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5 Things You Must Know About Brexit; What Happens Now, Who Suffers? (Clue, We All Suffer!)

The Vote Leave campaign pandered to little Englander’s fears about immigration and being controlled by an unelected Brussels elite. The Remain camp launched the divisive “Project Fear”, warning of the disastrous consequences of a Brexit, but forgetting to explain what the EU actually does.

It was depressing fare from both sides, and nobody, on either side, seems to be capable of drawing up a contingency plan now that the unexpected has happened.

Let’s try to answer 5 obvious questions about what happens now. Does anybody have anything coherent to say about the path ahead (and whether it’s too late to change direction)? Read the below and follow the links for considered opinion…

Is the result of the referendum legally binding? (No, not yet!)

What has happened is that there has been a referendum, the purpose of which was to discover if the British people wished to remain a part of the EU, or if they wished instead to leave the Union.

Now that the British public have “spoken”, it is the government’s responsibility to carry out their wishes. But they are not legally obliged to do so – they could defy the public and refuse to leave.

In truth, that is extremely unlikely to happen as it would destroy the public’s (well, 51.9% of the public’s) faith in them as the government would be reneging on a promise to respect the results of a referendum.

But it is worth noting that no formal request to leave the EU has been made yet. This would involve invoking article 50 of the Lisbon treaty, which governs how a country would, in theory since it has never happened before, exit the bloc.

David Cameron has so far refused to do it, despite repeatedly saying in the lead up to the vote that he would do so immediately in the event of a leave vote. That means Cameron’s successor would be the one to “push the button”, but nobody actually knows who that will be, it is at least 3 months away, and, given the growing consensus (or is it just Remain propaganda?) that the referendum vote has gone the wrong way and should be reversed, will Cameron’s replacement want to begin their reign by making such a divisive, controversial call?

Post referendum, the EU seem impatient for the UK to get the ball rolling, invoke the clause and begin the 2 year exit process (if it should take more than 2 years the UK risks leaving with no deals in place). But even Boris Johnson and Michael Gove, who led the “leave” campaign, are dragging their heels and saying there is no rush. It’s almost as if they didn’t believe they could win and don’t know what to do next…

It has been widely reported on the continent that the Article will be invoked (nothing has to be issued in writing, only a formal statement made) by Cameron this evening when he hosts an EU summit dinner. But if it isn’t, then there is not a great deal anybody can do.

There will remain the bald fact that the UK has expressed its wish to leave via a referendum, but no wheels have been set into motion, and in theory, the standoff could continue indefinitely. As things stand, Britain remains a part of the EU, it’s just that it has had a rather high profile discussion about whether or not it should be, and that, to say the least, has put a few noses out of joint.

2. What happens to EU workers currently residing and working in Britain?

There are more than 3 million EU migrant workers currently living in the UK. The Leave campaign has stated that new rules around immigration will not apply to anyone currently resident in the country, and the same presumably goes for to Britain’s 2 million expats. Their rights are protected by the Vienna convention, the Leave campaigners have said.

The remain camp disagree however, and suggest that current residents are likely to have to reapply for residency, and that the requirements will be much more draconian. The truth is, that with acquired rights such as right to residence, to work, run a business or own a property, or even to remain in the country after retirement, no longer guaranteed by EU membership, anything could happen.

The Vienna convention has also been criticised and called a “red herring”, as it applies to states and not individuals. An option that is becoming increasingly popular is to apply for a separate passport.

Currently Britain operates a “Tier 2” system for visa applicants which takes into account fluency in English and other such factors, and is similar to Australia’s controversial points based system. After 5 years’ visa holders can apply to become permanent residents, but reams of supporting documentation are required.

Again, the answer as to what will happen will all depend on the outcome of negotiations with the EU after Article 50 has been invoked, but it is hardly reassuring for the country’s 3m migrant workers to be left in a state of such limbo.

What will Brexit mean for net migration into the country?

EU migration now makes up nearly 50% of all non-British immigration into the UK. This figure has crept up in recent years as previously most immigration was from non-EU countries. Net migration is currently at a high level (nearly 200,000) compared to previous years / decades, and this is cited as one of the main issues that has triggered a “leave” vote.

But in fact there is no guarantee that Brexit will reduce overall migration, mainly because nobody knows what rules will be brought in to replace the current system. There seems to be 2 likely outcomes.

Firstly, like Switzerland or Norway has done, the UK could negotiate some kind of agreement that allows for the free movement of EU citizens based on co-operation agreements, so not a great deal would have to change. This seems like a sensible / the least worst option, although those who voted Leave in order to try to control the migration of EU citizens may feel aggrieved, as they will not get what they thought they were voting for.

The other likely alternative is that Britain treats EU citizens the same as it treats non EU citizens migrating to the UK. That means student visa holders would have to apply for a work or family visa after they left their university, and other citizens would have to qualify on work or family unification grounds.

Currently, non-EU workers must be sponsored by a company for a skilled job that pays at least £20,800 per year, but there is a cap on skilled work visas meaning the figure can fluctuate and go as high as £46,000. This would be a tricky obstacle for new EU member states who tend to apply for unskilled jobs.

