The brexite won’t let us go

The brexite that kept us so busy last year is still not off the table. Talks on a free trade agreement (FTA) between the UK and the EU have stalled. Today, a summit meeting is expected to bring new momentum to the talks. According to its own statements, however, the British government under Prime Minister Johnson would also accept a no-deal brexit if the talks did not go according to its ideas. London also strictly rejects an extension of the current transition phase. It is a déjà vu: once again, Great Britain is heading for an unregulated withdrawal.

The effects of a „No FTA“ Brexit on the British economy would be similarly serious as those that the so-called No-Deal-Brexit would have had last year: trade between the two economic areas would take place from one day to the next only on a WTO basis, customs duties and border controls would massively slow down foreign trade. A significant devaluation of the pound would increase inflationary pressure and curb consumption. The shock would hit the British economy at a time when it is probably only just beginning to recover from the deep corona recession. Unemployment would remain elevated and national debt would continue to rise. The Bank of England might have to consider negative interest rates after all. Overall, it would be a disaster.

However, given the fragile economic environment caused by the Corona crisis, which hit Britain particularly hard, the consequences of a chaotic breakeven would be even more difficult for the British economy to cope with now than last year. By contrast, many companies „on the continent“ seem to have prepared themselves for the possibility of a no-deal brexit in recent years. Most EMU countries should feel the repercussions of the hard break at most to a limited extent. The British are thus actually in a much weaker negotiating position. Therefore, one should not give up hope for a reasonable and mutually beneficial solution. Much of the current developments could also just be part of a negotiating strategy.

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