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The economic cost of Brexit could outweigh the benefit

  • 30 Nov 2018

Economic predictions from economists and bankers signal that the exit from the EU would be to the UK's detriment.

( Reuters )

The United Kingdom of Great Britain and Northern Ireland will leave the European Union on March 29, 2019 – a divorce deal that was decided on November 25.

The divorce bill

Although the UK has argued it does not owe the EU anything when it leaves the European Union, the withdrawal agreement has terms for "a fair calculation method" but not an actual number. 

However, the figure of about $50 billion was agreed upon by Britain in 2017 and will be paid over a number of years.

This means the UK will continue to contribute to the EU budget in the transition period as well as other possible outstanding costs.

The British government has guaranteed that it will stand by its financial obligations and commitments during its time as EU member. 

Without the treaty, EU taxpayers would have to step in something that the EU has been explicitly against.

The fact that UK taxpayers will no longer be paying large amounts of cash to the EU after the transition period will be a net benefit to the UK and allow the money to be reinvested where it is most needed.

Bank of England Scenario 

A disorganised exit formally referred to as a no-deal from the EU could trigger a recession in the UK, which has not been experienced since WWII according to the Bank of England statistics.

Should the agreement negotiated with the EU not come into force by the day of divorce, the British economy is likely to shrink by 8 percent and unemployment rise to 7.5 percent  within a year, according to the Bank. And it would be worse than the 2008 crisis – for the UK, the Bank of England forecast added.

If the deal is finalised by March 29, next year, then the British economy will grow a lot slower than it would have otherwise grown had it stayed within the EU.  A best case scenario will see the UK economy shrink 2.5 percent to 3.9 percent in the next 15 years

British policymakers are now on damage control seeking to mitigate the losses from the Brexit.

The British finance minister said that May's deal is "the best," but could not avoid commenting on the back of the result on Wednesday: 

"The analysis clearly shows that staying in the EU would be the better result for the economy – if only marginally."

Will Theresa May survive the deal?

Prime Minister Theresa May and her cabinet members are currently desperately seeking support for their Brexit agreement. 

On December 11 the British Parliament will vote on the deal. 

So far, however, it seems more than questionable whether the government can get a majority for the agreement. The danger of a Brexit without an agreement is not over yet.

Morethan eight ministers and state secretaries, and over 12 high officials of the British administration have resigned under the May government.

The Labour Party and some Conservative Party members of parliament oppose the deal with the EU because of its harsh conditions towards the UK.

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