Volume IV: Brexit Rumbles On

As Boris Johnson became the seventy-seventh Prime Minister of the United Kingdom and the fourteenth PM in the Queen's reign, he entered Downing Street knowing that the success of his reign will depend on one single issue: Brexit.

On the steps of Downing Street, the new Prime Minister announced that the UK will leave the European Union, "with a deal or without a deal" on October 31st (Halloween). 

With ninety-nine days to go until that deadline, we take a look at what the landscape looks like for the Prime Minister. 

According to a report by the Economists for Free Trade, formerly known as the Economists for Brexit, the breakdown of talks would have a positive net present value for the UK comprising a one-off gain of £38 billion on the EU budget, plus £180 billion from bringing forward the non-budgetary Brexit gains, plus £433 billion from EU tariff revenue, some £651 billion in all. For the EU, it would mean a one-off loss of £38 billion in a financial settlement, plus another one-off loss of £36 billion in terms of trade gain, plus the £433 billion from paying the UK its tariff revenue– a negative net present value of £507 billion.

Of course, such numbers do not take into account the potential reputational damage to the UK’s brand that might arise from a breakdown of talks. But in a populist narrative, they do suggest an asymmetry in the economic inter-dependency between the UK and the EU. The accuracy of the assessment of the Economists for Free Trade is certainly up for debate, however. The “divorce” bill is not an amount asked by the EU to fill their budget gap, but rather EU monies already spent in the UK to which the UK is no longer entitled after Brexit and that have to be paid back as well as commitments to which the UK is legally bound (e.g. civil servant pensions).

The EU itself is being buffeted by the winds of populism, which manifested themselves during the recent Parliamentary elections. European voters indicated they want a change. 

The new prime minister has pledged to scrap the Irish backstop from the withdrawal agreement and hold on paying the UK multi-billion pound financial settlement until a UK-EU free trade deal is agreed. 

However, the UK MPs voted to keep Parliament open until the Brexit deadline to prevent a "suspension" of Parliament to allow for a "no-deal" to happen. The coming months will be a testing time for the new Prime Minister.

In the coming months, as Britain prepares to enter negotiations with the European Union, tackling issues from the backstop to a free trade deal, there will be much uncertainty hanging over the UK but there is one thing certain. Nobody knows what will happen next.


Post Date: 24/07/2019

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