Brexit is an abbreviation of British Exit similar to the term Grexit.

It refers to the possibility that Britain will withdraw

from the European Union. An in-out referendum has been set for execution on Britain’s European Union Membership
on June 23.
The idea for the European Union first got conceptualized by the Maastricht Treaty on November 1st 1993, with the
aim of ending the frequent and bloody wars between neighbours, which culminated in the Second World War.
Though, European Union is not the result of one day but of a gradual integration since World War - II. Originally
found by the six member countries in 1951, confined to Western Europe, the EU undertook a robust expansion into
central and Eastern Europe in the early 21st century.
The treaty of Maastricht was designed to enhance European political and economic integration by creating a single
currency (the Euro), a unified foreign and security policy and common citizenship rights and by advancing
cooperation in the areas of immigration, asylum and judicial affairs. The EU was awarded the Nobel Prize for Peace in
2012, in recognition of the organization’s efforts to promote peace and democracy in Europe.
On January 1st, 1973, Denmark, Ireland and United Kingdom joined the European Union raising the number of
member states to nine. Today it has the membership of 28 nations. Britain joined the EU as a way to avoid its
economic decline. The UK’s per capita GDP relative to the EU founding members’ declined steadily from 1945 to
1972. However, it was relatively stable between 1973 and 2010. This suggests substantial benefits from EU
membership especially considering that, by sponsoring an overpowered integration model, Britain joined too late, at a
bad moment in time, and at an avoidably larger cost.
The movement for Brexit was founded in 1991 (under a different name) to oppose Britain’s EU membership and saw
its popularity surge in 2013. The two campaigns, “Britain Stronger in Europe” and “Vote Leave”, that are likely to
form the official lobby group for each side in the referendum.
Article 50 (of the Treaty on European Union):
This Article allows European Union member states to notify the EU of its withdrawal and obliges the EU to try to
negotiate a ‘withdrawal agreement’ with the state. The form of any withdrawal agreement would depend on the
negotiations and there is therefore no guarantee the UK would find the terms acceptable. The EU Treaties would cease
to apply to the UK on the entry into force of a withdrawal agreement or, if no new agreement is concluded, after two
years, unless there is unanimous agreement to extend the negotiating period.
Arguments in favour of Brexit:
Trade: The Brexitters feel, it can secure better trade deals with important countries like China, India and the US. It
will negotiate a new EU relationship without bound by EU laws.
EU Budget: Britain can stop sending £350 million (equivalent to half England’s school budget), to Brussels every
week. This money could be spent on scientific research and New Industries.
Regulation: The general feeling is prevailing that leaving EU could mean better and greater regulation, especially in
areas like employment laws and health & safety.
Immigration: Eurospectics believe that leaving EU could help Britain reform its policies in this regard by having a
sensible regime for the movement of people over skilled and non-skilled people. Britain can change the expensive and
out of control system that could offer an open door to EU and Non EU immigrants, who could contribute to Britain.
Influence: Those in favour of Brexit believe that leaving the EU would allow Britain to regain their seat on
international bodies where EU represents them, and use their greater international influence to push for greater
international cooperation.
1. Overall, it is an opportunity to reassert British National Sovereignty and in a sense to liberate Britain from the
bottlenecks of EU, both politically and financially.
Arguments against Brexit:
Trade: Britain avoids exporter tariffs and red-tape, which is important because nearly 45% of its trade goes to EU.
Another benefit is that being a member, Britain can obtain better trade terms, because of the EU’s size. Brexit would
damage Britain’s export competitiveness.
EU Budget: On the budget front, the Stronger In Campaign contends that the benefits outweigh the costs. Its annual
contribution to the EU is equivalent to £340 for each household, according to the Confederation of British Industries,
all the trade, investment, jobs and other prices gave £3,000 per year benefit to each household because of EU
membership.
Regulation: By staying in EU, Britain can better negotiate for changing regulation. Most EU regulations, they argue
is standardized and effectively collapses 28 national standards into one European standard, thus reducing red-tape and
benefit businesses.
