Explain Britain’s ouster from EU and bring out its consequences on world economy in general and India in particular. (2016, 20 Marks)
Brexit, Britain’s exit from the European Union it had joined in 1973, was a choice rather than an ouster. In the referendum of 23 June 2016, 51.9% voted Leave. London invoked Article 50 in March 2017, left on 31 January 2020 and ended the transition on 31 December 2020 under a Trade and Cooperation Agreement. It was the first time a member state left the Union.
Why Britain left
- Sovereignty: “take back control” from EU law and the Court of Justice.
- Immigration: free movement after the 2004 eastern enlargement became the campaign’s sharpest issue.
- Money and rules: budget contributions, perceived over-regulation, and the wish for an independent trade policy.
- A Eurosceptic tradition: Britain stayed outside the euro and Schengen and had held a membership referendum as early as 1975.
Ernst B. Haas’s neofunctionalism expected integration to deepen through spillover. Brexit fits better the postfunctionalism of Liesbet Hooghe and Gary Marks: once integration is politicised around national identity, a “constraining dissensus” can halt or even reverse it.
Consequences for the world economy
- Financial shock: sterling fell to its lowest level against the dollar since 1985 within days of the vote, and investors repriced European risk.
- Trade frictions: the TCA avoided tariffs and quotas, but customs checks, rules of origin and the absence of financial-services equivalence raised non-tariff costs. The UK’s Office for Budget Responsibility assumes British trade intensity about 15% lower, and productivity about 4% lower, than had it remained.
- Relocation of finance: some euro clearing, banking and asset management moved from London to Frankfurt, Paris, Dublin and Amsterdam.
- Rebuilding a trade policy: Britain had to set its own WTO schedules, roll over EU agreements and negotiate new ones; it joined the CPTPP in December 2024.
- A signal of de-globalisation: with Donald Trump’s election the same year, Brexit suggested a turn to protectionism and fragmentation. Higher UK–EU trade costs also dragged on the income growth of their partners.
- The EU itself, however, closed ranks: no other member has followed.
Consequences for India
| Effect | Mechanism |
|---|---|
| Lost gateway | Tata Motors–JLR, Tata Steel and Indian IT firms had used Britain as an English-speaking base for the single market |
| Two negotiations | Separate standards, regulators and trade deals with London and Brussels |
| Uncertainty | Investment decisions were delayed, and EU arrangements stopped covering the UK |
| Mobility | The end of free movement put Indian professionals on more equal terms with Europeans in Britain |
| Diplomatic loss | India lost an English-speaking advocate of services liberalisation inside EU councils |
The opportunity proved larger than the loss. Outside the EU, Britain could sign its own trade agreement, which it could not do as a member. The 2030 Roadmap (May 2021) created a Comprehensive Strategic Partnership and a Migration and Mobility Partnership. The India–UK Comprehensive Economic and Trade Agreement, signed on 24 July 2025, entered into force on 15 July 2026: about 99% of Indian exports enter duty-free or at reduced rates, with textiles, leather, gems and marine products gaining most. The Double Contributions Convention, in force alongside it, exempts Indian workers on temporary postings from UK national insurance, a long-standing Indian demand. India also gained room to reorganise supply chains disrupted between Britain and the Continent.
Conclusion
For the world economy, Brexit raised trade costs and showed that integration is reversible, though the EU did not unravel. For India it was disruptive at first but net positive: one negotiation became two, and the British one delivered first. It also showed that pooled sovereignty can limit a member’s freedom to deal with a rising power like India.