A deep reshuffle of the global financial markets seen through the Brexit turmoil

Britain’s Brexit has become a thing of the past, but its ripple effects continue to ferment in the global financial markets. This four-year political saga not only redefined the UK’s political landscape but also had a profound impact on investors’ asset allocation. This article will start from actual market fluctuations to help you understand the economic logic behind the Reasons for Brexit, and how this historic event has reshaped the global trading pattern.

1. Why Did Brexit Become a Reality? Analysis of Three Deep-rooted Causes

Confidence Crisis Triggered by Economic Recession

Long-standing structural imbalances within the EU, with core countries leading production and peripheral countries gradually becoming consumers. After the 2008 subprime mortgage crisis, the Eurozone crisis followed, plunging the entire euro area into a quagmire. Although the UK did not join the Eurozone, as a core member of the EU, it had to extend a helping hand, which led domestic public opinion to question the EU’s economic system—thus brewing “Euro skepticism.”

Unexpected Turn in Political Gamble

Before the 2016 referendum, then-Prime Minister David Cameron made a bold promise to gain more votes: if re-elected, he would hold a referendum on Brexit. At that time, hardly anyone believed the Leave camp would win; most MPs from the Conservative, Labour, and Liberal Democrat parties supported remaining in the EU. However, history loves to play tricks—Brexit supporters reversed the situation with a narrow 51.9% support, and Cameron resigned. This high-stakes political gamble, betting on the nation’s future, ultimately ended in failure.

The Refugee Crisis as the Final Straw

The EU mandated member states to accept refugees, but a large influx of refugees crowded out local employment opportunities, diluted education and healthcare resources, and drove up housing prices. As a model of low unemployment, the UK naturally refused to bear this additional burden. After 2015, the worsening EU refugee crisis became the most compelling reason to sway public support for Brexit.

2. Brexit Timeline: A Four-Year Continuous Drama

The entire Brexit process can be divided into several key milestones:

2016: June 23 referendum decision; July, Theresa May becomes Prime Minister, the UK’s second female PM.

2017: March 29, officially triggers Article 50, starting a two-year countdown for negotiations. June, general election; November, EU institutions begin relocating from London.

2018: March and November, EU reaches draft withdrawal agreement and political declaration respectively, seeming to herald a glimmer of hope.

2019: January, the first agreement is overwhelmingly rejected by Parliament (432 votes to 202); March, second vote fails. Theresa May resigns in July, replaced by Boris Johnson. October, new agreement reached and approved, Brexit date postponed to January 31 of the following year. December, Conservative Party wins the highest support since 1987 in the general election.

2020: January 23, the EU (Withdrawal Agreement) Act is approved; January 31, the UK officially leaves the EU, with a transition period until December 31.

2021: January 1, trade agreement takes effect, marking a new era for the UK with other countries.

3. The Double-Edged Impact of Brexit on the UK

Potential Benefits

Post-Brexit, the UK can independently refuse refugees, easing social pressure. The £23 million daily EU membership fee can be redirected to domestic development. Most importantly, the UK gains full political and economic autonomy, no longer constrained by EU regulations, enabling free trade agreements with countries worldwide.

Real Challenges

However, the gap between ideals and reality is significant. The EU accounts for 46.9% of UK exports and 52.3% of imports, making it the UK’s largest trading partner. Post-Brexit, this close economic relationship will inevitably face obstacles, causing significant short-term impacts on the UK economy. Whether new agreements with other countries can fill the gap remains a key variable for the UK’s economic outlook.

4. Turmoil in Global Financial Markets

Chain Reaction in Stock Markets

Following the UK’s formal exit in early 2020, global stock markets experienced volatility. European financial stocks, automakers, airlines, and related sectors bore the brunt, as these areas are most sensitive to UK-EU trade relations. Although trade agreement reached in 2021 eased some fluctuations, logistics and transportation companies still face new rules and challenges in cross-border operations.

Sharp Fluctuations in the Pound Exchange Rate

The most direct manifestation of Brexit uncertainty is the sharp volatility of the GBP/USD exchange rate. When the UK officially exited in early 2020, the pound experienced intense fluctuations in the short term. By early 2021, with the trade deal settled, the pound stabilized somewhat, but macro factors such as the pandemic, economic recovery expectations, and central bank interest rate policies continued to exert pressure.

In 2022, escalation of the Russia-Ukraine conflict further intensified GBP/USD price swings, with upward momentum weakening. However, as global central banks gradually raise interest rates, market dynamics began to shift. From multiple perspectives, 2022 and beyond may mark a turning point in trading GBP and other currency pairs.

5. Common Questions Investors Should Know About Brexit

Why is the Brexit process so lengthy?

Four years, two general elections, three Prime Ministers—these numbers say it all. While the Reasons for Brexit are clear, implementation has been fraught with difficulties. First, the Brexit agreements themselves involve major disagreements—soft Brexit, hard Brexit, Chequers plan, no-deal Brexit—these four options have yet to reach consensus between the UK and EU. Second, most UK MPs are pro-EU, and the Brexit process has been turbulent domestically. Third, the complex and sensitive Northern Ireland–Ireland border issue complicates matters; both sides agree to avoid a “hard border,” but specific implementation plans have yet to be finalized.

The global outbreak of COVID-19 has further worsened the situation, with economic standstills severely hindering negotiations.

Understanding the Difference Between Hard and Soft Brexit

Soft Brexit means that although the UK nominally leaves the EU, it maintains close economic and trade ties with EU member states, at the cost of making certain concessions—such as allowing EU citizens to enjoy some benefits.

Hard Brexit, on the other hand, is a true “break in relations”—the UK will sever most ties with the EU, no longer be bound by EU rules, and trade will need to be renegotiated entirely.

In reality, the final Brexit outcome lies between these two extremes—neither fully soft nor entirely hard, but a pragmatic compromise.

This globally watched event of Brexit is not only a political decision but also a reflection of countries re-evaluating sovereignty and interests amid the wave of economic globalization. For investors, understanding the Reasons for Brexit and its process is essential to more accurately grasp market volatility and uncover trading opportunities.