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CONSEQUENCES OF A BREXIT WITHOUT AGREEMENT

During the 2010 general elections in the United Kingdom, David Cameron, who was playing his place as prime minister, promised that, if he won the election day, he would organize a referendum on British permanence in the European Union. Thus, once re-elected, June 23, 2016 was set as the date to carry it out. After a weak campaign for the permanence launched from the government of Cameron and a campaign based on deceptions on the part of the ‘ brexiteers ‘, the United Kingdom decided to withdraw from the European Union by a narrow margin.    

After these results, David Cameron resigned and the conservatives chose Theresa May -who occupied the portfolio of the interior- as his deputy at the head of the British government. Thus, it was she who notified the European Commission, on March 29, 2017, of the UK’s intention to resort to Article 50 of the Treaty of Lisbon, formalizing the beginning of the divorce process between the parties. With this notification began the two-year countdown that would mark the withdrawal of the British from the EU. Thus, the divorce date will be Friday, March 29, 2019, regardless of whether an agreement is reached or not.

The European Union is a space for the free movement of people, goods, services and capital; However, he always found in London a strong counterweight to the integration process. During the Brexit negotiations , Brussels repeatedly told the UK that it can not be part of the commercial benefits of belonging to the EU bloc without the obligations that other freedoms entail. After a year and a half of tense talks between the Commission and London, both sides reached an agreement in November 2018.

However, the preliminary agreement between the EU and the UK needs the approval of the British parliament; whose vote will take place next January 15. It should be recalled that, last December, May managed to overcome a motion of censure promoted by parliamentarians who oppose the agreement with Brussels, which would have cost her the position as prime minister and would have added more uncertainty to this divorce process.

However, just on January 8, the British parliament blocked “the economic capacity of the Executive to face an exit from the European Union without agreement . ” And, on January 9, the parliament approved an amendment that forces May to present an alternative plan in just three days, if it votes against the agreement reached with Brussels on January 15.

By virtue of the above, it is increasingly possible for the UK to leave the EU without an agreement. In this sense, businessmen, investors and decision makers need to prepare for such a scenario.

The first big challenge of a Brexit without agreement would be the customs congestion. The free movement of goods has generated a continuous and fluid traffic of ships in British ports. Upon entry into force of the formal EU divorce, these ports will tend to become congested as there would be no free movement of goods. The British government has allocated 100 million pounds sterling to rent ferries in order to relieve congestion. This was done as a contingency plan under the assumption that France imposes customs control in the port of Calais, causing delays of several hours in the unloading of British ships.

There is also uncertainty about the consequences for the nearly 4 million Europeans living in the United Kingdom. A massive repatriation of labor can lead to significant decompensation in the British labor market, affecting industries such as chemistry and automobiles; which will generate greater inflationary pressures for its economy. Recall that, similarly, expected a slowdown in its economy and even a possible recession. This will undoubtedly also impact its main European trading partners: Germany, France, the Netherlands, Belgium and Ireland. The above would go hand in hand with a generalized increase in import prices for the tariff costs that both London and the European Union would impose.

On the other hand, there has already been a significant reduction in the price of real estate in London. This is indicative of which companies are looking to leave British territory to continue enjoying the legal and commercial benefits of belonging to the European single market. Being The City the financial capital of Europe, many investors used the British market as a springboard to expand their operations to the rest of the region. Now, these companies are moving their investments to other European countries that allow this growth.

In addition, divorce with the European Union will result in costs that exceed the savings of leaving. The United Kingdom would be saving approximately EUR 13 million by not paying its contributions as a Member State. However, he will have to pay the EU a “divorce fee” of more than £ 39 billion in compensation for the abandonment of infrastructure projects and budgets planned for the long term. Likewise, it will no longer be a beneficiary of credit support and subsidies from the European Union to sectors such as agriculture, research and development, education, green infrastructure projects, among others.

Likewise, the political consequences within the UK must be taken into account. Although Northern Ireland voted overwhelmingly to stay within the EU, it will be dragged into divorce along with the rest of the United Kingdom. Uncertainty about the restoration of a physical border between the Republic of Ireland and Northern Ireland has generated discontent and possible disturbances are not ruled out. As part of the contingency plans for an agreement with no way out, the Irish police, in collaboration with the Scottish and English police, have already begun training to keep the peace on this border.

Like Northern Ireland, the Scots voted to remain part of the EU. It is worth remembering that in 2014 a referendum was held in Scotland to decide on its independence from the UK. With the argument that an independence would leave them outside the EU, he won the vote for not leaving the UK. Thus, the Brexit opens the possibility of holding a new referendum for the purpose of becoming independent to request admission to the European community block.

Are you interested in knowing what kind of impact your organization will have as a result of Brexit? Come with us to provide comprehensive advice, you can write to info@riesgospoliticos.com.mx .

 

Photo by Ethan Kent on Unsplash

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