On January 31st 2020 Great Britain left the European Union after 47 years of membership. Exactly at 11:00 p.m. local time the party started. The bells of Big Ben were prohibited as well as fireworks. Everywhere the Union Jack. People celebrating. The EU members were reduced from 28 to 27 countries.
The deviation from EU regulation is a clear target of Prime Minister Boris Johnson. The European Union on the other hand tries to avoid unfair competition through state aids, environmental protection or taxes.
Both parties must be interested to get an agreement. The Bank of England reduced their forecast for GDP growth 2020 down to 0,8 %. Nearly nobody can imagine, that the period until year end 2020 could be long enough to achieve an acceptable agreement between Great Britain and the European Union.
In the Handelsblatt one can read, that the continent worries that it could be a start “Singpore at the river Thames”. Boris Johnson told, that he will start the “turbo charger” and he will finalize trade deals with the whole world. He promises an economic boom. Johnsons supporters confirmed that the EU has too many rules which hurt entrepreneurs end especially small companies. The sense of BREXIT is, that one wants to deviate from European standards.
The British Government expects to become faster and more flexible in trading. An agreement with the EU has high priority, but also contracts with the US, Japan, Australia and New Zealand shall be signed by year end. Detractors are commenting this timetable as absolutely illusory, because the big partners like the US, the EU or China will dictate the conditions. Additionally, one knows that trade deals usually take years of negotiations.
Europeans worry about deregulation of the financial sector in England. As London is beside New York one of the leading financial centers of the world and one of the leaders in trading derivatives, such a step could have an influence.
Company taxes are as well a bugbear for the Europeans. Does Great Britain target tax rates like Ireland (right now 12,5 %)?
If Boris Johnson wants to initiate this promised economic boost, the real challenge is not to find in trade policy but in a strong improvement of the productivity of the UK economy. We are curious about the big economic program, which will be presented in March.
Brexit was a big party. We will see how big the hangover will be after that party.
February 4th 2020