Brexit: German Cars, Playground Politics and Boiled Eggs

Sam is a Business Analyst at Deutsche Bank. He is passionate about educating young minds on the financial implications of economic and political matters. He is a regular contributor to the Economic Street blog.

• Pay more for your favourite French wines, German cars and Italian brands

• Our jobs are going! Paris, Frankfurt or Brussels anyone?

• Visa checks and long queues at the airport for your holiday to Ibiza

• Go back to your country!” - Will EU citizens living in the UK be forced to

leave???

• How do you like your eggs?

The build-up to the Brexit vote was a war of 2 sides.

On one hand, the Remoaners (those who want to remain in the EU and constantly moan about the outcome of the Brexit vote) – who believe that the UK has a better future within the EU than it does outside of it. On the other hand are the Brexiteers(those who voted to leave the EU) – who believe that the UK is stronger without the burden of EU membership.

What is the one thing Remoaners and Brexiteers have in common? Campaigners from both sides tried to play on the prejudices of the British people, forcing them to make a mis-informed decision on the type of future they want with their EU neighbours.

Irrespective of how you voted, life after Brexit is still yet to be defined.

The aim of this article is to explain the potential impacts of Brexit – hopefully in a way that can be understood by all.

1. Pay more for your favourite French wines, German cars and Italian brands

Theresa May has confirmed that the UK will be leaving the EU Customs Union.

A "Customs Union" is an agreement between a group of countries to remove any restrictions on the goods they buy/sell (trade) from/to each other. Taxes are an example of restrictions on trade, which are added to imports (goods brought into the country from another country) to make them more expensive.

Leaving the Customs Union, means that this agreement to remove restrictions (taxes) will no longer apply. The impact to you?...Your favourite French red wine and that BMW you've been dreaming of buying, could become more expensive!

Understanding the situation: Playground Politics

3 playgrounds. 1 for the Primary School pupils; the 2nd for the Secondary School pupils and; the 3rd for the Sixth Form pupils. The School allows pupils to buy and sell Pokémon cards to each other during break time.

One day, a group of Sixth Form pupils shout at some of the Primary and Secondary School pupils for being childish and always playing with Pokémon cards. After the argument, the Primary and Secondary School prefects start charging a fee (tax) on any Pokémon cards bought/sold in the Sixth Form playground. As a result of the new fee (tax), the price of Pokémon cards begin to increase, making it more expensive for Sixth Form pupils to buy their favourite Pokémon cards.

2. Our jobs are going! Paris, Frankfurt or Brussels anyone?

Much like the EU’s Customs Union, the "Single Market" also consists of a group of countries who have agreed to remove the restrictions on the goods they trade with each other. However, the Single Market goes a step further.

The Single Market allows all goods AND services to be traded between its member states, without any restrictions (i.e. taxes). To enable the free movement of goods and services, the Single Market also allows people and capital (money) to move freely between the countries who have signed up to the agreement.

One of the most important benefits of the UK’s access to the Single Market is that it allows UK companies the ability market their services to the EU’s 500 million citizens.

This benefit even extends to non-EU companies that are not part of the EU’s Single Market. Many non-EU financial services companies are given the approval by UK regulators to provide their services in the UK. As long these companies are authorised to operate in the UK, they too can access and provide their services to the rest of the EU. This is what is known as the “Passporting Right”.

Many companies in London who provide financial services, “Passport” into the rest of Europe.

The Implication?

With the UK set to leave the EU and the Single Market, it means that these non-EU financial services companies will not be able to service their EU clients via London.

Many of these firms have already begun shifting jobs from London to other parts of mainland Europe.

This means less jobs for the British people. Paris, Frankfurt or Brussels anyone?

Understanding the situation: Playground Politics

Imagine a school in which the year 7 - 11 pupils all share a single playground and the year 12 - 13 students have use of another. Due to a number of bullying incidents in the past, year 12 - 13’s are banned from using the year 7 - 11 playground.

Samantha, a very intelligent year 11 pupil, uses the playground to provide a tutoring service during break time to year 7 - 11 pupils who are struggling with their homework. Samantha realises that she will no longer be able to access the year 7 - 11 playground to provide her tutoring service to the pupils when the new school year begins.

