Brexit To Reduce Economic Growth Now That It’s Official

Written by SK Ashby

Britain will formally initiate the process of leaving the European Union in a "Brexit" this week, but the potential for a hard, no-deal Brexit remains as Prime Minister Boris Johnson has set a deadline of December 31st to negotiate new rules of trade and immigration with the European Union.

Finally taking the leap of exiting the European Union was suppose to relieve pressure on business and unlock investment, but the uncertainty of continued negotiations and the remaining possibility of a hard break will reduce growth in the British economy this year according to new researched from the RAND Corporation.

From Bloomberg:

According to the report, growth this year could be 0.17% lower than it would be in the absence of trade negotiations, and the effect could increase to 0.39% by 2025 if the talks end up being extended. That means a 1.6 billion-pound ($2 billion) hit to the public finances, which could increase to 3.75 billion pounds by 2025. [...]

British negotiators “will need to weigh up the potential short-term economic implications of prolonged trade policy uncertainty if negotiations last beyond December 31 2020, versus the potential negative long-term economic implications of an agreement that is made quickly but lacks the comprehensiveness required for a broad and deep future U.K.-EU trading relationship,” the RAND report said.

Regarding that idea that negotiations likely won't conclude this year, the European Union's top Brexit official says they will almost certainly need more time.

The U.K. will probably need significantly longer than eleven months to strike a future trade deal with the European Union, the bloc’s chief Brexit negotiator warned. [...]

[Michel Barnier] said Johnson needs to clarify exactly how much the U.K. will move away from EU standards as it exits. Home Secretary Priti Patel said on Sunday the U.K. won’t align with the EU, something Barnier has insisted is needed for significant access to the single market after Brexit.

“It is not clear to me where, or by how much, it wishes to diverge: on standards relating to the safety and quality of products? Or on those relating to fair competition?” Barnier said.

“It is not clear to me whether, when the U.K. leaves the EU and the single market, it will also choose to leave Europe’s societal and regulatory model,” he said. “That is the key question, and we are waiting for an answer.”

Indeed, will Britain leave behind the social and regulatory fabric of Europe? And if so, what will Britain's new model look like and how will European law interact with it? These are very complicated question that would be difficult to answer even over the course of a whole generation, not just one year.

Hardcore, anti-European Brexit floggers probably aren't going to like the relatively soft answers the Johnson administration comes up with for these questions because the deeper the break from European norms, the more severe the consequences will be to the British economy and average citizens. Moving further away from the European model means fewer environmental regulations, less social welfare, fewer civil rights, fewer labor rights. It likely means more socialism for corporations in the form of tax breaks and less for average people.

In short, it's a pathway to becoming what the United States looks like under Republican rule.