LONDON: Should Britain finally leave the European Union on Oct 31, UK business will continue to face investment uncertainty as the country looks to agree trade deals, notably with the EU.
British business groups, companies and trade bodies cautiously welcomed last week’s news that Prime Minister Boris Johnson had struck a new Brexit divorce deal with the European Union, helping to reduce the uncertainty that financial markets so much dislike.
Yet even if UK parliament approves the deal by the looming Brexit deadline or following a short extension, British business will still face a new wave of prolonged uncertainty.
Britain could even still crash out with no deal next week.
“Under almost any scenario, Brexit uncertainty will continue to weigh on investment,” said Jonathan Portes, an economics professor and part of “The UK in a Changing Europe” research group.
“And the UK economy may well be in recession, due to a combination of Brexit uncertainty and global factors,” he told AFP.
Under Johnson’s deal, Northern Ireland would remain part of the UK customs area, with goods imported to the province from outside the EU will be subject to UK duties as usual.
But if goods from non-EU countries come into the EU via Northern Ireland, it will be up to Britain to apply EU customs.
“The UK in a Changing Europe” estimates that even a decade after Brexit, Johnson’s deal could slash British GDP per capita by between 2.3 per cent and 7pc, compared with the nation remaining in the European Union. The forecast is close to the government’s own predictions given one year ago.
Another uncertainty is the outcome of a UK general election, widely expected in the coming months as Johnson seeks to secure a Conservative majority in the House of Commons for the next stage of the Brexit saga -- forming new trade agreements.
But should the main opposition Labour party win, its leader Jeremy Corbyn has promised a major renationalisation programme that would deal an entirely different set of economic cards for the country as it negotiates separate trade deals with the EU, the US and other nations.
Britain’s biggest business lobby group, the CBI, is calling for a future treaty with the EU to reduce tariffs and quotas as much as possible to preserve the fluidity of trade with the United Kingdom’s largest export market.
A future treaty must address also the thorny issue of trade in services that represents the bulk of the UK economy.
On manufacturing meanwhile, the CBI on Tuesday published a survey showing that UK output continued to fall in the quarter to October.
“A combination of Brexit uncertainty and weaker global growth are clearly hitting sentiment and export prospects, with job prospects at their weakest since the global financial crisis” more than a decade ago, noted CBI chief economist Rain Newton-Smith.
Published in Dawn, October 23rd, 2019