Immigration: Pro-EU campaign says that leaving the EU will not stop immigration to the UK. Countries such as
Norway and Iceland, which are not a part of EU, as per the European Free Trade Association, have to accept free
movement and have higher rate of immigration including from EU countries than Britain.
Influence: Pro-EU campaigners’ rests on the fact that Britain is represented twice in international organizations by
foreign secretary and EU High Representative. Staying in Europe might only result in better cooperation, which has
helped them tackle issues of global concerns like Ebola and piracy in Africa.
1. Overall, Britain will also undermine London’s position as Europe’s financial centre. But in a post-Brexit world,
Frankfurt and Paris may overtake that position from Britain.
Brexit consequences on EU:
• If we see the trade pattern then 51.4% goods export to EU from Britain in return to 6.6% from EU to Britain. A post-
Brexit Britain will have to form a set of trading and institutional relationship with it to secure above mentioned export.
• EU will become smaller and weaker both in economic and geopolitical terms.
• The EU share of the world population will fall from 7.0 to 6.1 percent. In terms of world GDP, in purchasing power
parity, the EU share will decrease from 17.0% to 14.6%, and in current international dollars from 23.8 to 20.0 percent.
The EU share in global exports of goods and services at current prices and exchange rate will fall from 33.9% to 30.3
percent.
• The transition process may take several years. It would greatly increase legal and economic uncertainty, not only in
the UK but also in EU.
• The political and economic shock created by Brexit could be a step towards further disintegration of the union.
Given the increasing strength of Eurosceptic parties in many EU member states.
• It will further aggravate problems with completing the Banking Union, or accepting the burden sharing mechanism
to tackle the refugee crisis. Due to its opt-out clauses the UK does not participate in these projects and there are other
EU member states that are reluctant to accept larger degree of burden and sovereignty sharing related to them.
• The free movement of people, goods and services has been affected by the Brexit from other EU member states.
• Attracting and retaining this foreign talent will become harder after Brexit, when EU workers moving to Britain will
no longer be able to take their pension rights with them, and the other conveniences of a single labour market which
are lost.
Hard, Soft, On Hold or No Deal: Brexit Outcomes Explained
The U.S. isn’t the only country to be paralyzed by political division. Across the pond, Britain is edging closer toward
leaving the European Union (EU) without anything resembling a clear action plan.
At the beginning of 2019, the British Parliament rejected Prime Minister Theresa May’s proposed Brexit deal by 230
votes. May’s setback, the greatest defeat in the country’s democratic history, has suddenly left the U.K. in a deadlock
with just little over two months to spare until it is scheduled to leave the EU.
At this late stage, all options are back on the table, including a Brexit without a trade deal or the whole thing being
scrapped entirely. Goldman Sachs says there's a 50% chance of a later, softer Brexit. The brokerage assigned a a 40%
probability to a reversal of Brexit via a second referendum or general election and a 10% probability to a “no deal”
Brexit.
Here is a breakdown of all the different terms being thrown around — and how each of them could impact investors
and the economy.
Hard Brexit
Since the U.K. public voted to leave the EU in June 2016 and Prime Minister May submitted the Article
50 withdrawal notification in March 2017, talk has centered on whether the U.K. should pursue a “soft” or “hard”
Brexit — terms used to refer to the closeness of the country’s relationship with its key trading partner once their
divorce is cemented.
A hard Brexit is another way to say a clean break from Europe. That means Britain giving up membership of the EU's
single market, an arrangement that enables the country to trade freely with its European partners without restrictions
of tariffs.
Supporters of a hard Brexit want the freedom to set up their own trade deals and rules. The problem is that drawing up
its own independent trade agreements will take a lot of time and, in the meanwhile, force the country to use less
favorable World Trade Organization rules.
If Britain finds itself outside of the customs union, imported goods will suddenly become much more expensive,
squeezing consumer spending across the country and weighing on the many firms that buy in European materials and
do business with their European partners. At present, roughly 45% of the U.K.'s exports are to the EU while 50% of
the goods it imports come from the EU.
