The UK will leave the European Union’s single market and customs union in a historic break that will forever redefine their relationship. Last Wednesday, the UK Parliament passed a 1,500-page deal outlining boundaries on trade and security relationships. This has essentially averted the prospect of a chaotic divorce and ensued that the flow of goods is unhampered by tariffs or quotas from the beginning of 2021 along with agreements on a range of other issues such as energy, transport and security cooperation. UK Prime Minister Boris Johnson addressed the ‘newly, and truly, independent nation’ of the UK, taking back control of its laws, borders and fishing waters under the Brexit pact. He has stressed that the UK will remain a close and strong ally of the EU.
However, there will be rifts from new non-tariff barriers, rules and requirements that could make it more costly to do trade as well as disrupt certain supply chains for businesses. David Henig, director of UK Trade Policy Project said ‘There’s 660 billion pounds worth of trade under new, more restrictive rules’ with the new trade deal focusing on goods that comprise 20% of UK’s GDP. There is speculation that Brexit may harm the UK’s economy in the long term and diminish its global standing. Estimates by the London School of Economics reveal that the EU raised FDI into UK by 28% but Brexit may not trigger a decline of 22% over the next 10 years. According to UK’s financial watchdog, the Office for Budget Responsibility, UK’s departure will shrink national economic output by 4% over the next 15 years. EU economies are also expected to experience a slight decline in economic growth but will vary across the bloc.
