Britain reveals Brexit plan: What is 'hard Brexit' and what's next?
LONDON — Britain's Prime Minister finally laid out her plans for Brexit Tuesday, nearly seven months after the shock U.K. vote to quit the European Union (EU).
Theresa May, who came to power after the referendum result prompted the resignation of her predecessor David Cameron, said Britain will seek a so-called 'hard Brexit' — meaning the U.K. wants to quit the EU completely, along with the associated single market for goods.
The European single market affords preferential rates between EU member states, something many in Britain saw as a key benefit of the trading bloc. However, it also requires the free movement of citizens across EU borders, leading to high levels of immigration. Populist concern over immigration was successfully exploited by the "Leave" campaign.
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In a major speech, May said Britain will seek a clean break and not "anything that leaves us half-in, half-out." Britain won't "hold on to bits of membership," nor seek associate or partial membership of the bloc, she said.
The European Court of Justice was also a pinch point for many voters because it has the power to overrule decisions made in the courts of member states. May announced Britain would cease to recognize its authority as part of Brexit.
So what is happening now, and what's next?
Hasn't Brexit begun already?
No. Britain hasn't formally invoked Article 50 of the Lisbon Treaty, a kind of divorce clause that allows countries to leave the 28-member bloc.
Prime Minister Theresa May has promised she'll do so by the end of March, which gives her fewer than 80 days in which to act. (There is a countdown.)
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Article 50 triggers a negotiation period of up to two years in which Britain must agree on the terms of its withdrawal with the remaining 27 countries. During this time, Britain will no longer be able to take part in EU discussions. Article 50 is effectively also a point of no return for Britain because the process cannot be reversed or abandoned without the unanimous agreement of now-antagonized EU states.
Isn't there a legal challenge?
Yes. A court ruled in November that May's government needs the assent of lawmakers in the House of Commons before invoking Article 50.
The government disagreed, arguing that it can use executive powers, and launched an appeal. However, May signaled Tuesday that a final Brexit deal would be voted on by both chambers of Britain's parliament, the House of Commons and the House of Lords.
How long will Brexit take?
While the Article 50 negotiations must be completed within two years — giving May until Spring 2019 to reach a deal — experts are warning that the complexity of establishing alternative trade deals with dozens of countries could take many times longer.
Former cabinet secretary Gus O'Donnell told the BBC that negotiating a final deal would take "at least five years," adding: "We certainly won't have come to any final arrangements in two years' time."
Britain's ambassador to the EU, who earlier this month quit in frustration at what he called the "muddled thinking" of government ministers, believes a final deal might not be done until the early to mid-2020s. In his leaked resignation letter, Ivan Rogers warned: Serious multilateral negotiating experience is in short supply in [London] and that is not the case in [Europe]."
Why should Brexit matter to Americans?
Billions, if not trillions, of U.S. dollars could be called into question by a British exit, CNBC has reported. American direct investment into the EU totaled about 1.81 trillion euros in 2014, and about 1.99 trillion euros flowed in the opposite direction, according to the European Commission. Even a small disruption to that could have a significant impact on trade.
Related: Rising Populism Echoes Nazis: Prince Charles
As Britain realigns its international relationships, there could also be major implications for America's biggest military ally in NATO, and for London-Washington relations.
Tim Oliver, Dahrendorf Fellow on Europe-North America Relations at the London School of Economics, says there are parallels between the unprecedented politics of President-elect Donald Trump and the uncertainty of Britain's Brexit adventure.
"There are similarities between what happens with Trump and what is happening over Brexit — the rise of populism and people voting for an agenda that isn't necessarily realistic but has been sold to them through a mix of messages that sound realistic," he told NBC News. "As with Trump, the real test with Brexit will be in six months when it has to deliver.
"People are trying to figure out what they're going to get with Trump. An outward-looking, globalized Republican view? He's something of a nationalist but also a businessman and knows you can't just shut down free trade. Likewise, Britain also has to figure out what it wants and what it can realistically achieve."
