The Big Picture – Britain votes to exit EU: Implications?

  • June 27, 2016
  • 8
The Big Picture- RSTV
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Britain Votes to Exit EU: Implications?


In an unexpected result and unprecedented event, UK has voted with 52-48% majority to leave European Union. The result of historic referendum was received with jubilation as well as deep disappointment. The British Pound and stock market collapsed steeply. Other currencies and stock markets have also become volatile.


Brexit= Britain’s Exit from the trading and political block, the European Union (EU)

The referendum was a part of British PM’s election campaign which was called upon to legitimise the acceptance of institution by its population. The population feared that EU was making infringement on Britain’s sovereignty and national interests on issues such as trade, immigration, labour regulation and social security.

Remain or Leave

The British population was put to vote to decide if they wanted to ‘Remain’ or ‘Leave’ the EU.

The result of the referendum went in favour of Brexit with 52-48% majority to leave European Union. On dissection of the votes, t was found that Scotland, Northern Ireland and London had voted ‘remain’ whereas England and Wales voted ‘Leave’. Also, senior citizens were ‘pro-leave’ to avail social security facilities whereas younger generations wanted to ‘remain’ as it opened up job and career opportunities pan-EU. Brexit has divided society, political parties, working class and families in UK. As a leading newspaper objectively put “Great Britain looks today like Little England”.

What prompted Brexit?

  • The elite British were benefiting the most from the EU whereas the working class, peasants, low and middle class were dissatisfied with Britain’s efforts to protect their interests.
  • The good economic performance of Britain had not percolated to all sections of society.
  • Also, people felt that Britain being largest contributor to EU, its wealth was being distributed to others without fulfilling their needs.
  • Xenophobia, anti-immigrant attitude fuelled the leave.
  • Eastern Europe addition– till 2004, UK had no problem with EU citizens as they had same income as other members. However, incorporation of eastern Europe which is comparatively poorer saw huge influx of one and a half million workers from Romania, Bulgaria, Poland in England.
  • In addition, the financial crisis of 2007-08 increased unemployment. Migrants were willing to take low paying jobs which further ballooned unemployment.
  • Thus, Migration was the main reason of referendum result. EU had free labour mobility and Britain being a country of migrants, witnessed more job chances to migrants who were productive as well as provided low-cost labour. Thus, citizens were threatened by insecure future
  • Perceived threat to culture- citizens felt that workers from eastern Europe who did not speak their language, nor played their sport neither had their culture were threatening the British values and identity.

Economic impact

  • The Brexit has triggered confusion amongst business and investor sentiments.
  • A top rating company has put UK at risk of credit downgrade due to wider anticipated economic instability.
  • Asian economies may be favoured over UK for low cost of production. However, Brexit is expected to trigger global economic ramifications.
  • Shrinking of British market- UK has 6 million population whereas EU market was of 582 million
  • Increased funds for infrastructure- EU and UK being different, separate infrastructure will be required.
  • High labour cost- The immigrants population will drastically reduce which will increase labour cost
  • No Schengen visa- EU population will have to take visa for UK.
  • Tumultuous short term future- Negotiations and re-negotiations are likely to damage growth, affect pound sterling and see less investments

Political Impact

  • British PM who voted ‘Remain’ will quit.
  • Either the Conservative party may choose another leader or General Elections may be conducted again
  • Scotland may go for second referendum to gain independence and remain a part of EU
  • UKIP- the anti-immigrant party of UK shall gain foothold in political establishment but it is yet gain majority in Parliament
  • In both labour and Conservative party, the rank and file did not support EU (as per reports)
  • Other EU countries may ask for referendum

Political lesson– Governments are accountable to their population. Previous leaders made promises of critical issues being put to vote but they never did. Treaties like Maastricht treaty, Treaty of Rome, Treaty of Lisbon are example. So, masses were never asked if it was acceptable to them.

Impact on India

  • Direct impact on currency as it will weaken against dollar
  • Indian-based companies and investments in UK will suffer direct negative impact.
  • Gateway to Europe being closed, huge trade costs to be occurred in dealing with EU separately.
  • Lower commodity prices, crude oil prices may help narrowing CAD
  • More investments done in safe options like gold. This has increased cash outflow and surged prices of gold
  • Decrease in FIIs
  • Not much impact on pharma industry as US is the bigger market

However, India is not expected to be too much impacted due to its deep foreign exchange reserves, a high growth rate, somewhat restrained inflation, a not significant current account deficit and fiscal discipline maintenance.

It is too early to comment on all economic, cultural, political bearings and thus, all the anticipations shall be evaluated in due course of time with political and economic developments in coming days.


With such wafer thin majority and divided interests, there are many future possibilities which include second referendum, not abiding by the referendum etc.  Scotland wants to remain in EU, and thus, there are high chances of it conducting another referendum for Scottish independence. The future of UK in itself has come into question. Other EU countries were interested in moving out like Greece. EU will have to toil hard to keep the trading and political union intact post Brexit.

Key words:

Labour party ideals– Government plays bigger role in life of people, reducing income inequality gap, more taxes to be paid for public good and public services, communities to promote respect for all and by all. (Left winged)

Conservative party ideal– Less government interference, more freedom to people and businesses, solve the issues of income inequality themselves, less taxation, upholding traditional culture. (free market tilt)

UK Independence party– A right winged populist party of UK which played a crucial role in Brexit by highlighting immigration issues.


India-EU relationship

EU referendum: the big questions for Britain (A detailed explanation)

Important Brexit articles from different dailies

India and Brexit

UK-EU deal

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