"Should the U.K. go down the hard Brexit path, the U.K. economy would likely slow further as EU trade uncertainty
weighs on consumer sentiment and business investment," said John Lynch, chief investment strategist at LPL
Financial
No Deal
If British politicians fail to come to an agreement before the U.K. is scheduled to leave the EU March 29, 2019, the
country will walk away with no deal.
Unlike, a hard Brexit, which could theoretically include some type of agreement with the EU and potentially set out a
transitional period to negotiate free trade deals, a no deal scenario presents no cushion whatsoever.
Economists across the world have repeatedly warned against a hard Brexit. When they discuss a no deal scenario, their
predictions are even more catastrophic
The Bank of England warned that a no deal Brexit could shrink the U.K. economy by 8% in a year and lead domestic
house prices to fall by a third. British and European stock markets will certainly be punished, as will the U.K.
currency.
The rest of the world’s economy is expected to get caught up in this chaos, too. Recently, the International Monetary
Fund became the latest big name to warn that a no deal risks triggering a further slowdown in global growth.
"The U.K. constitutes only about 2% of the global economy and 4% of world goods trade, so global ramifications of
all realistic scenarios are likely to be manageable," said Lynch. Capital Economics has warned that a disorderly exit
could hurt British GDP growth by 1–2% spread over two years.
Soft Brexit
In general, economists agree that the least damaging path would involve what the media have been calling "soft"
Brexit. This term is used to refer to Britain remaining closely aligned to the EU by retaining some form of the bloc’s
single market.
Such a scenario would minimize disruption to trade, supply chains and businesses in general. However, there is a
major sticking point: the EU has demanded that access to the single market can only be granted if all its principles,
including the free movement of people, are respected.
Supporters of a soft Brexit have called for a deal similar to what Norway has with the EU. Norway is a member of the
single market, but in return abides by the free movement rules. It’s already become clear that many U.K. politicians
aren’t willing to compromise on immigration, claiming that such a deal would betray the wishes of the British public.
“We expect UK domestic stocks to outperform UK exporters by 20% if a soft Brexit materializes,” said Sebastian
Raedler, head of European equity strategy at Deutsche Bank, in an interview with Bloomberg.
Brexit on Hold
If the U.K. wants to avoid crashing out of the EU without a deal, Article 50 will almost certainly have to be extended.
The March 29 expiry date is quickly approaching, meaning that there is little time left to renegotiate any type of new
agreement.
Whether the EU will agree to extend the deadline is unclear. Most of the bloc’s states agree that it is in their best
interest to prevent a hard Brexit, although it is also true that they are growing frustrated and appear to be losing hope
that a deal that suits all parties can be agreed on.
British politicians are divided on what Brexit they want and finding a way to match all their requests, together with
those of the EU, increasingly appears to be an insurmountable challenge. Dragging on the process another two years
without any guarantees of finding a breakthrough might scupper chances of a serious renegotiation ever getting off the
ground.
That said, the recent appreciation of the U.K. currency suggests that traders are confident that Brexit will be put on
hold for now. Sterling, and the ETFs such as Invesco CurrencyShares British Pound Sterling (FXB), VelocityShares
Daily 4x Long GBP vs USD ETN (UGBP) and ETFS Short NZD Long GBP (NZGB.L) that track its movement, have
been rising, implying that investors are hopeful that a damaging no deal Brexit can be averted.
Placing Brexit on hold would ease fears that the U.K. will leave the EU without a deal. However, uncertainty would
still remain over whether Britain will eventually secure a hard or soft Brexit agreement, or call a second referendum
that could see the decision to leave completely revoked.
That would ultimately mean further volatility as investors continue to try to second guess how Brexit will play out and
how the many companies caught in the crossfire will fare under each potential scenario. Meanwhile, these same firms
will undoubtedly be impacted by being left in the dark about future relations with a key trading partner.