Brexit: Status and Outlook

Summary

After the 2016 referendum in which 52% of voters in the United Kingdom (UK) favored leaving the European Union (EU), Brexit was originally scheduled to occur on March 29, 2019. In early 2019, however, Parliament repeatedly rejected the withdrawal agreement negotiated between Prime Minister Theresa May’s government and the EU without supporting any alternative. In April 2019, the EU granted the UK an extension until October 31, 2019.

Recent Developments and Possible Scenarios

After becoming Prime Minister in July 2019, Boris Johnson asserted that Brexit will take place on October 31 and that he will not request another extension. Johnson declared his intention to renegotiate a new agreement with the EU that drops the Northern Ireland backstop provision, which would keep the UK in the EU customs union until the two sides agreed on their future trade relationship. The backstop provision was included in the rejected withdrawal agreement as an insurance policy to maintain an open border between Northern Ireland (part of the UK) and the Republic of Ireland (an EU member state) while safeguarding the rules of the EU single market. The backstop was a main reason many Members of Parliament voted against the deal.

The UK and EU have sought to avoid a no-deal Brexit, a scenario in which the UK leaves the EU without a negotiated withdrawal agreement, due to concerns that it could cause considerable disruption with regard to the economy, trade, security, Northern Ireland, and other issues. In September 2019, Parliament passed legislation requiring the UK government to request another extension by October 19 if it has not reached a withdrawal agreement with the EU.

The dynamics of Brexit are likely to evolve in relation to pivotal events and deadlines in October 2019. Possible scenarios include a new withdrawal agreement, another extension, a no-deal Brexit, and an early general election in the UK.

Brexit, Trade, and Economic Impact

The various Brexit scenarios have considerable implications for the UK’s trade arrangements. Outside the EU customs union, the UK would regain an independent national trade policy, a major selling point for many Brexit supporters who advocate negotiating new bilateral trade deals around the world, including with the United States. The UK likely would seek to negotiate a free trade agreement (FTA) with the EU. A Brexit in which the UK remains a member of the EU single market or customs union would provide more barrier-free access to the EU, but the UK would have to follow most EU rules without having a say in how they are made. Analysts predict that the disruption resulting from any form of Brexit likely will have at least a short-term negative economic impact on the UK. A no-deal Brexit represents the most disruptive and unpredictable scenario, and many businesses in the UK are taking steps to mitigate potential economic losses.

Northern Ireland

Many observers have expressed concerns that Brexit could destabilize the Northern Ireland peace process and lead to a hard border with physical infrastructure and customs checks between Northern Ireland and the Republic of Ireland. Although conditions have improved considerably since the 1998 peace accord (known as the Good Friday Agreement or the Belfast Agreement), concerns about the fragility of peace and security in Northern Ireland remain. A Brexit that results in a hard border likely would have negative economic effects for Northern Ireland and constitute a pressure point in the continuing implementation of the peace agreement.

U.S.-UK Relations and Congressional Interest

President Trump and Administration officials have expressed support for Brexit. Members of Congress hold mixed views. The UK likely will remain a leading U.S. partner in addressing many foreign policy and security challenges, but Brexit has fueled a debate about whether the UK’s global role and influence is likely to be enhanced or diminished. In 2018, the Administration notified Congress of its intention to negotiate a bilateral FTA with the UK after Brexit. Congress would likely need to pass implementing legislation before the potential FTA could enter into force. Many in Congress also are concerned about Brexit’s possible implications for Northern Ireland’s peace process and economy.