The UK might be close to a deal, but Brexit wrangling could last for a decade
Boris Johnson, U.K. prime minister, speaks during a news conference at an European Union (EU) leaders summit in Brussels, Belgium, on Thursday, Oct. 17, 2019.
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BRUSSELS — The U.K. government might be edging ever closer to sealing a Brexit deal, but experts warn that the negotiations and the politicking will last for years and years.
The different twists and turns over the last three-and-a-half years have brought unprecedented uncertainty. The 2016 Brexit vote has delayed business investment decisions and made it more difficult for people to plan their futures — whether that’s changing jobs, going on vacation or buying a home.
But whatever happens ahead of the current Oct. 31 deadline, the uncertainty is here to stay.
“Make no mistake about this: The lack of clarity imposed by the Brexit vote in 2016 for trade investment between the U.K. and the rest of the world have only just begun,” Erik Nielsen, chief group economist at UniCredit, said in a research note Sunday.
“We are in for a decade of ongoing uncertainties, and that’ll almost certainly cause the U.K. to underperform its peers in growth terms for years to come,” he added.
U.K. lawmakers are currently contemplating whether to approve the divorce deal that Prime Minister Boris Johnson negotiated with other EU countries last week. They can either approve it, moving the process to a second phase where both sides start negotiating their future trade arrangements. Or they can reject it, meaning Britain leaves without a deal or the deadline is pushed back for a third time. All of these scenarios would involve long and detailed discussions, further prolonging the process.
“The deal is nothing more than the ‘divorce bill’, while all the arrangements for how the U.K. wants to live, trade and invest with other countries still needs to be negotiated. As often quoted, it took Canada and the EU seven years to negotiate their trade deal and another year to ratify it,” Nielsen added in his note. Fears of a no-deal Brexit would return as the Brexit transition period draws to a close and if the U.K. fails to negotiate a future trading arrangement with the EU.
Anti-Brexit protesters stand protest outside the Houses of Parliament in London on September 9, 2019.
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The Bank of England outlined in a report earlier this month that “Brexit uncertainty is weighing on business investment, the prices of U.K. assets and flows of foreign capital into the U.K.” A London-based think tank, the Centre for European Reform, also noted in a report last week that “the biggest victim of the Brexit vote has been business investment.” UBS Chairman Axel Weber has also warned that Brexit could cause a broad “investor strike.”
Speaking to CNBC via email Monday, Kallum Pickering, senior U.K. economist at Berenberg bank, said that the approval of Johnson’s deal would clear some of the uncertainty, but not all of it.
“An orderly Brexit … would significantly reduce economic uncertainty by dramatically narrowing the range of likely scenarios for the near-term economic and political outlook,” he said. However, he added that it “would not end the uncertainty about the final shape of Brexit — i.e. the future U.K.-EU economic relationship, which could remain a modest drag on business activity throughout the transitional period.”
There is a growing expectation that a general election is just around the corner for the U.K. Several opposition parties would campaign to offer a second referendum, or could promise to abandon Brexit altogether. It’s also likely that every British election in the future will involve some sort of debate about the U.K.’s ongoing relationship with Europe — a sobering thought for those already fed up with the process.