This would mean that Samantha would lose out on the £30 per week she is currently earning as a tutor.

Samantha quickly realises that she can keep the tutoring service going if she passes all her study notes onto one of the year 10 pupils, Francis. Francis uses the study notes to carry on the tutoring service in the Year 7 - 11 playground when Samantha leaves.

The key point to realise here is that the tutoring service can only continue to be provided in the year 7 - 11 playground, by someone who is authorised to provide it.

Similarly, non-EU companies must shift their services to cities that will continue to give them the authority they need, to provide services within the EU’s playground, the Single Market. Hence why companies have started moving their offices (and therefore jobs) to cities like Paris, Brussels and Frankfurt.

3. Do I really need a Visa to fly to Paris, Barcelona or Ibiza?

One of the main points made by Brexiteers was that the UK cannot control its borders because it must abide by the rule of allowing people (i.e. EU citizens) to move freely in and out of the country.

If the UK leaves the Single Market, it can put greater restrictions on the number of EU citizens coming into the country.

A point that was barely mentioned during the Brexit campaign, is that the EU can also put greater restrictions on UK citizens going to EU countries.

4. “Go back to your country!” - Will EU citizens living in the UK be forced to leave????

The unfortunate truth is that there is currently no guarantee for EU citizens living in the UK to remain in the UK.

Despite the UK’s best efforts, the EU refuses to come to an agreement on the rights of EU citizens in the UK until the more important matters are dealt with first (i.e the UK's contribution to the EU budget after Brexit). The UK has come up with the following proposal and aims to negotiate the same for UK citizens living in the EU.

EU citizens who have lived in the UK for 5 years when the UK leaves the EU, will be able to apply for “Settled Status”. There will be a 2-year grace period to apply for this new status. EU citizens with a settled status will have the same access to healthcare, education and other forms of public funding. They can also apply for British citizenship.
For EU citizens who arrived after the cut-off date (to be agreed as part of the negotiations) but have lived in the UK for less than 5 years when the UK leaves the EU, must apply for temporary permission to remain during the 2-year grace period. Once they have lived in the UK for 5 years, they too can apply for Settled Status.
EU citizens who arrive in the UK after the cut-off date must apply to remain in the UK based on future immigrations rules.
Family members or dependants who join EU citizens living in the UK before the UK exits the EU, can also apply for "Settled Status" after they have lived in the UK for 5 years.

The Implications?

Your French boyfriend/Italian girlfriend (delete as appropriate), will have to go through the very tedious and expensive process of applying for British citizenship after Brexit.

Despite feeling isolated and unwanted after the Brexit vote, the number of EU citizens applying for British citizenship, has increased by 80% since the vote to leave the EU. This reflects the difficult decisions EU citizens are being forced to make as a result of Brexit:

Abandon life as you know it in the UK, leaving your family and friends behind in the process.
Endure the lengthy and expensive application process for UK citizenship.

(Please tick as appropriate)

How do you like your eggs?

Some people prefer hard boiled eggs, others prefer soft boiled eggs.

In the case of Brexit, a hard-boiled egg gives the UK:

A chance to exit the EU’s Customs Union so that it can be free to make new deals with other countries, making it easier and cheaper for the UK to buy and sell from the rest of the world.
A chance to regain control over how many people are immigrating to the UK from the EU

A soft-boiled egg gives the UK:

The chance to continue its membership in the Customs Union, so that UK citizens can continue buying their favourite European wines, cars and luxury goods, without having to pay much, if any, additional costs.
Continued access to the Single Market so that non-EU companies can carry on using London to “Passport” into the rest of Europe to provide their services.
Less fractious relationship with the EU going forward.

The definitive impacts of Brexit are all heavily dependent on the UK’s negotiations with the EU.

The two main things that need to be negotiated are the terms on which the UK will be leaving the EU and also, the terms on which the UK will be interacting with the EU going forward.

So now that you know a bit about how Brexit impacts you, how do you like your eggs?

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