On Monday, Trump told Britain's The Times newspaper that he will offer the U.K. a quick and fair trade deal with America within weeks of taking office to help make Brexit a "great thing."
What type of Brexit does Britain want?
Aside from Greenland in 1985, no country has left the modern-day EU so there is no precedent for Britain's withdrawal. Nor, it turns out, do pro-Brexit campaigners have a unanimous view on what should happen next.
Referendum voters were given a simple binary choice of whether they wanted to remain in the European Union or leave, so there is no political mandate for what Britain's future relationship with Europe should look like.
One of the biggest hurdles is the future status of about 3 million citizens of EU states living in Britain thanks to free cross-border labor movement — mostly Irish and economic migrants from Poland, Romania and Portugal. In addition, just under 1.2 million British nationals live elsewhere in the EU, mostly Spain.
Related: Brexit, What Brexit? Londoners Focus on the Bright Side
Until now, May has repeatedly refused to spell out Britain's next move, saying to do so would weaken its hand in negotiations. She has reportedly not even told the queen, who holds weekly private meetings with prime ministers, what the plans are. "Brexit means Brexit" has been May's refrain, signaling only that she won't change her mind on the referendum result.
"That it's a bit like telling a toddler 'bedtime means bedtime,'" said Oliver. "Eventually you have to define what that means. And right now the government is still trying to figure out the process, never mind the policy."
What is a 'Hard Brexit'?
Also known as "Clean Brexit" or "Black Brexit" — it means the U.K. will break completely with the EU, the European Court of Justice and the single market.
May's preferred strategy will see the Britain negotiate new trade deals, or it will have to fall back on basic trade tariffs set by the World Trade Organization.
It would also mean the loss of free cross-border movement to Britain for EU citizens. However, May said EU citizens will "still be welcome" in the U.K. after Brexit.
"Brexit must mean control of the number of people who come to Britain from Europe — and that is what we will deliver," May said.
May's announcement will disappoint pro-EU campaigners who had hoped for a "Soft Brexit" — also known as "White Brexit" — in which the U.K. quit the EU but retained access to the single market. This would have put Britain in a similar situation to Norway.
However, May did say she would seek a customs agreement with the EU.
When can we expect the economic consequences?
Britain's pound sterling rallied during May's speech, in which she repeatedly emphasized that Britain was open to news global trade opportunities.
Forecasts on the longer-term effects are bitterly contested and the true impact is unlikely to be known until well after the terms of any future deal are known.
A Financial Times survey of 122 economists found the majority believe that U.K. economic growth will slow markedly in 2017 and household incomes will be squeezed by higher inflation because of Brexit uncertainty.
There are also fears big financial firms could relocate to the rest of the EU to protect access to the single market. In December, insurance market Lloyd's of London said it would begin moving some of its operations to the rest of the EU and Anthony Browne, head of the British Bankers' Association, said bankers' hands were "quivering over the relocate button."
Pro-Brexit lobby group Change for Britain says a "Hard Brexit" could create 400,000 new jobs and save the country $30bn a year through new trade deals and improved exports, which have already risen. However, a former senior government economist said those claims were "total junk" and noted that, since Brexit, "production of fictional statistics is up 579%."
"There are similarities between what happens with Trump and what is happening over Brexit — the rise of populism and people voting for an agenda that isn't necessarily realistic but has been sold to them through a mix of messages that sound realistic," he told NBC News. "As with Trump, the real test with Brexit will be in six months when it has to deliver.
"People are trying to figure out what they're going to get with Trump. An outward-looking, globalized Republican view? He's something of a nationalist but also a businessman and knows you can't just shut down free trade. Likewise, Britain also has to figure out what it wants and what it can realistically achieve."
On Monday, Trump told Britain's The Times newspaper that he will offer the U.K. a quick and fair trade deal with America within weeks of taking office to help make Brexit a "great thing."
What type of Brexit does Britain want?
Aside from Greenland in 1985, no country has left the modern-day EU so there is no precedent for Britain's withdrawal. Nor, it turns out, do pro-Brexit campaigners have a unanimous view on what should happen next.
