policy that the EU and UK have agreed to include in the withdrawal agreement to avoid this happening. Both sides see it as a last resort to be triggered in the event of no better solution being found to avoid a hard border in a EU-UK trade deal. But there is a sequencing problem: a withdrawal treaty must be agreed before a trade deal, hence the need for the backstop first. (Follow this link for an in-depth explainer on the Border and the backstop)
The economic impact
The economic impact of Brexit is negative, for both the UK, Ireland and the rest of the EU. The biggest impact will be in the UK itself and in Ireland, its closest trading partner. For the UK, any trade arrangement reached after Brexit – barring full membership of the EU trading bloc, which the UK has ruled out – will be less favourable than current arrangements. Economists say that any new trade opportunities elsewhere will not make up for losses in trade with the EU. Weaker sterling since Brexit has already cut the purchasing power of UK consumers and uncertainty has hit investment, with growth estimated to be 1 to 2 per cent per annum lower over the couple of years.
For Ireland, growth remains strong and the main short-term impact has been via a weaker sterling exchange rate, which is good if you’re going to the UK to buy a second-hand car but bad if you’re an exporter to the UK market.
The main threat to Brexit comes from barriers to exports to the UK and also delays and higher prices for importers of UK goods to Ireland. Forecasters have estimated that in a harder version of Brexit, where the UK leaves the EU trading bloc, the Irish economy could be 4 to 7 per cent lower in a decade’s time, with most of the hit in the first five years. A no-deal Brexit means the economic effect would be more severe and happen more quickly
Key dates:
March 12th, 2019: Theresa May has scheduled a second “meaningful vote” on her Brexit deal for this date after the UK parliament rejected the withdrawal agreement brokered with the EU by 432 votes to 202 on January 15th.
March 13th, 2019: If May’s deal is rejected by British MPs, the House of Commons will be asked on this date if it supports leaving the EU without a deal on March 29th.
March 14th, 2019: If this vote is rejected, MPs will be asked to vote on a "short, limited extension" to the Article 50 process, delaying Brexit to no later than the end of June, May has said. The Irish Government is targeting the passage of the hard Brexit’ emergency legislation by the Oireachtas by this date.
11pm, March 29th, 2019: Brexit - the United Kingdom is scheduled to leave the European Union. If a deal is reached, the 21-month standstill transition period kicks in, maintaining the existing EU-UK relationship while both sides try to hammer out a future trading agreement.
June 30th, 2019: This is the date that May has said would be the latest date that the Brexit Article 50 process can be delayed until, if MPs reject her divorce deal in the March 12th vote, reject leaving the EU without a deal on March 13th and vote for an extension to Article 50 on March 14th.
July 1st, 2020: Under the draft Brexit agreement, the UK and EU can, before this date, request an extension to the transition period "of up to one or two years to the transition period".
December 31st, 2020: If the EU and UK have agreed a Brexit treaty and agree a future trading relationship, this is the earliest date by which the transition period will end.
December 31st, 2022: the date the EU’s chief negotiator has proposed extending the Brexit transition to in order to allow the EU and UK negotiate a trading deal. Under the withdrawal agreement this is the latest date on which the transition period can end. If it were extended until 2022 it would mean that the UK would stay within the single market and customs union for six and a half years after the Brexit vote.
