The Oxford English Dictionary, celebrated as a principal custodian of the English language, defines “uncertain” as follows: ‘not able to be relied on; not known or definite.’
Those words are as good a summation of the current state of the Brexit process as any. Monday’s shocking/not shocking move by UK Prime Minister Theresa May to postpone the British Parliament’s vote on the EU-UK Withdrawal Agreement in the face of certain defeat continues a long established cycle of uncertainty, confusion and ultimately, chaos.
Such words are the stuff of nightmares for business leaders and market watchers, who thrive on things they can rely on. The deeply dismayed reaction of British business to the latest about-turn was best encapsulated by Carolyn Fairbairn, director-general of the influential Confederation of British Industry (CBI) lobby.
“This is yet another blow for companies desperate for clarity,” she said in reaction to the canceled vote. “Investment plans have been paused for two and a half years. Unless a deal is agreed quickly, the country risks sliding towards a national crisis.”
The price of uncertainty
The markets quickly reflected that lack of clarity. The British pound hit its lowest level since April 2017, and is now valued at €1.10 and $1.26. At the end of London trading on Monday, it had fallen 1.4 percent against the US dollar.
The FTSE 100 index also took a hit, with a sharp sell-off in the brief trading period that followed May’s announcement to parliament. It had fallen by almost 1 percent by the end of the day.
The effects of the deepening uncertainty are being felt far from English and European shores. “The market is concerned that the postponement uses up valuable time before the March 29 exit date, and the risk of a no-deal scenario is growing,” National Australia Bank economist David de Garis said of the effect on global markets.
The specter of a no-deal
The EU-UK deal currently has nowhere near enough support among British MPs to pass a House of Commons vote, but even more important is the fact that the EU have made it abundantly clear that the deal is not up for renegotiation.
Therefore, barring a dramatic change of opinion in London, that suggests only two realistic Brexit scenarios remain on the table: a no-deal Brexit or simply, no Brexit at all.
Business leaders in multiple sectors and industries across the UK and Europe have consistently said that the best-case scenario would be for Brexit not to take place at all. However, Monday’s events have increased the likelihood of a no-deal Brexit happening — by far the worst scenario, according to those same business leaders.
The economic implications of a no-deal Brexit, such as chaos at the Dover-Calais crossing (pictured) are disturbing for many business leaders
German business and industry representatives, in classic Teutonic style, have been consistently blunt and direct in their opposition to Brexit. A statement from Holger Bingmann, President of the BGA — a trade association which represents the German wholesale, foreign trade and services sectors — did not even attempt to play down his frustration and fear with the whole process.
Read more: Brexit’s other border: EU-UK trade across the Channel, in numbers
“What a mess!,” he said in a statement. “Just three months before the deadline, companies still do not know what to expect and how to proceed. The next tremor of the Brexit quake will be felt on both sides of the English Channel. This is an unprecedented disaster.
“For the British side again to try and play with time and to renegotiate is unbelievable and irresponsible, not least for their own population.”
Back to the border
The implications for business of a no-deal Brexit are profound. From the imposition of tariffs, customs, safety and other checks on future UK-EU trade, to possibly diverging regulatory standards on manufactured products, to chaos at borders and ports, the checklist of consequences is pretty scary for any business owner whose business has depended on UK membership of the EU.
Yet there is arguably nowhere in Europe with a higher stakes bet riding on the outcome of the Brexit process than the island of Ireland, especially Northern Ireland.
The Ireland-Northern Ireland border (Ireland to the right, Northern Ireland to the left) has become the primary battle line in the Brexit process
The region, part of the UK but whose citizens have the right to Irish citizenship under the terms of the Good Friday Agreement, has been recognized by the EU-UK agreement as being worthy of special status in the Brexit process. The agreement allows for it to effectively remain part of both the EU’s customs union and the UK’s internal market, regardless of how the Brexit process turns out.
That ‘best of both worlds’ scenario has been almost universally welcomed by business groups in the region, including those with long-standing affiliations to the hardline Democratic Unionist Party (DUP), on whose support May has relied for several key parliament votes and who oppose the deal on political grounds, regardless of its potential economic benefits for Northern Ireland.
Therefore, it is little surprise that business leaders in the region have reacted with the same concern and fear as those in the rest of the EU and across the Irish Sea to the latest convulsion in Westminster.
“Any delay to a future agreement is extremely concerning, particularly with just three months to go until the UK leaves the EU,” said Aodhán Connolly, director of the Northern Ireland Retail Consortium.
“A no-deal outcome would result in higher costs, harming consumers in NI who already suffer from having half the discretionary spending power of those in the rest of the UK. Parliament must urgently find a workable proposal to avoid a cliff-edge no-deal scenario. The Brexit clock is ticking loudly.”
Yet what happens when the hour finally strikes remains anyone’s guess.
Credit: Source link