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Britain’s post-Brexit transition period ends on December 31, so the race is on to reach an agreement before that date; The EU and UK parliament are set to ratify a deal and there are expectations that this can be done quickly, given the need to mitigate a “cliffside” scenario for businesses on both sides of the Channel on January 1.
There are glimmers of hope that a deal can still be reached. British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen have agreed to continue discussions beyond last Sunday. Then on Monday Von der Leyen noted that there had been some “movement” in the talks and on Wednesday said that while she could not say whether or not there would be an agreement, “there is a path to an agreement now ”.
“I am happy to report that the governance issues have now been largely resolved. The next few days are going to be decisive, ”von der Leyen noted, but, she added, competition rules (to maintain what the EU calls a“ level playing field ”) and fishing rights remain unresolved.
What happens in a no-deal scenario?
At the basic level, this means that import duties will be applied to each other and trade will become more expensive and complex. The prices of goods to consumers are most likely to increase as a result, and UK supermarkets are already stocking some long-lasting products in the event of shortages or delays in ports.
In 2019, UK exports to the EU were worth £ 294 billion or $ 393.5 billion (43% of all UK exports), while UK imports from the EU were worth £ 374 billion (and accounted for 52% of all UK imports), according to government data. .
Experts note that trade on WTO terms would be more difficult for some sectors than for others.
“Without an agreement on their future trade relations – in particular some sort of free trade agreement – trade between the UK and the EU will be based solely on WTO terms”, Catherine Barnard and Anand Menon , respectively senior fellow and director of ‘The UK in the Changing Europe Think Tank, noted in a detailed report on the matter.
‘This means that import duties and various controls will be imposed on trade between the UK and the EU, with impacts concentrated in agriculture and industries that depend on products that repeatedly cross the UK. United and the rest of the EU, such as components for making cars. or ingredients for food processing. ”
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Services, travel … and fishing
Trade on WTO terms would mean that the UK’s services sector, a large part of its economy which previously could ‘relatively freely access the entire EU single market, would only be allowed’ much more restricted access to EU and UK WTO commitments. According to the UK in Barnard and Menon in Europe.
The financial services sector remains an area of uncertainty. The EU has yet to decide whether or not to grant market access to UK banks and other financial firms after December 31 and may not take a decision until January. The lack of clarity has already prompted some banks to relocate offices and staff to continental Europe.
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Travel is an area of concern to many in the UK when it comes to dealing or not making a deal; The Covid-19 pandemic has cast more uncertainty on possible travel disruptions after the end of the transition period, with the UK becoming a ‘third country’ and out of the EU, meaning that British travelers might not be allowed into the area given the high infection. rate in the country, except specific exemption.
Planes, trains and automobiles
The measures aim to ensure “basic air connectivity … to ensure the provision of certain air services between the UK and the EU for 6 months, provided the UK provides the same”, as well as measures aimed at ensuring that aviation safety is maintained. It also proposes a regulation covering basic connectivity with regard to both road freight and road passenger transport for 6 months, again on condition that the UK reciprocates it.
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Impact on the market
Peter Oppenheimer, Chief Global Equities Strategist at Goldman Sachs, weighed the possible impact of a chord and no-chord in a note this week. He and his team concluded that “if there was no deal in the end, national (UK) companies would be affected in several ways”.
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Goldman reiterated its no-deal Brexit target for EUR / GBP at 0.96 (one euro is currently trading at around 90 pence) “but would expect markets to only partially assess this even if negotiations fail over the next few weeks ”.
Would the no-deal be so bad?
“At this point, ‘no deal’ meant the UK was leaving the EU without any agreement on anything. But now a ‘no deal’ would most likely involve all of these deals in the Withdrawal Agreement (Financial Regulation, Citizens’ Rights, Northern Ireland), the substantial progress made in financial services equivalency and the renewal of most of the trade agreements with third parties with the EU, ”he noted.
“A no deal at this stage would therefore be a“ less disruptive ”cooperative“ no deal ”than a more disruptive non-cooperative“ no deal ”. As a result, the economic consequences would probably be less than what most people fear, ”he said. Although he conceded that “the economy would not come out without a hitch.”