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Three Key UK-EU Relationship Scenarios to Consider as Brexit Day Draws Near

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Three Key UK-EU Relationship Scenarios to Consider as Brexit Day Draws Near

A no-deal scenario will likely weaken the UK GDP growth to -0.4% by 2021, says Frost & Sullivan

PR Newswire

LONDON, Aug. 21, 2018 /PRNewswire/ -- The United Kingdom is witnessing weakening economic growth and political turmoil amidst Brexit, with lingering uncertainties concerning post-Brexit conditions. A final ratified withdrawal agreement before Brexit day should provide businesses with a 21-month transition period from March 29, 2019, through December 31, 2020, to better prepare for permanent post-transition UK-EU relations. However, such an agreement is not guaranteed, and it is possible that the UK could crash out of the EU with no deal.

"Brexit is expected to change the future of trade costs, customs checks, worker movement and so on between the UK and the EU," noted Neha Anna Thomas, Senior Economist at Frost & Sullivan. "Trade would be most affected under the no-deal scenario as the UK's exports and imports would, respectively, become subject to EU's common external tariff and the UK's most favored nation (MFN) tariffs, as well as to customs checks."

Frost & Sullivan's recent analysis, Brexit Impact on UK Economy and Business, Forecast to 2023, highlights the transition period impact, UK-EU post-Brexit relationship scenarios, scenario-based macroeconomic outlook, and scenario-based industry outlook for the automotive and financial services industries.

For further information on this analysis, please visit: http://frost.ly/2ph

Frost & Sullivan experts examined three key potential Brexit UK-EU relationship scenarios that must be considered:

  1. Comprehensive Economic Trade Agreement (CETA) or CETA Plus-type scenario based on the EU-Canada trade model
  2. No-deal scenario, which would cause the most disruption to trade of all the potential scenarios and eliminate the benefits of a transition period
  3. Soft Brexit scenario, based on the Chequers meeting and UK government white paper

There is also the possibility of a deep-bespoke scenario if UK-EU negotiations are extended.

"Outside of the no-deal scenario, which rules out a transition period, UK-EU relations are expected to be largely unchanged during the transition period," said Thomas. "The UK, for example, will remain in the EU Single Market and Customs Union, with free movement also expected to continue during the transition period."

The UK's GDP growth is expected to slip to -0.4% by 2021 in a no-deal scenario. In the other probable scenarios, GDP growth is still expected to weaken but remain positive. Factors such as interest rates, trade costs and customs checks will also evolve differently, depending on which scenario comes to pass. Organizations should evaluate how supply chains could be restructured to minimize the risk of disruptions from Brexit and to avail of benefits tied to the UK's new expected trade relations with the rest of the world.

Brexit Impact on UK Economy and Business, Forecast to 2023 is part of Frost & Sullivan's global Emerging Market Innovation Growth Partnership Services.

Brexit Impact on UK Economy and Business, Forecast to 2023
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SOURCE Frost & Sullivan

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