Why Brexit is not ‘done’

Prime Minister Boris Johnson will surely say that he got “Brexit done”, as he promised. However, in a sense, Brexit is only just beginning.

The Christmas trade deal with the European Union is more than 1200 pages long and still only covers a fraction of the relationship between the UK and its biggest export market.

The most egregious omission is that of services, which make up 80% of the British economy and where the UK has a trade surplus with the EU.

It remains to be seen whether the UK can maintain that trade surplus and how its highly lucrative financial services sector will fare after 1 January 2021.

But beyond that, what is becoming clear is that far from bringing a sense of achievement and unity, this trade deal is as divisive as the Brexit referendum and the period that followed it were.

Some of the Brexiteers are claiming a major victory over the EU, due to the fact that the Trade and Cooperation Agreement allows tariff-free trade in goods.

They pretend that this was their aim all along, conveniently forgetting that they promised a Brexit without any changes to the UK’s overall commercial position vs the EU.

However, administrative barriers will be erected from January 2021, as the UK is leaving the common market and customs union, and exporters will need to fill in various forms to ship their goods to the EU.

Additional challenges to British exporters could arise later. If rules on making the exported goods diverge between the two trading partners, there is nothing in the text of the agreement preventing the EU from imposing other administrative burdens.

What will Brexit mean for the UK Economy?
Image by Tumisu from Pixabay

 

The end of freedom of movement for citizens was cheered by Brexiteers – immigration, particularly from eastern Europe, was the main scare tactic used to manipulate ordinary people into voting from Brexit.

But this works both ways, with UK people now excluded from working and studying in the European Union.

Moreover, the mutual recognition of qualification has been scrapped, which means if talented Europeans still choose to move to the UK, they will have to deal with increased bureaucracy to prove that their qualifications match the British ones.

Brexit and entrepreneurs

This is likely to affect the UK more than the EU. Britain was, until the 2016 Brexit referendum, the preferred destination for bright European Union graduates and young entrepreneurs.

Their love for innovation and drive have been behind some of Britain’s most successful start-ups – TransferWise, the cross-border money transfer company founded a decade ago by Estonians Kristo Käärmann and Taavet Hinrikus, is one of the better-known examples.

EU citizens make up a large percentage of the UK’s successful start-ups founded by immigrants, according to data from The Entrepreneurs Network.

While 38% of the UK’s immigrants came from an EU country, 42% of the immigrant co-founders of Britain’s fastest growing companies are EU-born.

But if until the end of 2020 all a European citizen with a brilliant idea had to do to start a business in the UK was to move there, starting from 2021 the EU entrepreneur would have to apply for a visa.

These are just a few of the ways in which doing business in the UK will become harder, not easier after the end of the transition period on 1 January 2021.

Others will no doubt crop up as the country forges its new path as an “independent” and “sovereign” nation (although it was both these things in the EU as well, but symbols were always more important than facts in the Leave campaign’s rhetoric).

Brexit, therefore, is by no means done. A new phase of Brexit starts as the UK leaves behind the advantages of EU membership and begins the long journey of rebalancing its economy away from the common market.

@AntoniaOprita