I was fortunate enough to attend a webinar by Reuters this afternoon, discussing the ramifications of Brexit and the steps ahead to ensure the UK makes the most of Brexit Britain.
There is no doubt that the UK has many challenges ahead, the financial sector for example, will likely bare most of the burden if the UK does not retain some of its passporting rights with other European neighbours.
The bulk of the UK’s exports are not goods, but services, and these services reflect mostly in the financial sectors that currently dominate the capital of the country. There is concern, that London could lose its status as the financial hub of the World, unless Theresa May is able to secure a similar status with the bloc it wishes to leave behind.
But will the UK leave the bloc altogether? The hope is that the UK will opt for a ‘Soft Brexit’, maintaining some membership with the EU. The EEA (European Economic Area), allows the UK to maintain most of its agreements with the EU which would benefit the financial sector and prevent business from moving into central Europe.
Whilst this option offers an ‘all singing, all dancing’ approach to Brexit from a business perspective, it does not answer the concerns of those that opted to leave the EU, it does not necessary offer a curb on immigration, and it does not allow the UK to ‘take back’ control over policies set in Brussels. The option of ‘Soft Brexit’ would not sit well with leavers unless some special deal can be struck.
Anyone that understands how the EU operates, understands the complexities and policies that underline free trade and thus, free movement of people. Switzerland held their own Referendum in 2014 to limit free movement and are yet to come to any agreement on such matters. The UK will have a difficult time cherry picking negotiations, as highlighted by Jean Claude Juncker, Wolfgang Schauble and EU president Donald Tusk.
One of the key points that was driven home by the discussion today was the option of a so called ‘Hard Brexit’, a complete removal from the bloc and therefore a return to WTO rules. The implications on the financial sector could be huge unless the UK could offer passporting rights and equivalent policies to other European nations, which in any event, could take far longer than the 2 year time-frame offered by Article 50.
Whilst this could solve the problem of immigration, and could offer opportunities for the UK to open free trade deals elsewhere, it does raise more questions than it solves.
For one, the UK as a lone wolf must arrange not only agreements with other nations, but also quotas which could conflict with the EU. There is also the concern that the UK’s negotiating will be limited given the huge rise in globalisation.
A good example of this would be TTIP, the US are pushing for their own trade agreements with blocs as opposed to individual nations. Barack Obama warned that the UK would be back of the queue in trade negotiations. As a business you can appreciate that trading with a national supermarket is far more profitable than say, an independent newsagents.
Whilst the webinar did offer some ‘what if’s’, it did not offer much in the way of reassurance and it’s not difficult to see why. The UK has not even left the EU yet and probably won’t until the latter part of 2019. Whilst there is every opportunity other EU nations could call their own Referendums, or at least look to curb immigration, much of these potentials offer very little for a nation held in Limbo, unable to provide a clear post-Brexit plan.
Yes the Pound has slumped, and whilst this may help British exports, it doesn’t provide much use to a nation that is a net importer. And with the Bank of England cutting rates to a record low, it would seem likely that the government will have to pull its weight in stimulating the economy. We will wait in anticipation for Philip Hammond’s Autumn statement which could differ greatly from his predecessors’ austerity measures.
The UK has some complex challenges to overcome, and it would seem that a one-size-fits-all plan is looking less likely.