Brexit One Year Later: The Good, The Bad And Where Next

One year ago, British voters cast their ballots in favor of leaving the 28-member European Union, defying multiple opinion polls leading up to the Brexit referendum that said the “remain” camp would notch a narrow victory.

In a pre-Brexit Frank Talk last year, I wrote that Brexit would be regarded as the most consequential political event of 2016. President Donald Trump’s surprise election notwithstanding, I stand by my earlier comment.

Brexit, in fact, laid the groundwork for Trump. Both movements, described by many observers as populist and nationalistic, exposed an impatience and frustration with rampant bureaucracy, strangulating regulations, lax border security, political correctness and a sense of a loss of autonomy. “Take our country back!” and “We want our country back!” were the battle cries of supporters of Trump and Nigel Farage, then-leader of the UK Independence Party (UKIP).

EU membership has been nothing if not costly. As I shared with you last year, the U.K. is the third-largest net contributor to the Brussels-based bloc after Germany and France, paying the equivalent of between $11 billion and $14 billion every year. On top of that, the 100 most expensive EU regulations, passed down by unelected officials, are estimated to cost somewhere in the vicinity of 33.3 billion pounds, or $49 billion.

Although the British economy is showing signs of slowing down, the country has not contracted or imploded as many Brexit opponents had predicted. In fact, certain British sectors such as exports and manufacturing continue to expand.

Now that the “leave” camp has its country back, the hard work of negotiating a satisfactory departure from the EU, of which it has been a member for four decades, has begun. Talks are expected to last at least two years. In a closely-watched speech before the House of Lords last week, Queen Elizabeth II, attired in what many saw as a not-so-subtle EU flag-inspired gown and hat, said that her government’s priority “is to secure the best possible deal as the country leaves the European Union.”

That task, however, has recently been complicated by Prime Minister Theresa May’s humiliating loss of her government majority in the June 8 snap election. The disappointing outcome possibly signals waning public support for Brexit, which Brussels officials could very likely capitalize on and see as giving them increased leverage over making demands. A 100 billion pound exit fee, which has been hinted at, would be a decisive negotiation defeat.

What’s unclear at this point is what kind of Brexit the U.K. and the EU will pursue: a “hard” or “soft” exit. The former, favored by British nationalists, would strip the U.K. of all access to the single market and customs union. The country would effectively have full control of its borders and would also be required to assemble new trade deals from scratch.

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A “soft” arrangement, on the other hand, would keep in place the country’s role in the European single market, meaning goods and services could still be traded tariff-free. As such, the U.K. would need to adhere to some basic rules involving the movement of goods, capital and people. Other European countries with similar arrangements include Iceland, Norway and Liechtenstein.

A piece in the Financial Times makes it clear that it’s this latter arrangement, the “soft” exit, that’s highly favored by British businesses of all sizes and from every sector. To be able to trade freely across borders without tariffs or other barriers, and to be able to hire skilled workers from the continent, would ensure that U.K. companies could remain competitive.

At this point, it’s really too early to tell which direction the two parties might take, but May’s crippling setback earlier this month will undoubtedly have a significant impact.

Below are five charts that illustrate where the U.K. has been in the 12 months following Brexit, both the good and bad—and where it could be headed next.

The benchmark British index, the FTSE 100 Index, has performed relatively well since last year’s referendum, despite skeptics’ pessimistic attitudes. Stocks have risen about 18 percent, even though they’ve trailed the Euro Stoxx 50, which has likely benefited from the euro’s rally since the start of the year.