Brexiteers have long argued that leaving the European Union, with or without a trade deal, would herald Britain’s so-called sunlit uplands of economic prosperity.
But the outlook remains uncertain, as the economy struggles to recover from a recession sparked by the coronavirus outbreak.
Britain will nevertheless embark upon life outside its main trading partner on January 1, 2021, leaving the EU single market and customs union that benefitted “UK plc” for decades.
– ‘Inevitable disruption’ –
Capital Economics analyst Thomas Pugh says there will inevitably be disruption but predicts it might not be long lasting.
“If there were a deal it would probably mean no tariffs or quotas on goods, and trade in services would probably remain similar to how it is now,” Pugh said in a research note, also sounding optimism over a possible deal for key financial services.
In the absence of an agreement, Britain will revert to World Trade Organization (WTO) rules which would see tariffs imposed on a wide range or products, from car parts to beef.
UK companies would face an overnight spike in their costs — which they are expected to pass on to consumers in the form of higher prices, particularly for imported fresh food products.
“There would be some inevitable disruption as firms get used to the new rules — there will be ‘rules of origin’ checks for the first time in many years,” predicted Pugh.
The documents, unveiled in late 2018, also suggested that GDP would still be diminished by 4.9 percent — even in the event of a trade deal.
Although a free-trade agreement would eliminate or sharply cut customs duties, it does not remove all red tape or border controls.
Britain is therefore pressing ahead with the construction of giant lorry parks in Kent, southeast England, as it looks to prevent gridlock on the roads in and out of London.
– ‘Last leg requires biggest leap’ –
Businesses and markets alike were stunned in 2016 when British voters chose to end almost half a century of European integration.
Fast forward four and a half years, and the business community is still urging the government to do everything within its power to avert a cliff-edge no-deal departure.
Instead, they are urging compromise with Brussels.
“It’s a deeply frustrating moment for business people,” said Tony Danker, the new head of business lobby group the Confederation of British Industry, in an interview with the Financial Times newspaper.
“We see the landing zone of compromise very clearly,” he said.
“But this isn’t business, it’s politics. And it’s a time for political leadership on both sides. The last leg always requires the biggest leap.
“Failure to get a deal over the line would cast the net even wider of businesses facing a bleak end to 2020.”