Brexit is happening tonight: Here’s how we got here, and what comes next

LONDON, Jan 31, 2020, CNBC. The U.K. will leave the EU on Friday evening after 47 years of membership, marking one of the biggest political and economic shifts in modern Europe. Brexit brings about the end of a tumultuous three-and-a-half year departure process that has caused turmoil in the U.K.’s political establishment, economic uncertainty and heightened tensions between the U.K. and the EU, its largest single trading partner as a bloc, CNBC reported.

The departure on January 31 at 11 p.m. London time will mark the start of a “transition period” in which the U.K. remains a member of the single market and customs union, but begins negotiations with the EU in the hope of striking a free trade deal.

The U.K. government has set an ambitious (and some say, unviable) deadline of the end of 2020 in which a deal must be reached, otherwise it could confront a “no deal” scenario and would have to revert to the World Trade Organization trading rules, putting up trade barriers with the EU in a move likely to damage both the U.K. and EU economies.

In the European Parliament on Wednesday, a majority of the Members of the European Parliament (MEP) ratified the Brexit Withdrawal Agreement by 621 votes to 49 after an emotional debate in the chamber.

There were hugs and tears as pro-EU, British MEPs gave their final speeches to the Parliament stating their hopes for the U.K. to one day return to the EU.

Others, such as lifelong Brexit campaigner Nigel Farage, a familiar antagonist in the European Parliament who once led the U.K. Independence Party (whose popularity was a factor behind holding an EU referendum in 2016) told the Parliament: “I know you’re going to miss us.”

On June 23, 2016, the British people went to the polls in a vote on whether the U.K. should remain a member of the EU.

To much of the country’s shock — even, it appeared, to politicians like current Prime Minister Boris Johnson who campaigned to leave the bloc — 51.9% of Brits voted to leave the EU with 48.1% voting to remain in the economic and political bloc.

Although the political earthquake brought about by the vote was unexpected, euroskepticism was rife in the country in the decades and immediate years leading up to the referendum, partly fueled by an anti-EU tabloid press in the U.K., the rise of the U.K. Independence Party led by Nigel Farage and an increase in populist sentiment.

A migration crisis in Europe in the run-up to the 2016 vote, fears over the possible accession of Turkey to the EU and a desire among many Brits to contain immigration also played a part in the vote. There were also more intangible factors such as Britain being an island, separated from its continental neighbors and of somehow, someway, being ‘different.’

Reeling from the vote and the resignation of then Prime Minister David Cameron immediately after the referendum result, the government under Theresa May took the U.K. until March 29, 2017 to trigger “Article 50,” beginning what was meant to be a two-year countdown to the U.K. formally leaving the EU.

In the meantime, the EU and U.K. struck a Brexit deal, or “Withdrawal Agreement” but it had still not been approved by a majority of the British Parliament in March 2019 and May was forced to ask the EU to extend the withdrawal date deadline.

The bloc agreed to extend the deadline to October 31, 2019 but with her Brexit deal rejected three times by Parliament, May was all but forced to step down as party leader. That prompted a leadership race with the ruling Conservative Party and the election of Brexit-supporting Johnson in July.

Johnson went back to Brussels and renegotiated parts of the Brexit deal, but his deal was also rejected by Parliament and Johnson, threatening to take the U.K. out of the EU by October 31 “come what may” was forced to ask for another extension from the EU, until January 31, 2020 … Keeping up?!

When the U.K. leaves the EU on Friday, it will remain a member of the single market and customs union but only during a “transition period” until the end of 2020.

During this time the U.K. will no longer be represented in the EU institutions, agencies, bodies and offices but EU law will still apply in the country until the end of the transition period.

During that time, the U.K. and EU will try to strike a trade deal although the short time frame is seen as ambitious and Brussels has warned London that the trading relationship will not be the same post-Brexit.

Irish Prime Minister Leo Varadkar suggested in an interview with the BBC Monday that the EU will be the “stronger team” in post-Brexit trade talks and that striking a deal would be “difficult.” Johnson has dismissed the pessimism, however, saying the U.K. can “wrap up” a deal by its self-imposed deadline.

What’s certain, and repeatedly reiterated by the EU side, is that the economic and political relationship will change and the U.K. might not enjoy the “frictionless trade” it has enjoyed as a member of the EU and a member of its single market.

The single market seeks to guarantee the free movement of goods, capital, services, and labor — the “four freedoms” — within the EU. And with a collective population of over 500 million people and consumers, the value of single market membership and that unfettered movement of goods and services is a boon to businesses in the bloc.

The EU is particularly worried about ensuring what it calls a “level playing field” when it comes to striking a free trade agreement with the U.K. It’s concerned that the U.K. could pursue a more aggressive policy of business subsidies, introduce a competitive (and undercutting) tax regime and unfair competition policy. As such, the EU wants guarantees from the U.K. that would prevent any unfair competitive advantage.