BREXIT Finally Means BREXIT

Theresa May finally confirmed that the UK will pursue a hard BREXIT and that it will leave the European single market. Following the announcement there was a sense of relief that the UK had taken the plunge and admitted the inevitable, that the UK could not have its cake and eat it, there could be no single market access without free movement of people, one of the Prime Minister's stated red lines. The debate over the wisdom of this choice is not now one of importance. The key question is what will the impact be on UK trade now that it has decided to withdraw from the world's largest free-trade area, a bloc with over 500 million people.

The UK will now have to negotiate access to the European customs union while at the same time negotiating its exit from the single market. Commentators have described this as unprecedented and have highlighted the fact that it will require a legion of trade negotiators that the UK simply does not have. At the same time the UK will also out of complete necessity need to negotiate other trade deals simultaneously with countries all over the world. As a member of the EU the UK benefits from dozens of trade agreements that the EU has negotiated with countries around the world. These agreement are the product of decades of negotiating.

The UK prime minsters opening gambit in the coming negotiations on the customs union has been to threaten to walk away if a fast tracked deal can not be secured. The EU has previously stated that no negotiations can occur before the UK's exit is complete and the UK's attempt to play tough, as opposed to nice, on this point has raised many eyeballs. The UK is not necessarily in a weak position when it comes to negotiating access to the customs union. Whereas the expectation that the EU would negotiate on its 4 founding principles to keep the UK as part of the single market was asinine it would actually be a case of cutting ones nose of to spite ones face for the EU not to allow full and fluid UK access to the customs union. By finally announcing a hard BREXIT the UK has shown that it is now getting serious about leaving the EU and this was welcomed by European leaders. However, to follow this up with threats including that of creating a super massive EU offshore tax haven seems incredibly unwise. EU exports to the UK as a share of national income are a lot smaller than trade in the opposite direction. At the same time the European business community will be on the UK's side preferring as little disruption as possible so the emphasis should now be on playing nice with European political leaders.

The markets have responded reasonably calmly to the news appreciating the removal of uncertainty that had been clouding the landscape. However, a lot of questions still remain, such as London's potential exclusion from European passporting rules and it is these questions that this blog will seek to provide some clarity over during the coming weeks.