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Saturday, 21 July 01:36 (GMT -05:00)



Business And Politics News

Any Brexit Scenario Will Damage the British Economy


In practice, there can be multiple Brexit scenarios, i.e. the scenarios of how the United Kingdom will exit the European Union. Experts say that almost any scenario will damage the British economy to some extent. Moreover, there will be some economic damage to both the UK, the USA, and the EU.
 
Not so long ago, RAND Corporation (Research and Development Corporation) studied possible Brexit scenarios and published the “After Brexit” report. The report concludes that regardless of the agreements between London and Brussels, the British economy (as well as the economies of the USA and EU) is doomed to be considerable Brexit consequences.
 
At the same time, the international community has been debating mostly about the variations – whether this is going to be the hard version of Brexit or the soft one. Simply put, this boils down to whether the UK should quit the Single Market as well as the Customs Union or not. It is interesting to note that the parties have several trade opportunities to choose from.
 
As for the trade arrangement they will eventually choose, the experts believe that it will largely depend on the negotiations between the European Union and the United Kingdom. Apparently, finding a perfect solution for both of them won’t be an easy task. The Brexit talks is expected to be a real challenge for the UK since the UK is going to break most of the existing economic ties with the EU and will definitely have to set new ones.
 
All in all, RAND experts studied 8 likely trade scenarios of the post-Brexit world whether the UK, the EU and the US will have to cooperate in a new economic environment. Like we already mentioned, the UK is likely to be worse-off in any of the scenarios, especially if the UK and the EU fail to compromise and sign a new trade agreement on different terms and conditions. Apparently, since Europe is really important for the British economy, London is really motivated to end up with some sort of trade agreement with Brussels, especially if it involves some sort of open trading and investment opportunities for Great Britain.
 
As for the best option for everyone, the experts say this can be an agreement between the USA, the UK, and the EU. However, they don’t really believe this is going to happen given the existing political situation in the world.  
 
So, let’s take a closer look at the most important findings RAND experts came up with:
 
Number one, is that UK will have to face some economic damage anyway. The question is, how big it can be, and this depends on future post-Brexit trade agreements.
 
If there is no agreement, this coupled with WTO rules will make the UK lose 5% of the GDP over the next 10 years, which is around 140 billion dollars. This is the worst-case economic scenario for the UK. The same WTo rules will make the EU lose 97 billion dollars.
 
The option of leaving the EU with no deal and entering World Trade Organization (WTO) rules would lead to the greatest economic losses for the UK. This would reduce future GDP by around five per cent over ten years, which is a loss of $140 billion.
 
A trilateral agreement between Washington, London and Brussels is considered to be the best-case scenario, especially if this some kind of a free-trade agreement. However, despite being the best scenario possible, it’s also the most probable one given the current conditions.
 
The UK will lose influence on the process of making economic, political and geo-political decisions inside the EU, which is something the USA is definitely going to miss.
 

 

Nobody knows which scenario the parties are going to implement. But we know for sure that it’s in the UK’s best interest to try and end the Brexit process with some kind of agreement with the EU and USA.

 

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In February 2018, 7 out of 10 base components of Goldman Sachs' Global Leading Indicator (GLI) dropped a bit. The bullish momentum started weakening and slowed down from 0,249% down to 0,234%. These are the weakest figures since March 2016.

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