In the short term, migration may well increase as migrant workers’ target entering the country before Brexit happens, to take advantage of the more favourable regulations. The government has repeatedly said that it wants to reduce net migration to the “tens of thousands”, but the figure is currently around 196,000 per annum.

Without being able to rely on skilled or unskilled migrant workers from the EU, there is also a possibility that illegal immigration will become more common, as firms look to replace the cheap labour force they have lost through Brexit.

How will Brexit affect the startup scene in Britain / London?

The multinational nature of the London tech startup scene has long been a source of pride to its members, not to mention one of its greatest strengths.

LONDON, UNITED KINGDOM - AUGUST 30, 2014: Fashionable visitors entering the outdoor Shoreditch Food Village in the hip district of Hackney in London's East End.

Shoreditch thrives on migrant talent which brings variety, skills and talent – but can it survive 2 years’ of Brexit negotiations? It can if it takes a lead role.

The consensus is that there simply isn’t a deep enough talent pool in the UK for companies to create the kind of technical teams they need to be competitive, and because tech companies by their very nature tend to be borderless, accessible from anywhere, and generally target foreign markets in conjunction with their domestic one, if skilled migrant workers are prevented from living and working in the UK, UK based companies will lose vital knowhow about target markets and lose ground on their foreign competitors.

Not only that, but the US, which has generally considered the UK and London as their preferred “beachhead”, from which to launch their businesses into Europe, may begin to think otherwise. Why bother with London when Paris, Lisbon, Berlin and other European cities attract the best talent and provide better access to target markets?

And how easy will it be to trade with Europe – the short answer is, not as easy as it is now. Plus, attracting investment from European VCs just got harder. So did maintaining a technical team in Portugal, Romania, or Lithuania.

There have been whispers about replacing STEM talent from the EU with non-EU migrants, from South East Asia, China, India, Africa, who, under current EU rules, are harder to hire because EU applicants had to be prioritised until a certain quota was met. There has also been talk that a Brexit could even empower FinTech firms, who had allegedly been suffering at the hands of sluggish decision making in Brussels, and also, given that the lending powers of high street banks may be curbed by a Brexit, may find themselves with a larger customer base.

Finally, it is worth pointing out that some of Europe’s most celebrated tech companies and hubs can be found outside of the EU. Norway’s fledgling but growing startup scene, Skype in Estonia, for example are based outside the EU. Slim pickings, perhaps – Tech City was essentially a Europhile organisation and will have to make sure they play an active role in exit negotiations.

So although the long term future of “Tech City”, the “Silicon Roundabout” and the many tech hubs around Britain are under threat from Brexit, the only thing we can say with certainty is that in 5 years’ time, for better or worse, the tech scene in Britain may look very different. Then again, it may not. It all depends, again, on what kind of deal is negotiated in the 2 years after article 50 is invoked. Here is what the “experts” are saying.

How will Brexit affect businesses dealings with the rest of the EU?

This was one of the issues that led to a referendum in the first place. Was Britain getting a satisfactory deal from the EU, or were bureaucrats in Brussels making it harder for the UK to trade with the rest of Europe?

One of the toughest aspects of Brexit negotiations will be the short timeframe of just 2 years that Britain will have in which to negotiate new trade deals.

It’s possible that the EU will ask Britain to pay tariffs on any goods that it exports into the EU, which could have potentially disastrous consequences for our motor industry (8 out of 10 cars built in Britain are sold overseas), and any other export led industries, tech being one.

The UK will not be obliged to make separate deals with the 27 remaining members of the EU (although by the time we officially leave, Turkey, Montenegro, Serbia and others may have joined the Union), but one single deal with the EU that covers all of its member countries.

Whatever deal is struck, it’s likely that the banking sector will suffer as it will no longer have the right to “passport” its services into EU countries, which is likely to lead to a diminished role. Banks would not be able to sell products denominated in euros, for example, unless they become part of the European Economic Area, which can only be done by accepting freedom of movement (which sounds like a win-win for moderate, less xenophobic Brexiteers.)

startup business people group working everyday job at modern office

Talented coders and developers are in high demand and will go where they feel most welcome; is London facing a brain drain as EU migrant workers look elsewhere, or will we see a short term surge in numbers to try to gain residency before Brexit takes effect?

Conclusion

If voting to leave the EU was an emotive decision, expressing a rejection of Europe, a desire to “go it alone” and “claim our country back”, then we are in trouble. Britain faces 2 years of furious, fraught negotiations and if this is not done correctly and sensibly, the EU has the power to make Britain suffer.

If, on the other hand, a Brexit is an attempt to revitalise the country, negotiate better, more relevant trade deals which benefit Europe and benefit Britain, and find a solution that maintains close ties to Europe whilst giving Britain a freer hand at the negotiating table, well, things are still likely to be tough, but there is hope.

Europe is hurting, and the road ahead looks daunting. Politicians who made outrageous promises in the lead up to the referendum are already backtracking. New leaders will have to step up to the plate, or Britain will become even more divided. Perhaps a new government, a new PM, and a second referendum really is the best way out of this mess. Either that, or somebody needs to start making some sense, and fast.

 

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