Brexit Uncertainty Could Linger Long After March 29 Deadline

by on

March 29 is currently supposed to be the date by which Britain’s future relationship with the European Union is finally settled.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

There are several possible outcomes of varying likelihood. Britain could remain part of the E.U., which is looking comparatively unlikely.

Or, it will leave based on the agreement Prime Minister Theresa May has reached with Brussels, but including some last-minute tweaks around the longevity of the Irish border question (the most likely option).

Or, Britain will plunge out with no formal agreement — and to judge by the opinions of much of the business community and many commentators, it would plunge into an extremely uncertain and volatile future.

Either way, most Britons think that that will be the end of the matter.

Unfortunately, the reality is it will be only the beginning.

Let’s leave aside a slim possibility that Britain remains within the E.U. — that would require a second referendum, which is unlikely. Despite all of the advice as to the economic downsides of Britain leaving the single market, the majority of the population (by a slim margin) still seems intent for leaving.

Unfortunately, May’s agreement with Brussels is fat on words but thin on detail.

As James Blitz observed in the Financial Times, May’s Brexit deal finalizes the E.U.-U.K. divorce settlement, but the future trade relationship contains no firm commitments on either side. As a result, Britain’s departure would simply mark the start of yet more years of negotiation between the E.U. and U.K. covering every conceivable sector of the economy.

As an illustration of the lack of preparedness, The Times reported — following a Sky News report — that the U.K. Department for International Trade plans to cut more than 80% of import tariffs on goods if Britain leaves the U.K. without a deal on March 29.

To be coming out with such an announcement just 3 ½ weeks before the departure date — and with no consultation with the business community or any Parliamentary debate — is, to put it mildly, crass irresponsibility.

Many politicians favoring a hard Brexit optimistically pointed to the opportunity of forging new trading relationships with countries like the U.S. However, Woody Johnson, the U.S. ambassador in London, has said any transatlantic agreement will have to include hormone-fed beef and chlorinated chicken (both of which have been banned by the E.U. for 20 years and would face overwhelming opposition from British consumers).

The fact is MPs and the voters that put them in office are being asked to sign up for a Blind Brexit. The prime minister’s “deal” has so many contrarian objectives, which are contradicted within one paragraph of each other, that it is clear years of negotiation will be required to finally reach a trade deal with Europe, despite what voters are being told.

Ex-Labour Prime Minister Tony Blair is hardly the country’s most popular politician, but he made abundant good sense during a TV debate over the weekend when he said “The risk for Britain is that we leave not knowing what the future relationship with Europe is, pay the (divorce) money up front, become supplicants to Europe, have no negotiating leverage, and then, of course, it’s too late to do something about it if we decide we don’t like it.”

So fractious has the debate been among British politicians that both major political parties have developed potentially irreconcilable splinter groups with sharply divided views over what kind of future they would like to see.

For the first time in decades, a new political party is gradually forming following the resignation of eight Labour MPs and three Conservative MPs to form a loose coalition called the Independent Group, the BBC reported late last month. The group has several aims, one of which is a second referendum, as they believe the electorate was lied to in the first one and that, now facing the hard reality of what is to come, may just change its mind. It’s a fine enough ideal, but there seems little enough appetite for it among those remaining in either of the major parties.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

So, to the casual observer who assumes that the prime minister’s deal, if voted through, will settle matters and the U.K. will return to some semblance of normal — think again.

Uncertainty will continue for years to come; as a result, those looking to invest in Britain will likely look elsewhere.

Not surprisingly automakers with their highly integrated supply chains are in the vanguard, with Honda, Nissan, BMW, Vauxhall and even Jaguar Land Rover taking steps or making plans to reduce investment in the U.K. in the years ahead should the uncertainty continue.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.