Brexit

According to the current plans, the United Kingdom will leave the European Union on 29 March 2019. But what happens next is still a mystery. Although some of the analyses forecast a splendid future if Brexit becomes reality, most of them are more replete with darker shades. However, Brexit is disadvantageous not only to the British, but to other European countries, too. Among them, Hungary has a premier position, and might be one of the biggest losers of the UK’s break with the EU.

According to the current plans, the United Kingdom will leave the European Union on 29 March 2019. But what happens next is still a mystery, and since the vote in June 2016, there have been a lot of studies and predictions about it. Some of them forecast a glorious future for the UK with a prospering economy, but most of them foresee exactly the opposite.

The latest study of Oxford Economics belongs to the latter group. It states that should the UK leave without a deal (a so called “cliff-edge” exit), the British GDP will fall by 2% by 2020, and the remaining EU member states would also suffer a significant loss: 1% in Ireland, 0.5% in Hungary and the Czech Republic and 0.4% in Poland. The Hungarian 0.5% is in match with the 0.4% that Mihály Varga, Hungarian Minister for National Economy, mentioned last summer when talking about the consequences of Brexit for Hungary.

Why Does It Affect Us Too?

1. Cut in the cohesion funds

After Germany, the UK is the second biggest contributor to the EU budget. The funds for the cohesion policy are allocated from this budget, made up by the contributions of the member states (and some other sources). Hungary has received thousands of millions from this money in the last few years, which contributed significantly to the rise of the economy in the country. Presumably, the money spent on cohesion policy will decrease once the UK’s contribution is out.

However, this is not a pressing issue yet, as the EU plans its spending in a seven-year framework. The current one lasts until 2020 (some payments until 2023), and the United Kingdom – according to the current standpoint of the negotiations – intends to fully pay its part until the end of the term. What will happen after 2020 is not yet known.

2. Hungary’s trade relations with the UK

As Hungary has a small and open economy, it is vulnerable to international changes in trade. According to statistics, in 2016, 2% of our import came from the UK, and 4% of our export went there. The volume of trade between the two countries might decline, or at least suffer a temporary halt after Brexit until everyone adapts to the new situation. As there have been no words on the terms regarding the trade between the UK and the EU, we do not know any details as to how it will work out for us.

But Why Hungary Especially?

In 2004, only three countries decided upon opening their borders completely to the new member states: Sweden, Ireland and the United Kingdom. Originally, almost all of the countries were on the same course of action, but they decided last-minute upon a seven-year transition period. The UK did not change its decision and, because of that, they ended up with a lot more immigrants than they originally calculated. About 200,000 people entered the UK in two years, most from the former Eastern bloc – including Hungary. They originally estimated about 5-13 thousands. They learned their lesson and imposed the seven-year transition period in 2007 for Romania and Bulgaria.

So, if we look at migration inside the EU, most immigrants in the UK came from those countries who joined the European integration in 2004. This explains the high level of Hungarians, Poles and Czechs in the country, and why Brexit is especially important for these nations.

According to Eurostat (2016), about 100,000 Hungarians live in Great-Britain, not counting the students and the seasonal workers. Most of them are employed in wholesale and retail trade, hotels and restaurants, or in the manufacturing sector. Most of the time, we focus on the negative effects of migration from Hungary to Western Europe, and we forget that those people contribute significantly to the Hungarian economy as well. For example, they regularly send money home, probably to their families.

Source: ksh.hu, author: Kitti Bocskor, license: CC BY-NC-ND 2.0

About third of the Hungarian remittances comes from Britain. Looking at the diagram, we can see that the amount of remittance grew since the financial crisis in 2008, although it slowed down in the last few years. However, this does not mean that less people leave Hungary. Quite the opposite, now it is not just single persons but entire families who leave and, consequently, there is no need to send money home.

How will Brexit affect migration from Hungary to the UK and the Hungarians living in the UK? As most of the people working in Britain are employed in jobs where human capital is always needed, they are not likely to suddenly lose their jobs. Nevertheless, they might suffer the anti-immigration atmosphere that accompanied the Leave campaign. Also, there are talks about the British Government introducing a stricter immigration policy after Brexit, which would maximise the number of people entering the country yearly.

Due to the uncertainty, less people from Hungary might choose the UK as their destination, but it does not mean they will not leave. They will just end up in a different EU member state, and will still send back money to their families. So, while Brexit may change the trend of migration from Hungary, it will not affect its volume.

As we can see, it would be a good idea for everyone to follow the Brexit negotiations, since they will affect us more than we think.

Opening pic: Shutterstock