The Costs of Brexit

Brexit will cost the UK much more than expected.

A hard Brexit, and a final exit from the EU has been announced. And the UK will try and get as great as possible as access to the single market. Theresa May has intentions to ask for a phased process to avoid an economic shock for both Britain and the EU. EU citizens who live in Britain will have all rights, which is also expected of the EU for citizens of the UK; She has however emphasized that further influx in the UK from Europe will be limited. And all political parties will have the chance to vote on the final Brexit deal.

Yet, there are many contradictions in May’s plan. She announced to leave the single market, but she has also stated that is necessary to achieve reciprocity in future economic agreements with the EU. Her limiting of further workers’ influx in the UK is contradicted by her admission that the UK does not have enough educated people, and so will need immigrants.

In theory, the EU could request from the UK to pay into the EU budget until 2022 or 2023, but it is quite unlikely that Britain will accept that. On the other hand, it is unlikely that other members will agree to allow the UK to have the same right as before without paying anything, as the UK intends. As Angela Merkel says, the UK cannot expect the same treatment as before.

Also, although the UK counts on €150 billion (£127.5bn) worth of European Union assets, Michel Barnier, the EU’s chief Brexit negotiator, prepare a list of up to £51bn of liabilities, while Sir Ivan Rogers, the UK’s former man in Brussels, warned that the EU will probably demand from the UK to pay a £45.5bn Brexit bill. However, the Lords report calculated the sum from 15 billion euros to more than 60 billion euros, depending on whether the amount will include contributions to future commitments of Britain while it is still a member of the EU, and pension liabilities for those who work in EU institutions that could be from €2.5 billion to €9.6 billion. On the other hand, after Brexit, the UK will stop paying around €19 billion per year for the EU.

Analysts in the UK estimated that a hard Brexit will cost Britain between 5 to 10 percent of GDP by 2030, which is between £100bn and £200bn. Because of leaving the EU single market and the lower volume of the educated migration, trade and investment, the UK’s growth rate will fall from 2.2 percent to 1.8 percent per year, causing several problems in the economy. The greatest negative impact will be on the City, because with a hard Brexit, the UK’s firms will lose European financial passports. Mark Carney has already promised a help of $200bn to the UK’s businesses. Also, Philip Hammond threatened that Brexit will make the UK a fiscal haven and offer lower standards to attract more investments. In the end, this will adversely affect the UK’s budget and the EU also can hamper British companies’ access to the European market if Britain does so.

Presumably, Brexit will cost the UK more than expected. If on the one hand it seems like a well-planned, thought out strategy, on the other, the EU seems hardly reasonable in its expression about Brexit. While Theresa May thinks of Brexit as the only ruthless solution to a better Britain, she may be making it unduly hard, if not difficile, to many of her counterparts, to agree to her terms of Brexit.




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