What Brexit means for UK trade and economy?
Since Britain voted to leave the EU back in 2016, the British government have been frantically negotiating a plan for what happens post-Brexit. But it seems Brexit has been faced with obstacles every step of the way.
When Brexit was announced, conservative David Cameron (the then-current Prime Minister) resigned, unwilling to lead the country in a deal he didn’t agree with. Since then, the government has undergone a lot of reshuffling, with several cabinet members resigning.
But as we approach the official date of Brexit, plans are being finalised and put to the vote. So we’re starting to get a better idea of what’s in store for the UK and their relationship with the EU, and what Brexit will mean for those involved.
What’s happening with Brexit now?
In just a few months, on the 29thMarch 2019, the UK is scheduled to officially leave the EU, after nearly three years of negotiations. But the closer Brexit gets, the more tension seems to rise in the UK.
Brexit promised economic independence, better trade agreements, and the freedom to create a new immigration plan. But a successful Brexit deal turned out to be harder than anyone thought it would be. No one has been able to successfully suggest ways of achieving the goals set out in the leave campaign, and Brexit will definitely not be a clean break as promised.
In fact, Prime Minister Theresa May pushed for a 21-month period after Brexit during which the UK is still technically a part of the EU economy, simply to give the UK more time to sort out an effective Brexit strategy.
It’s already taken a long two years for any sort of draft plan to be agreed upon, but finally Theresa May publicly announced a deal had been made.
However, the deal was by no means final, in fact it was more of a draft. The deal has been approved by several MPs and even some EU leaders, but on Tuesday 11thDecember it will be debated in the House of Commons. The House of Commons will vote on whether or not they agree upon the withdrawal terms laid out by the deal.
But with rumours of MPs road-blocking the deal, both the UK and the EU are fearful of a ‘no-deal’ Brexit, which would be unchartered territory.
How is Brexit affecting those in charge?
Politics always sparks controversy, but Brexit has managed to divide an entire party. Part of the reason it’s taken so long for Britain to come up with a solid deal is because party members struggled to agree every step of the way.
As a result, many cabinet members have resigned, and with each resignation, the Conservative government gets weaker. Amongst the resignations was Boris Johnson, who was a key figure in the leave campaign, but resigned as foreign secretary because he believed Brexit was a dying dream under Theresa May’s rule.
Johnson’s resignation, along with the resignations of several others, including the Science Minister’s resignation just a couple of days ago, show that both the British people and members of May’s party are losing confidence in Brexit and in Prime Minister Theresa May.
The inter-party conflict has lost Conversative party a lot of support, even from those that initially voted for Brexit. In 2016, 52% of people voted to leave the EU, but surveys now show that if given the option to vote again on the matter 59% of people would vote to remain in the EU.
What is the economic impact of Brexit so far?
One of the main reasons the UK voted to leave the EU was because people believed it would be a chance to improve the UK economy. The UK had grown sceptical of the euro since the 2008 financial crisis, and was reluctant to continue paying for EU membership.
However, economists agree that so far, Brexit has done more harm than good for the UK economy. The pound has already weakened, and it’s expected that the economy will soon be 1.2% weaker than it was before the Brexit vote. Whilst 1.2% might sound like a small decrease, this translates into a £24bn drop.
Different economists have different predictions about exactly how badly Brexit has and will affect the economy, but putting specifics aside, economists are in agreement that it’s not looking good. The different possible Brexit outcomes have been assessed, and in every case, the cost of leaving the EU is unexpectedly high.
However, we have to bear in mind that Brexit hasn’t actually happened yet. Economists have begun comparing the current economy to the economy before the EU referendum, but the economy may rise once a Brexit deal has been reached.
If a successful Brexit deal is agreed upon, one which outlines healthy political and trade agreements with both European countries and the rest of the world, the UK may well be able to deliver on its Brexit promises. The five days of debate starting on the 11thwill give us a better idea of what’s to come.
What’s the trade impact of Brexit?
The deal proposed by Theresa May means, if approved, the UK will continue to trade as normal with the EU. So for 21 months after the 29thMarch 2019, the UK will trade as normal but will have to comply with existing EU laws, and any new ones that are brought in during that period.
The UK will be free to create new trade agreements with other countries during the transaction period, but these can’t be brought into play until after the 21 months is over.
The UK would like to create a deal with the US that benefits both countries in terms of trade and economy. And likewise, the US wants to create a transatlantic free trade agreement as soon as possible. However, May’s 21-month transition period means that a UK-US trade agreement won’t be possible for quite a while. Continuing to comply with EU laws means the UK might not be free to trade with the US.
There’s also the issue that even after the transition period, the UK may have to choose between EU and US trade. And considering the UK does the most trade with the EU, it’s unlikely that it could afford to risk losing that trade. So the UK may be stuck in a position where they have to continue trading mainly with the EU, but paying tariffs that didn’t exist pre-Brexit.