- The UK stopped being a member of the European Union (EU) at 23:00 GMT on 31 January 2020.
What is Brexit?
- Brexit - British exit - refers to the UK leaving the EU.
- A public vote (known as a referendum) was held in June 2016, which gave the Leave side 52%, compared with 48% for Remain.
- The process of leaving the EU formally began on March 29, 2017, when U.K. triggered Article 50 of the Lisbon Treaty.
- The U.K. was expected to leave the EU by Oct. 31, 2019, but the U.K. Parliament voted to force the government to seek an extension to the deadline and also delayed a vote on the new deal.
- While the UK has agreed the terms of its EU departure, both sides still need to decide what their future relationship will look like.
- This will need to be worked out during the transition period, which began immediately after Brexit day and is due to end on 31 December 2020.
Changes in UK and EU relations during the transition phase
- During this 11-month period, the UK will continue to follow all of the EU's rules and its trading relationship will remain the same.
- The UK will leave all of the EU's political institutions and agencies.
- No more EU summits for UK
- However, in addition to the UK following EU rules during the transition period, the European Court of Justice will continue to have the final say over legal disputes.
Impact on India
- The implication of the BREXIT will directly impact not only the Indian stock market but the global market in totality because of the high volatility in the pound.
- The largest export market for India: UK accounts for 17 percent of India’s Information Technology (IT) exports. If Britain chooses to opt-out the overhead costs are also going to increase.
- In totality, the sectors which will be affected because of BREXIT will be auto, auto components, metals, oil, pharmaceuticals, IT, etc.
- Both UK and EU account for 23.7 percent of Rupee’s effective exchange rate. With BREXIT, foreign portfolio investments will outflow and will lead to the weakening of the rupee.
- UK’s third-largest Foreign Direct Investment (FDI) investor in India. It will adversely affect the movement of investors into the UK and will directly impact the investment.
- Britain is considered as a gateway to the EU for India, with it opting out, the advantage by India is lost. Therefore, there is a need to get border-free access.
- BREXIT will hamper India’s businesses based in the UK as till now they had border-free access to the rest of Europe.