The Election: More questions than answers. Where does this leave Brexit?

Neil Relph

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Neil Relph

As the dust settles on the general election and the recent confirmation that we will have a coalition Government with the Conservatives and Democratic Unionist Party (DUP), this throws up many more questions than it does answers.

In particular, what impact will it have on the UK leaving the EU? How will it alter the governments negotiating hand in Europe? Will it soften the UK’s eventual exit from the EU?

The Brexit clock is ticking

With Brexit negotiations underway and Article 50 already evoked, the UK will leave the EU at Midnight on 29 March 2019 at the very latest, even if agreements with the EU are not in place.

An extension to this date would need the agreement of all 27 other EU member states which is highly unlikely, so the more protracted the negotiations, the less time the government will have to come to agreements on the many areas covered by EU jurisdiction.

The election result coupled with the comments from EU countries probably means that we are heading towards a softer Brexit given the majority of Parliament and the electorate it now seems, does not want a hard Brexit. It is therefore likely that in the weeks and months ahead we will see the Brexit process revisited.

What could a soft Brexit look like?

A soft Brexit means that the Government will seek to forge a close relationship with the EU, and as close as possible to the existing arrangements. In practice this could mean:

  • Keeping access to the European single market;
  • Tariff-free goods and services trading with the remaining EU states;
  • Financial firms keeping their “passporting” rights to sell services and operate branches in the EU;
  • Remaining within the EU’s customs union, with exports not subject to border checks;
  • Continued free access for European nationals to work and settle in the UK.

Norway, Iceland and Liechtenstein, which are not members of the EU, currently have this type of deal in place. In return, these countries make payments into EU budgets and accept the “four freedoms” of movement of goods, services, capital and people.

More questions than answers…

NAR“Will Theresa Mays leadership be challenged? Could there be another snap election or even another referendum, unlikely as it may seem? Will a compromise on hard v’s soft Brexit be found?”, asks Neil Relph, Managing Partner at Rouse Partners.

“During the next few months there is likely to be continuing political and economic uncertainty. This is of course challenging for businesses as they should be considering the Brexit risks to their supply chains, considering EC presence etc., including building in contingency plans and “what if’s” into their business models.”

“Many importers are already feeling the impact of price increases. Some are passing on the increased costs, whilst others are absorbing some of the increased costs and reducing their margins, which is not sustainable in the long run.”

“Inflation is also having an impact on the economy. We have started to see inflation increase over the last year, which has and will fuel wage inflation. The Bank of England is trying to dampen this by keeping base rates at record lows to weather the transitional period of exiting the EU and to provide hopefully a boost to business confidence”, says Neil Relph.

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This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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