In the aftermath of the Leave prevailing with 51.8% in the “Brexit” Referendum and the political crisis now happening in UK, uncertainty and confusion is dominating the scene. Only time will tell whether the referendum has been an exercise of sovereignty or, to the contrary, will affect the UK economy, and from EU’s point of view, will trigger the collapse of EU or just cause EU to finally take action towards a real and improved Union.
The obvious and difficult to answer question is: what changes from the vote? Predictably enough, stock exchanges are now volatile, more than they have been the last days before the referendum, urging European Central Bank and Bank of England to prompt measures against any possible economic turmoil; the immediate effect was the pound losing to the US dollar and Euro overnight after reaching its peak amid rumours of Remain leading.
The reassuring opinions that instability will not be here to stay as the capacity of markets to adjust to political events like this is large may be dismissed as optimistic, but economy proved flexible and resilient to seemingly catastrophic events on global economy, as it was with the Greek referendum last year. In addition, the EU is bound to take countermeasures shortly after the vote and ECB is likely to extend quantitative easing. This news has seen no positive effect, still, as stock markets today are facing big losses.
What happens to UK now? The victory of Leave does not mean that Britain is now putting up borders and reintroduce visas, nor does this bear the consequence that EU legislation is now inoperative in UK. Britain will remain in EU for the next two years and what happens to EU legislation once Britain left EU is still a matter of debate. The whole procedural path to leaving EU is laid down at Article 50 of the Lisbon Treaty and it provides for a negotiated withdrawal between the UK and the European Council, the final agreement then shall be approved by the European Parliament. The deadline can be extended by agreement from both parties, requiring the unanimous approval by the Council. Of course, it is possible for UK to join the EU after its withdrawal, following the procedure described at Article 49 of the Lisbon Treaty.
Some forecast for the UK a status similar to Norway, a country not being part of EU, in fact bound to respect most of EU legislation for being member of the European Single Market. This is the solution that Leave campaigners are seeking. Concerning civil and commercial disputes in the European Legal Space, UK may decide to join Lugano Convention on competent jurisdiction. Surely some EU laws will still apply to the UK, although indirectly. The European Free Trade Agreement might also revive. All is left to the negotiation process to be held between UK and EU in the near future. However, the result of the final agreement may make the regulation of the relationship between both parties more fragmented, and the risk of bilateral agreements between UK and single Member States may not be ruled out.
What appears certain is that, even though another referendum on EU membership passes, the UK may not regain its special status in EU, which allowed the country to opt out on EU legislation, as well as from immigration and other EU politics, etc. The most prominent UK politicians are downplaying the risk saying that UK wants to still be part of the European Single Market, enjoying the free movement of goods, services and capital, which can comprise free movement of labour force.
Clearly, the status quo is not going to change in the short term and EU citizens will still enjoy their rights of membership.
Doing business and investing in UK: the fall of Pound would mean cheaper exports to Europe, conversely imports from EU may not be as profitable as they have been so far. For now, there is no substantial risk of big banks moving elsewhere, but banking and finance sector moves more rapidly than others (Morgan Stanley may relocate 2,000 professionals in the short term).
A rise in interest rates is an action the Bank of England may happen, which is more profitable for savings. By contrast, mortgages may be costlier, as well as constructions and real estate prices, after the Treasury’s forecast of an increase of interest rates in borrowing. The opposite may also turn out to be true, though, with the Bank of England lowering interests, thus making housing and building prices more affordable.
Study and work in the UK: this is the issue frightening most of young expats from all over Europe. It is unlikely that the UK will impose immigration quotas, since Leave supporters want UK to be part of the Single Market, therefore UK is bound in return to abstain from any action limiting EU nationals from entering the UK. Visa permit for studying may be introduced, but this as well is still unclear. No proof of higher tuition fees for EU nationals is consistent, so far.
N.B. For people living and working in UK for over 5 years, it is possible to apply for residence permit and citizenship.
Again, the situation of EU citizens living in UK shall not be affected until the actual withdrawal of UK from EU process is completed and the final agreement will pose the conditions for EU citizens to remain and reside in the country, which in fact may be more favourable than we expect. However, research project may be affected as most funding comes from EU and healthcare may not be free anymore once the UK exits the EU.
Live and travel in the UK: this aspect will most likely be not affected by the Brexit. Housing and flight prices mostly depend on airlines’ nationality and price policy. UK mobile companies may apply roaming charges, unless the UK government decides to adopt price restrictions.
Kenton and Miles Legal professionals in London follow the state of the events and the changes to the legislation consequent to the Brexit. Our professionals provide assistance to EU citizens living in UK and British Nationals living in Europe on Labour and Immigration, Social Security and Pensions, Inheritance Law, Civil Law and Procedure, Commercial Law, Real Estate, Credit and Financing in UK and EU.