#Article50 and the end of the beginning

Theresa better off

Theresa May is finally ready to cross her Rubicon by notifying the EU of Britain’s intention to leave the Union, using the famous Article 50 process. Brexit minister David Davis told us last week that the possibility of a no-deal Brexit is not as frightening as some people think. Think about it this way, currently one can go online and order a fancy desk lamp from a French company and pay the price plus postage. If the lamp was coming from the USA however, customs duties will need to be paid by the customer (5.7%) once the goods have arrived in the UK but before they are delivered. She will also be charged import VAT at 20% and there will be a £8 handling fee to pay. The consequence is that buyers may well seek a domestically manufactured lamp instead. Wouldn’t this be a great thing for local manufacturers? It might, but it is likely that the domestic lamp manufacturer would incur similar charges when importing components to make their lamps. Further, they will find it more expensive to sell their lamps in Europe. Selling on WTO rules necessitates having appropriate licences and making export declarations to customs and following transport procedures. Increased demand from local customers will be probably offset by increasing costs of manufacture and a loss of market share in Europe. Mr Davis may not scare as easy as the consumers and businesses who will suffer the consequences. Brexit is happening regardless.

To summarise, we can say the following: Theresa May has selected two avenues for achieving Brexit. One is a so-called hard-Brexit (exit from the Single Market and the Customs Union) while the other is a presumed ‘no-deal’ Brexit (trade with Europe thereafter will be governed by WTO rules). Both options raise a series of significant dangers for the British economy, and crucially present a formidable challenge to the Treasury. The City has indicated that continuing business in London will require significant tax cuts as compensation for the loss of ‘passporting rights’ in the case of a hard-Brexit. Alternatively, a ‘no-deal’ fall back on WTO rules will cause significant upheaval to manufacturers, necessitating state aid to a number of industries. How will the Treasury fund either (or both) remains a burning question.

Good luck to all of us.

Art50

@iGlinavos

 

 

 

The consequences of Brexit

Since 2016 I have been writing on the potential consequences of Brexit. Before the referendum, the aim was to inform the public of the dangers ahead, were Leave to prevail. After the referendum, the aim is to steer policy away from a hard-Brexit.

After Theresa May confirmed she is after a Hard Brexit, I wrote an explanation of what this means for the City, and by consequence the country.

conversation-city-and-brexit

The prospect of Brexit is already making every wage earner in Sterling poorer, as explained in my Marmitegate piece for The Conversation.

conversation-marmite

While we knew of the potential effects of a Brexit vote on currencies, few people appreciate what a hard-Brexit (with no successor agreement) will mean for investment and trade. My article on opportunities for Eastern European investors in a hard-Brexit scenario should surprise many on the Leave side.

conversation-romanians

My other published work on Brexit can be accessed via this link.

@iGlinavos