Back in 2016, Brexit was seen by many as a bold and daring move, one that could propel the United Kingdom ahead of many other countries. However, if we take a step back for a moment and look at the implications, the prospect of a no-deal Brexit economy is not the outcome most Brexiters had desired.
One implication that could start having a lasting effect, for example, the cost of food could rise significantly, or jobs could be migrated to Europe—thus causing at-risk people to have less disposable income at the end of the month. One thing to remember is that food is not taxed, which means if most people only purchase essential goods, there is less revenue for the government. But there are many other complications expected to arise from Brexit that we shall explore in this article.
UK Job Losses
Whilst the masses were protesting and marching about the outcome; others were coming to terms with the fact that this outcome would have long-lasting effects on the job market. The consequence of Brexit prompted thousands of London City jobs to leave the UK. The hardest-hit area when it comes to job losses and job relocations is the financial sector since it has become entwined in the European economy. Firms operating within the UK have shifted 7,500 employees and more than £1.2 trillion of assets to the European Union ahead of Brexit.
There are genuine concerns that Brexit can displace London as a financial capital. From next year, financial firms in London will lose the certainty of their ability to passport services across the EU. Because of this, many investment banks and financial firms have relocated to the likes of Frankfurt, where they hope to still operate within Europe.
Trade & Tariffs
Brexit will significantly impact trade. Manufacturers of vehicles will raise their prices. In the event of a no-deal Brexit, this would add 10% tariffs on cars that are traded between the UK and EU, causing costs to rise by thousands. Some researchers claim that the price of new cars will increase by as much as £1,900 on average for each new vehicle. For people looking to buy an electric vehicle, unfortunately, they might observe prices rising as much as £2,800 for cars manufactured in the EU.
Mike Hawes, Chief Executive of the Society of Motor Manufacturers & Trade (SMNT) has been incredibly vocal about the bleak situation the UK automobile manufacturing industry will face should the no-deal scenario become a reality. Hawes’ comments have been picked up by Reuter, Euronews, BBC and others.
SMMT Tweeted in September that a “‘No deal’ would mean combined EU-UK trade losses worth up to €110 billion to 2025, on top of around €100 billion in lost production value so far this year because of the coronavirus crisis.”
BMW is already considering moving the production of the Mini from the UK to avoid expensive tariffs. The German manufacturer has already postponed the latest model of the car. Japanese producer Honda has already decided to close its British plant next year.
Food Security and Cost
One of the most alarming facts associated with a no-deal Brexit is that food prices will rise. Shoppers will need to pay more for vital food products. The British Retail Consortium (BRC) said that tariffs would add around £3.1 billion a year to the cost of importing food and drink unless the UK and EU can come to some sort of free trade arrangement.
The BRC stated, “If there is no deal before Christmas, the increase in tariffs will leave retailers with nowhere to go other than to raise the price of food”.
To put things into perspective, according to a report from the BBC, tariffs include a 48% levy on beef mince, 16% on cucumbers and 57% on cheddar cheese. Although the government could give subsidies, if the entire tariff cost is passed on to the consumer, a £3 pack of Irish beef mince could cost around £4.08, and Spanish cucumbers could cost 47p rather than 43p. In theory, cost increases would be passed to the consumer. Some lower tariffs on imports from other places could offset those eventual increases.
Travel & Transport Complexities
Immigration was unmistakably a huge part of the Brexit campaign. European and international immigration was a primary focus that grabbed much of the headlines both for positive and negative reasons.
Now that the time is upon us, where do we stand with the likes of travel, free movement and migration? The British government announced earlier in the month that they would set up ten inland sites to be able to cope with Brexit congestion and border checks in areas including Birmingham, Warrington, as well as a former airfield near Epping Forest in Essex. The inland border sites are being acquired to relieve ports including at Dover and Liverpool and could be in place for up to two years.
A document relating to new immigration rules has set out new rules for border controls for travelling with national ID cards from EU member states. It declares that these are no longer acceptable from 2021 when passports are mandatory for entry into the UK. To add fuel to the fire, hauliers will also need a Kent access permit, to get into the country if they are heading for a ferry in Dover or a Eurotunnel train in Folkestone as part of congestion management.
Brexit is going to re-shape how we think about travel and transport, as it is not just about immigrants anymore. The new rules ultimately affect haulage companies, which might, in turn, harm imports and exports, particularly for perishables.
There is no Shortage of Obstacles
It’s not just financial services, automobile manufacturing or people who eat food that will be affected by the implications of a no-deal Brexit economy. Other industries and sectors are also feeling the pinch because of Brexit. Members of Parliament have been told that trade will be a day-to-day struggle. The warning comes from a forecast of aerospace, chemicals and pharmaceuticals industries.
Although Boris Johnson remains unphased by the idea of a no-deal Brexit, all of the news and analysis suggest a rather bleak future for the UK. Businesses are now facing the uncertainty of Brexit alongside the constant threat of more coronavirus lockdowns. It’s hard to know what sensationalism is in today’s climate of social media, fake news and clickbait. We are constantly reminded of our demise, but it never comes to fruition. What is certain is there will be no shortage of opportunity in the currency markets for traders who know how to wield volatility.