While economic news lately have been dominated by topics pertaining to the American dollar and stock market, as well as the monetary policies of the European Central Bank and the Bank of Japan, one very important event deserves to be brought back into the spotlight: Brexit.
Certainly, Britain’s process of leaving the European Union has hardly made the news ever since an initial agreement was reached in December 2017, but as the next round of negotiations is right around the corner, analysts are beginning to talk about what this would entail for the global economy.
During the first round of negotiations between the European Union and the United Kingdom the main topics discussed pertained to immigration rights (the status of EU citizens residing in Britain, as well as Brits living and working in Europe), the border between Northern Ireland and the Republic of Ireland, and finally, the divorce bill which the UK would have to pay for its separation from the bloc. Those were the hard-line issues with the EU demanded to be addressed before negotiations could turn towards what the United Kingdom really wants to settle: trade deals.
Now that the time for the second round of negotiations is approaching, businesses are dying to know what exactly the United Kingdom’s government plans to accomplish. So far Prime Minister Theresa May hasn’t exactly demonstrated solid demands with her cabinet, but many companies operating from the UK need to know whether they would still be able to easily hire specialists from other EU countries or what import/export taxes they would be paying, for instance. Unfavorable conditions might even drive business away from the UK.
The official date when Britain would leave the bloc is March 30 2019 at the latest, giving the current UK government about a year to set up new agreements with the EU.
The British economy is already showing signs of decline: the GBP has been low ever since the Brexit vote in 2016, the UK dropped to a lower in the world’s list of biggest economies for 2017, and economic growth in the kingdom is currently the slowest among all European countries.
This week May held a series of meetings with important companies. Banks and other finance-related businesses, as well as foreign companies like Japan’s Toyota and Hitachi, are among the companies currently putting pressure on May’s cabinet to state a clear set of goals for the negotiations. Japan in particular has stated that it is prepared to move its businesses to other EU countries to avoid any new tariffs which Brexit might cause.
The next round of negotiations is set to begin in late March or early April this year. Unless May’s government comes up with a specific plan until then, it is likely that many of the country’s most profitable companies would seek to prematurely relocate, causing a deep blow to employment and inflation in the UK.
