The one-year anniversary of Britain’s historic vote to leave the European Union has passed. Many are sitting in anticipation for the next move and how the parties involved will be affected. Britain’s leaders remain adamant about reaching an agreement. By withdrawing the Article 50, the UK reiterates their stance on leaving the union by March 29, 2019.
However, the question about Brexit’s terms and the inevitable implications remain unanswered. Any scenario will have adverse and positive effects on Western Europe’s economy. Each scenario examined in this article spans from a highly disruptive Brexit to the most fluid Brexit.
The most disruptive scenario involves no deal. Here, the UK would be exempt from the thousands of international agreements under the EU. No deal would be disastrous among business in Britain. Nothing but a pure headache would result from this scenario.
To prolong a permanent Brexit, the UK and EU can agree to negotiate the relationship later. Still, this is no smooth transition. Furthermore, interim trade would follow the World Trade Organization’s rules. Britain would be forced to focus on self-sufficiency and benefit from less competition outside their borders. Conversely, the UK would lose all trade terms with non-EU countries.
A likely scenario for the UK involves an agreement on tariff-free trade in goods with the EU. The UK can trade with other countries at the expense of giving up access to the EU’s services sector. Instead of relying on WTO rules, the UK’s automotive, pharmaceutical and aerospace sectors would benefit. The main drawback lies within the services sector, which accounts for almost 80% of the UK economy. Financial services, such as banking and insurance, lose their right to sell services to the EU. Keith Knutsson of Integrale Advisors reported that “Many businesses in London are anxious about Brexit’s effect on the services sector and its role in the ongoing negotiation with the EU.”
Another scenario involves a comprehensive deal attempting to address many aspects of trade within the bloc. However, a more comprehensive deal means more regulation. Benefits include the UK selling services to the EU. Additionally, not much would change since the UK is already in full compliance with EU regulation.
To ease pressure at the UK and EU borders, the two could agree to a new customs bloc. No physical checks would be necessary at the border, deals currently under contract would remain intact and both the UK and EU’s manufacturing sectors would benefit.
The least disruptive scenario involves the UK remaining in the single market. The UK could continue selling services across the EU and large companies, manufacturers and construction companies would still enjoy the free movement of labor.
There is no doubt Brexit’s ripple effect will be felt. Over a year has passed since the vote on Brexit and the earliest agreement will not be until 2019. Without creating a civil war within the UK, three essentials need to be settled. A withdrawal agreement and future relations agreement, legislation to forgo EU laws unfair to the UK’s economy, and a successful exit plan.