On Tuesday of last week, UK Prime Minister Theresa May finally reached a Brexit deal with the EU in Brussels. If the deal is accepted, Britain is set to exit the EU on March 29, 2019.
There's still much to be settled. Though the Cabinet has approved May's decision, the British parliament has not and there's significant internal opposition. Other European parliaments also have to contribute to and approve the deal. Prime Minister Theresa May has stated that if politicians do not accept the Brexit deal, it will set the nation on "a path of deep and grave uncertainty." The EU has made it clear that there will be no other deals made.
The deal is deeply controversial. Since the deal was reached, two Cabinet ministers have resigned and many lawmakers are pushing for a no-confidence vote on May's leadership. The leader of the pro-Brexit segment of the Conservative party is spearheading the effort to oust May. This may affect when and if May meets with European commission president, Jean-Claude Juncker.
"It is dependent on the negotiations," May's spokesman said. "This is clearly a very intense part of the negotiations. You would expect the prime minister to be working very hard to get the best deal for the UK and her engagement with the commission president is part of that."
Beyond gaining approval, there still needs to be work done on the actual withdrawal agreement. Elaborations need to be made on the potentially permanent customs union framework and security. The transition period also needs to be made clear, as some claim it may last until December 2022.
"If either side fails to honor the commitments it has made in the political declaration then there are stages you can go through, ultimately leading to the suspension in part of parts of the withdrawal agreement, including financial payments," May's spokesman said.
If the deal is approved and these final tenets are solidified, the Brexit deal will have significant ramifications for Britain and Europe in general. First, even though there is a transition period that businesses will have to get used to new trade rules, ultimately, Brexit will yield new trade barriers such as tariffs and quotas that could exert upward pressure on inflation within Britain. There may also be erosion of cross-country supplier benefits, such as rebates and bulk discounts that will affect many transport and manufacturing businesses. It's estimated that a fully-implemented Brexit deal would boost British economic growth to 2% in 2019, from 1.3% this year.
"Going into next year we expect business investment to experience a relief rally and higher sterling to depress inflation and lift real wages so consumer spending would also accelerate," said Karen Ward, a market strategist at JPMorgan Asset Management. "If the deal as described in the press were to pass into law, both [the pound] and [the euro] would benefit," Kit Juckes, a strategist at Societe Generale, wrote in a note.
However, if a deal is not made then the consequences could be dire. First, markets would become extremely volatile due to ambiguity, and the pound would most likely plummet. The uncertainty has already taken a toll on the British pound, which has been volatile since Brexit was officially voted in two years ago, trading almost 14% lower than on the day of the referendum to the present. Jobs would also be at risk due to adverse market conditions and unemployment would likely increase. Moreover, national security would also be at risk due to deteriorating economic relations with surrounding European countries. This could induce protests and international outrage.
On November 25, the 27 EU member states will vote on their approval of the deal. After that, British parliament will have to vote. While no date is set, it's expected they'll vote soon after the EU meeting.
- https://www.newsobserver.com/news/business/article221696865.html
- https://www.bbc.com/news/uk-northern-ireland-46259639
- https://www.theguardian.com/politics/2018/nov/19/brexit-talks-work-still-needed-on-future-ties-declaration-customs-union-says-no-10
- https://www.cnn.com/2018/11/14/economy/markets-economy-brexit-deal/index.html