Referendum voters were given a simple binary choice of whether they wanted to remain in the European Union or leave, so there is no political mandate for what Britain's future relationship with Europe should look like.
One of the biggest hurdles is the future status of about 3 million citizens of EU states living in Britain thanks to free cross-border labor movement — mostly Irish and economic migrants from Poland, Romania and Portugal. In addition, just under 1.2 million British nationals live elsewhere in the EU, mostly Spain.
Related: Brexit, What Brexit? Londoners Focus on the Bright Side
Until now, May has repeatedly refused to spell out Britain's next move, saying to do so would weaken its hand in negotiations. She has reportedly not even told the queen, who holds weekly private meetings with prime ministers, what the plans are. "Brexit means Brexit" has been May's refrain, signaling only that she won't change her mind on the referendum result.
"That it's a bit like telling a toddler 'bedtime means bedtime,'" said Oliver. "Eventually you have to define what that means. And right now the government is still trying to figure out the process, never mind the policy."
What is a 'Hard Brexit'?
Also known as "Clean Brexit" or "Black Brexit" — it means the U.K. will break completely with the EU, the European Court of Justice and the single market.
May's preferred strategy will see the Britain negotiate new trade deals, or it will have to fall back on basic trade tariffs set by the World Trade Organization.
It would also mean the loss of free cross-border movement to Britain for EU citizens. However, May said EU citizens will "still be welcome" in the U.K. after Brexit.
"Brexit must mean control of the number of people who come to Britain from Europe — and that is what we will deliver," May said.
May's announcement will disappoint pro-EU campaigners who had hoped for a "Soft Brexit" — also known as "White Brexit" — in which the U.K. quit the EU but retained access to the single market. This would have put Britain in a similar situation to Norway.
However, May did say she would seek a customs agreement with the EU.
When can we expect the economic consequences?
Britain's pound sterling rallied during May's speech, in which she repeatedly emphasized that Britain was open to news global trade opportunities.
Forecasts on the longer-term effects are bitterly contested and the true impact is unlikely to be known until well after the terms of any future deal are known.
A Financial Times survey of 122 economists found the majority believe that U.K. economic growth will slow markedly in 2017 and household incomes will be squeezed by higher inflation because of Brexit uncertainty.
There are also fears big financial firms could relocate to the rest of the EU to protect access to the single market. In December, insurance market Lloyd's of London said it would begin moving some of its operations to the rest of the EU and Anthony Browne, head of the British Bankers' Association, said bankers' hands were "quivering over the relocate button."
Pro-Brexit lobby group Change for Britain says a "Hard Brexit" could create 400,000 new jobs and save the country $30bn a year through new trade deals and improved exports, which have already risen. However, a former senior government economist said those claims were "total junk" and noted that, since Brexit, "production of fictional statistics is up 579%."
Some surveys immediately after the referendum suggested that many "Leave" voters regretted their decision, and a petition calling for a re-run of the poll quickly gained three million signatures.
However, eight subsequent polls still put "Leave" ahead, two had the sides tied and just one reported a "Remain" majority. "Six months on, it seems that Britain is just as divided on the merits of the case as it was on 23 June," it noted.
Will Scotland become independent?
Britain isn't just divided politically on Brexit, but geographically. A majority in England voted to leave the EU but London, Scotland and Northern Ireland voted to "Remain."
Scotland's First Minister Nicola Sturgeon has said she will hold a second referendum on independence from the rest of Britain if Brexit involves losing access to the EU's single market.
The first poll, in 2014, was defeated with 55 percent wanting to stay in the United Kingdom against 45 percent preferring Scotland to become an independent country.
Related: Is Brexit the Beginning of the End for the European Union?
Sturgeon, who is leader of separatist Scottish National Party, sees the Brexit earthquake as an opportunity to capitalize on pro-EU sentiment, arguing that Scotland could prosper as independent EU country inside the EU.
But while the political tide is in Sturgeon's favor, the economy is not: Scotland depends massively on revenue from its North Sea oil reserves and that income has been hugely dented by plunging oil prices since 2014, weakening the economic case for independence.
