Millennium Post

Tough times ahead for UK

 She firmly expressed that the United Kingdom would not be able to dictate terms of its future ties with the EU. “There must be and will be a noticeable difference between whether a country wants to be a member of the European Union family or not,” she said.

 Her comments come after the frontrunner to lead the British Conservative Party, Boris Johnson, said the UK would be allowed access to the EU’s single market after Brexit. Merkel’s comments are understandable, considering the serious impact Brexit would have on the German economy. To the uninitiated, the UK is Germany’s third most important trade partner.

 On Friday, Britain had voted to exit the 28-member EU. In the short term, nothing much will change for Britain. "There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold," said outgoing British Prime Minister David Cameron. The formal procedure for Britain’s exit will only begin when Article 50 is invoked, which will be triggered once it officially notifies the EU of its intention to leave. After that, there is a two-year period in which the terms of exit are negotiated.

 In the short term, uncertainty about the British economy will loom large, especially its future relationship with the EU. Since the EU is Britain’s largest trading partner, economists predict that the implication of "Brexit" in the long run could be a lot worse. Outgoing British Prime Minister David Cameron has already announced that he will not steer the UK’s bid to negotiate its exit from the EU. The next incumbent will have a very tough job of negotiating a favourable trade deal with the EU. And the signs are not good. 

British opposition Labour party leader Jeremy Corbyn refused to resign after losing a no-confidence vote. Corbyn has been accused of doing too little to ensure Britain remained with the EU. Experts contend that the EU will strike a hard bargain to discourage other countries from leaving the Union. It’s a heavy net loss for businesses based in the UK.

  "If you are Nissan or some other car producer with major production in the UK, today, the same safety standards and environmental standards allow you to sell everywhere in the European market," Jacob Funk Kirkegaard, an economist at the Peterson Institute for International Economics, told Vox, an online American publication.

 “But if the UK leaves the EU, you would no longer be able to sell into other European markets, not because you face a small tariff but because you'd have to go through another set of safety certifications. This kind of thing would be repeated in every industry you can think of."

 Economists at the Centre for Economic Performance (CEP), which is part of the London School of Economics, calculated that UK stares at income falls of between 6.3 percent and 9.5 percent of GDP.
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