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EDITORIAL ANALYSIS:Brexit-Britain’s challenges remain

Source: The Hindu, Indian Express, Indian Express


  • Prelims:Current events of international importance, Brexit, EU etc
  • Mains GS Paper II:Bilateral, regional and global grouping involving India or affecting India’s interests etc



  • Rishi Sunak has claimed several records this week — Britain’s first Asian Prime Minister, the youngest in two centuries, and certainly the wealthiest in living memory.





  • It refers to Britain holding a referendum to decide whether it wants to continue membership under the EU or not.
  • The referendum was held on 23rd June 2016 and 52% voted for BREXITwhereas 48% voted for remaining within the EU.
  • Lisbon Treaty: The UK has to invoke an agreement named Article 50 of the Lisbon Treaty.


Reasons for Britain to seek BREXIT:

  • Sovereignty: Some of the policy decisions such as competition policy, agriculture, copyright, and patent law were against the interests of Britain.
  • Regulations were becoming a Burden: Such as –limits on the power of vacuum cleaners, non-recycling of tea bags, etc
  • Immigration: Britain was not a signatory of the Schengen Border free zone(allows easy travel across Europe)-opposition towards migration into the country from within the EU and its effects on wages and public services.


Arguments in favour of Britain leaving the EU:

  • Migration of people: It will stop migration from both within and outside the EU, especially from West Asia (Syria and ISIS Issue) and East European nations.
  • Contributions to EU Budget:The UK’s contribution is not proportionate to the benefits it gets back.
  • Failure of EU: EU failed on several fronts in creating one community and one identity while solving the differences among its members, including Britain.


Arguments against Britain leaving the EU:

  • Great divide:It has reflected the great divide between Britain and the EU.
  • Immigrants: Majority of the immigrants are young and hence would have boosted economic growth and will help pay for the public services.
  • Trade: Trade gets a major boost for Britain if it stays with the EU.
    • Selling products to other EU nations becomes easier with EU membership.
  • Security: leaving the EU affected the ability to fight cross-border crime and terrorism.


What did  the referendum indicate?

  • Brexit was not an event:It was a process, and one with a long tail.
  • Disentangle itself: from all the trading, financial, legal, bureaucratic and cultural ties that bind Britain to the world’s largest single market.


What should Theresa May(former PM) have opted for?

  • Norway-type agreement:
    • It would have allowed for Britain to remain in the European Economic Area
    • Pursue a customs agreement with the EU, thereby protecting its most important trading relationship
    • Nominally bringing political control back to Westminster.

What she opted for?

  • She pursued a complete break with the EU.


Current Issues:

  • National Health Service (NHS):under-funding and a lack of staff
  • Turbo-charged growth: once the constraining labour laws and financial regulations of the EU were discarded
  • Comforting delusions: that countries would be lining up to sign trade deals with a ‘free’ Britain, so too

Liz Truss stand:

  • Pushing the myths of Brexit to their logical conclusion
  • She persuaded slash taxes for the rich
  • Appeal to bankers and their high risk strategies.



  • Lack of international investment: International investors do not buy into myths.
  • Declining confidence: The long-term prospects for Britain was signaled from 2016 with the fall of the pound.
  • Trade deals in the form of what countries wanted in return: In the case of India, a more favourable visa regime for its workers.


Manifesto promise by Rishi Sunak:

  • Strengthening the National Health Service (NHS): the UK’s publicly funded healthcare system:
  • Investing in schools: increased funding to schools and teaching staff.
  • A stronger economy: Tax cuts for the working class, protection of pensions for the retired, and leveling up the skills of British workers and making them more employable.
  • Safer streets:more and better equipped police personnel and more prisons
  • Tighter controls on immigration




Stagnant economy

  • Derailed  government finances.
  • Growing cost of living crisis
  • The Moron Premium:
    • The increased interest rates are being referred to as the “moron premium.
    • Truss-Kwasi Kwarteng decided to increase spending (including giving tax cuts to the richest) by simply borrowing more.

Key challenge facing the UK economy:

  • Trade shock: an increase in the price of imports relative to exports
  • For households: the looming cost shock will hit those least able to bear it
  • The weakness on the supply side of the UK economy: While output is 2.6% short of its pre-Covid trend, current excess demand is in the order of 1.4% of GDP.
  • Unemployment: It is expected to rise in the near term as demand falls.
  • Inflation: It  is expected to rise further


Three major challenges that he must address immediately:

  • Containing inflation: while addressing the cost of living crisis.
  • Improving the government’s fiscal health: while preparing the grounds for growth.
  • Political stability: Re-establishing political stability.


Implications for India:

  • Trade: India-UK trade got a boost. The stringent regulations of the EU which were the biggest obstacle were done away with.
  • The weakening of pounds: It will also be advantageous for Indian imports.
    • It will also benefit tourists and Indian students studying in the UK.
  • Indian Businesses in the UK:Indian businesses will not be able to utilize the UK as the gateway to the European Union.
    • Indian IT firms which have considerable exposure to the European markets, particularly the UK, will be affected since there is a risk of a decrease in growth levels in the EU and UK.
  • Tourism: Due to the weakening of the pound, there will be a decrease in tourists flowing into India from Britain.
  • Immigration: India-UK trade agreement is locked because of the immigration issues.
  • Indian students in the UK: Got benefited since the number of applicants from EU nations to the universities in the UK is likely to decrease after Brexit.
    • Weakening of the pound may lower down the total cost of education for Indian students.


The Roadmap 2030:

  • It was launched in 2021, during the India-U.K. virtual summit.
  • Mains focus area:Free Trade Agreement(FTA) between the two countries.
  • Bilateral relations: It elevated bilateral ties to a “Comprehensive Strategic Partnership.
  • Framework for UK-India relations: across health, climate, trade, education, science and technology, and defense.


Way Forward

  • Estimates calculate a 4% drop in productivity in 15 years: As a result of the Brexit-induced loss of market access and openness to trade
  • Politically sensitive decision: It would involve difficult and politically sensitive decisions such as asking nurses, who had risked their lives during the pandemic, to settle for lower-than-promised raises.
  • Truss government’s attempts to repudiate ‘economic orthodoxy: with deep, unfunded tax cuts. Though they have been reversed, the cost of the economic folly remains.
  • Rishi Sunak’s current in-tray will have briefings on: soaring inflation, rising mortgages, a continuing cost-of-living crisis, an NHS in crisis, and strikes by multiple workers unions.
  • Uniting the Tories: It is the necessary first step for any economic decision-making to be taken seriously by the markets and the rest of the world.




  1. The aim of Information Technology Agreements (ITAs) is to lower all taxes and tariffs on information technology products by signatories to zero. What impact would such agreements have on India’s interests?(UPSC 2014)

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