Divorce talks between Britain and the European Union have been going on for several years. Prime Minister Boris Johnson has embarked on a new confrontation with Brussels following an agreement on exit rules earlier this year, which could allow the worst-case scenario to materialize: Britain can withdraw from the European Union without any agreement, and access to the European market is virtually cut off overnight.
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The British government said this week that it wanted to change the terms of the “divorce agreement” signed at the end of January. European Union officials have given Johnson until the end of September to abandon his intention to change an earlier agreement, which would be in violation of international rules.
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If Johnson does not make concessions, the EU-UK trade agreement will be replaced by transitional arrangements that expire later this year. Thus, as early as the beginning of 2021, Britain is at risk of very unpleasant consequences – with chaos at the borders, food shortages and other problems. Likewise, the British economy is already in the deepest decade of decades, and leaving without an agreement would mean even greater problems for the economy.
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More importantly, in violation of international agreements, other countries would think twice before entering into any kind of negotiations with the British Government on free trade agreements, which Britain will desperately need in the new circumstances. At the moment, with Johnson right, Britain is facing a severe blow to its reputation, making the country an unattractive place for new businesses and foreign investment.
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“It is very unusual and worrying for a country that has no idea where it is going to come up with some other strange rules.”
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said David Henning, British director of the European Center for International Political Economy.
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There is currently no trade agreement that could replace Britain’s membership of the European Union, namely access to the world’s largest free market, which is the destination for 43% of Britain’s exports. Leaving the European bloc in any case means that British companies will have to face higher costs.
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Uncertainty about the future has already traumatized the British economy. Berenberg analysts have estimated that the economy has grown by 2.4% a year for three years before the Brexit referendum. However, after the referendum, the British economy grew to 1.6%, but business investment began to stagnate.
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A new trade agreement with the European Union would reduce the further consequences for businesses that are currently desperately trying to recover from the effects of the coronavirus pandemic. The British economy was already experiencing a 20% economic downturn in the second quarter.
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In the most devastating scenario, the withdrawal of Britain from the European Union without any agreement will in fact mean broken supply chains and great chaos at the borders. The customs systems will be overloaded and the country will not be able to cope for several months. As a result, Britain may face a major shortage of food and medicine.
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As early as November 2018, the British government estimated that trade between the United Kingdom and the European Union would fall by almost 8% over the next 15 years. Given the impact of the pandemic, this figure may be even higher.
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