Definition
Brexit is a term that amalgamates “Britain” and “Exit”, referring to the UK’s decision to leave the European Union (EU) following a public referendum held on June 23, 2016. This withdrawal imbues significant economic implications as it alters the UK’s trade, economic, and political relationship with its former EU partners. Finalized on December 31, 2020, Brexit has resulted in the UK ceasing adherence to EU regulations and directives across numerous sectors.
Key Takeaways
- Brexit refers to the decision of the United Kingdom to leave the European Union and the European Atomic Energy Community. The term itself is a portmanteau of “British” and “exit”.
- The Brexit vote took place on June 23, 2016, and it had significant impacts on global finance. This included fluctuations in currency values, notably in the British Pound, and uncertainties in trade agreements and the economic outlook of the UK.
- As one of the most important decisions in modern British history, Brexit has led to numerous negotiations and discussions surrounding the new economic, trade, and political relations between the UK and the EU. These changes have affected and continue to affect businesses and investors worldwide.
Importance
Brexit, a contraction of “British Exit,” indicates the UK’s decision to leave the European Union (EU) following a nationwide referendum in June 2016.
This is significant in finance because it has vast implications for the UK and European economic landscape.
Upon separation, the UK had to renegotiate trade agreements with the EU and other parts of the world, which impacted industries, jobs, and ultimately economic growth.
The Brexit decision also affected financial markets, causing significant currency fluctuations, particularly for the British Pound, and it influenced decisions made by investors, corporations, and financial institutions in the short term.
The long-term economic consequences of Brexit are still evolving, therefore understanding ‘Brexit’ is critical in finance.
Explanation
The term “Brexit” symbolizes the seismic economic and political shift that occurred when the United Kingdom (UK) decided to exit the European Union (EU) through a referendum held on June 23, 2016. The purpose of this significant move was motivated by various reasons, the key ones being sovereignty, immigration, and economic control.
The proponents of Brexit argued that exiting the EU would give the UK greater independence and regain control over laws, policies, and immigration that are deemed crucial for the nation’s growth and security. Essentially, Brexit was used as a means to assert national autonomy.
In terms of finance and economy, Brexit’s central aim is to free the UK from the regulatory frameworks and restrictions imposed by the EU. By doing this, the UK hoped to pave the way for forging new trade agreements and partnerships on a global scale without EU interference.
Brexit is also anticipated to be used for controlling the nation’s financial resources better and solely deciding on fiscal policies. Despite the complexity and short-term economic uncertainties, supporters of Brexit believed it could potentially lead to long-term economic advantages for the nation.
Examples of What is Brexit?
Value of British Pound: Brexit has had a significant impact on currency rates, most notably, the value of the British pound. Immediately after the referendum vote in 2016, the pound fell to a 30-year low against the dollar. This ostensibly affected international businesses, with British exports becoming cheaper and imports pricier.
Economic Uncertainty: Brexit created years of economic uncertainty in the real estate sector. For instance, London’s status as a global hub for finance was put into question, as many banks relocated parts of their operations to other European cities, impacting office space market in London.
Border Friction and Trade: Brexit caused major disruptions in supply chains. A real-world example can be illustrated in the delay experienced at borders due to new customs procedures and regulations. One significant instance was the congestion at the Dover-Calais crossing in late 2020, resulting in long queues of lorries, delay in shipments and unforeseen additional costs for many traders.
FAQs on Brexit
What is Brexit?
Brexit is an abbreviation for “British exit,” referring to the UK’s decision in a June 23, 2016 referendum to leave the European Union (EU). The vote’s result lent weight to the right-wing, anti-EU UK Independence Party, which argued that Britain had given up too much power to the EU and was being flooded by too many immigrants, particularly from Eastern Europe, and that leaving the EU would restore sovereignty.
Related Entrepreneurship Terms
- European Union (EU)
- United Kingdom (UK)
- Single Market
- Article 50
- Referendum
Sources for More Information
- BBC: Offers a large variety of topics including politics, which covers Brexit in detail.
- The Guardian: A British news outlet that provides extensive coverage about Brexit.
- Financial Times: A international daily newspaper with a special focus on business and economic news. Brexit is a regular subject in this outlet due to its economic impact.
- The Economist: A international news and business publication famous for its detailed analysis on a variety of topics, including Brexit.
