Boris Johnson’s Conclusive Victory Not Enough To Wish Away Business’ Brexit Concerns

While the massive and decisive victory for United Kingdom Prime Minister Boris Johnson has set an absolutely clear path for him to implement his version of Brexit, businesses continue to face the uncertainties of the impending exit of the UK form the European Union.

Johnson now has the mandate and the majority in the parliament to pass his Brexit proposal through it and take Britain out of the EU January 31, which is the latest deadline for the divorce. Analysts expect that this assurance at least will provide some vent to the pent-up business investment which should provide a boost to the British economy.

However, the path for the UK and Johnson after that was expected to be much more difficult. Following the formal divorce, a transitional period will kick in during which, companies in the UK will be allowed to continue to do business and trade with the EU as per the existing trading regulations.  That would mean that companies will be able to trade between the two regions without any tariffs or checks on exports and imports at least till the end of 2020.

Since then however, all products that would be exported to the EU from the UK will face tariffs as will products imported form the EU into the UK. That can be resolved by the UK and the EU reaching a agreement n tariffs on trade and other issues. Significant new barriers could be faced by banks and other companies that sell services in EU markets.

There is however serious doubts about whether a comprehensive trade deal can be struck between the two parties within a short period of just one year which raises the possibility of further delays and uncertainties for businesses.

And if the two parties – UK and the EU, are unable to come to an agreement, then the businesses in the UK will face the danger of a no-deal Brexit – a scenario that is the most feared by businesses. Years of economic growth in the United Kingdom could be wiped off because of new trade barriers and tariffs from a no-deal Brexit, say experts. Such an eventuality will also put the auto industry of the country at risk of a complete collapse.

“Johnson has left himself just 12 months to strike a new trade agreement with the EU that has taken others around four years,” said Paul Dales of Capital Economics. “We suspect that if Johnson falls short he would extend the transition period at the last minute.”

More delays are the last thing business wants as it has been almost four years since the Brexit referendum.

“The starting point must be rebuilding business confidence, and early reassurance on Brexit will be vital. Firms will continue to do all they can to prepare for Brexit, but will want to know they won’t face another no deal cliff-edge next year,” said Carolyn Fairbairn, director general of the Confederation of British Industry.

But most of this depends on the approach to problem solving that is taken up by Johnson in his negotiations with the European Union.

(Adapted from CNN.com)



Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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