BritOUT: A Period of Economic Transition
The triggering of Article 50 set in motion four years of tumultuous policy and tenuous negotiation. The 2016 referendum was to become the epitome of a democratic turning point in society as the public decided to leave the European Union. In turn, opting out of various laws, incentives, and policies. The 31st of December 2020 marked the beginning of an era where the UK will effectively retain complete autonomy on all political, economic, social, and various other elements of public policy decisions. The question for the past four years has been one of how the UK would exit, with the recent news of a confirmed trade deal we now know that the UK will continue a trading relationship with the EU. The question now is what exactly this entails and what this will mean for the long-term prospects for the UK’s economy.
The EU-UK Trade and Cooperation Agreement provides for trade in goods and services, digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, social security coordination, law enforcement and judicial cooperation in criminal matters, and participation in Union matters. This may seem extensive on the surface, however, this will by no means match the level of economic or political integration that existed while the UK was an EU member state, it merely provides a basis for preserving preferential long-lasting relations.
What does this new economic and social partnership between the EU and UK change?
The provision for zero tariffs and quotas on goods is much the same, the essential distinction to this is the requirement that all goods comply with the appropriate rules of origin. This is to determine where the goods originate, including materials and manufacture, not from where they have been shipped. For more specific information relating to these, the UK government website contains the Generalised Scheme of Preferences, sufficiently worked or processed goods made from materials of various origin, and the specific rule of origin requirements for trade by country.
The UK and EU have also committed their desire to ensure what they referred to as a ´level playing field´ by maintaining high levels of protection in crucial sectors such as the environment in the fight against climate change, carbon pricing, social and labour rights, tax transparency and State aid with effective domestic enforcement, a binding dispute settlement mechanism and the possibility for both parties to take remedial measures.
A new framework will be formulated to ensure the joint management of fish stocks in the EU and the UK waters. As widely publicised, the UK’s deal with the EU will allow British fishing activities in international water to continue and develop, whilst also safeguarding the European fishing community and preserving natural resources.
As for transport, the agreement provides for the continuation of sustainable, road, rail, air, and maritime connectivity. Provisions have been included to ensure that competition between the EU and the UK operators is engaged on a ‘level playing field’, securing the rights of passengers and workers, and ensuring the safety of all involved, remains paramount.
During the Brexit transition the EU has been working on their renewable and sustainable energy goals, this agreement ensures a fair platform for trading and interconnectivity with guarantees for open competition including safety standards for offshore and the production of renewable energy.
In terms of the social security aspects, the agreement aims at ensuring a number of rights for EU and UK citizens and nationals who have been and intend to continue or begin, working, living, or travelling within the respective countries as of the 1st of January 2021.
Conclusively, the agreement enables the UK to continue to participate in a number of flagship EU programmes for the next six years, such as Horizon Europe, provided that the UK makes a financial contribution.
With this in mind, what can we expect for the future of the UK’s economy?
According to financial analysts at the PWC, the UK could be the fastest-growing G7 economy up to 2050, with an average annual growth of 1.9%, maintaining a position in the top-10 global economies. The uptake after the pandemic is expected to double the value of the world economy by 2042, increasing at an average rate of 2.5% up to 2050.
The UK’s long-term economic growth could outpace leading EU countries such as Germany, France, and Italy. As expected, there will be some short-term fallout from the immediate effects of Brexit, however, the far-sighted prospects are looking very positive as the UK’s position is sustained by its projected larger working-age share of the population than in most other advanced economies. However, the PWC has cautioned that these projections are based entirely on the reliance of the UK continuing to employ talented individuals from overseas, and participating in the forefront of international schemes and incentives to progress the efforts on renewable and sustainable energy and other important developments.
In spite of the country’s decision to leave the European Union, in order for the UK to maintain a position in the top-10 global economies, it must embrace internationalisation and globalisation, promoting and contributing the efforts towards tackling climate change and sustainable development. Brexit may be a movement towards increasing the influence and reach of the UK both economically and politically but it must not become a movement against diversification, financial advisors warn. For the UK to thrive from this fundamental change, it must embrace the new opportunities that the recently granted distinction from the European Union has provided.