Quick definition

Updated: Jan 20, 2023

Brexit is the combination of the words ‘Britain’ and ‘Exit’ and it was coined to refer to Britain’s decision to leave the European Union (EU) on 23rd June 2016.

Key details

  • It took over 4 years since the referendum result to formulate a trade deal, the Trade and Cooperation Agreement (TCA), that aims to regulate the aftermath of Brexit
  • The UK will continue to trade with other EU countries without tariffs and quotas, instead, other economic barriers to trade will apply that shall increase costs of trading
  • Many provisions of the TCA still need to be further clarified and detailed in order to be successfully implemented without causing economic barriers to trade

What is Brexit?

Brexit marks the date of 23rd June 2016, when Britain voted in a referendum to have the UK legally depart from the EU. Over 4 years since, on 28th December 2020, the ambassadors of 27 EU member states unanimously voted to approve the result: the TCA. The UK parliament ratified the TCA on 30th December 2020. 

In a nutshell, the TCA provides that ongoing trade between the UK and the EU will not be subjected to tariffs or quotas. This will apply on the condition that goods must be produced in the UK or the EU to benefit from the scheme. The TCA is intended to ensure that the British economy does not take a hit post Brexit, however, it comes with its own cans of worms.

Currently, there are still plenty of details yet to be ironed. The immigration consequences of Brexit (i.e. regulatory red-tape and border controls) will adversely impact more than $590 billion in annual trade in goods between the U.K. and EU member states. Furthermore, other economic barriers to trade are estimated to increase costs for British companies by around £17 billion and for EU companies by around £14 billion each year.

Implementing the TCA

It is still unclear as to how the TCA shall be fully implemented as there are still gaps in the clarity of regulations. Still very much a work in progress but the UK and the EU economies cannot wait – markets are constantly on the move. Especially as economies are still recovering from the global pandemic. 

What we know is that trade shall continue as it would have pre-Brexit – without tariffs and quotas, as long as the goods originate in the EU and the UK. What we do not know iis something on which the UK and the EU are yet to reach agreement: the standards that products shall be held to in order to be eligible for trade under the TCA.

We may need certifications in the UK, we may need certifications in the EU, we may need a combination of both in order to ensure that goods meet the standards for trade. It is hard to decipher when we do not know what the standards are yet. This gap in knowledge will create additional costs and cause border delays that will prove to be barriers to trade (i.e. for agriculture and animal products).

Where can I learn more?

To stay on top of developments regarding Brexit and other key financial concepts, check out our stock market course page. If you want to learn more about investing, our helpful courses below will take you through everything you need to know.

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Srijani Chatterjee
Financial Writer
Srijani is the quintessential Third Culture Kid having grown up in India, Singapore, Malaysia, The Netherlands, Scotland, and England. She still loves to travel and speaks… read more.