Tuesday, 17 January 2017

What Does A Hard Brexit Mean For UK Citizens And Investors?

Britain plans to make a clean break from the European Union. PM May does not want an Brexit agreement that leaves the United Kingdom "half-in, half-out."

Prime Minister May has recently come out with a much tougher position on EU withdrawal than she had previously taken; now supporting plans for a "hard" Brexit. PM May recently said that Britain plans to make a clean break from the European Union, and not opt for "anything that leaves us half-in, half-out."

We seek a new and equal partnership, between an independent, self-governing, global Britain and our friends and allies in the EU … Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave. - British Prime Minister Theresa May

This creates a great deal of uncertainty over what kind of economic relationship the United Kingdom will have with Europe after Britain exits the European Union. One thing is certain though, I think we need to accept that a hard Brexit is likely to bring about a period of economic disruption in the UK. This has lead many citizens and investors to grow concerned that a hard Brexit will be bad for the pound.

A hard Brexit arrangement would prioritise giving Britain full control over its borders, making new trade deals and applying laws within the country. This would benefit the UK by making it a global trading nation. After all, don't forget that the UK is a full and founding member of the World Trade Organization.

The obvious downside to this arrangement is that Britain will have to give up full access to the EU single market. In doing so, it will subject itself to tariffs when trading with European neighbours. As well, experts have warned that London’s position as an international financial hub will be dealt a severe blow if the UK leaves the EU single market. Time will tell.

Since Prime Minister May's announcement there has been a positive reaction to the news of a hard Brexit. At the moment the pound is trading at $1.22 against a strong U.S. dollar, its highest since the June vote to leave the European Union.

Membership in the EU does not define the United Kingdom's future as a global player. In fact, quite the opposite. There are already plans to trade freely beyond Europe, in countries like Australia, Canada and the United States, where officials have already said they are eager to negotiate trade agreements with Britain.

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