The only real information we had on Brexit – the timing and process – are once again entirely uncertain. On 3rd November, the UK High Court upheld a legal challenge brought by citizens who oppose Brexit, stating that the UK government must get approval from the Parliament before triggering Article 50, to begin the process of leaving the EU.
Although the government has appealed the decision (with the Supreme court to hold a hearing on 5th December) it is unlikely that a different conclusion will be reached. In fact, reports suggest that the British government is already preparing legislation to put before the Parliament.
Given the referendum result, the Parliament is not in a position to block Brexit from happening, however this change in process will allow it to have an input into the UK’s future relationship with the EU. In particular, the Labour party will seek to ensure that continued membership of the single market is guaranteed. In addition to this, the UK governments timeline of triggering Article 50 by the end of March is now out the window. Passing a bill or resolution in the Commons will probably take months, and the House of Lords, which is avowedly anti-Brexit, will also get a say and is expected to cause major delays in the legislation’s approval.
While the court’s ruling, did cause a slight jumped in the value of the pound relative to the euro, an analysis of the long-term impact of Brexit, published by the Economic and Social Research Institute on Monday, 7th November, did not bring good news. The study, commissioned by the Irish government, gave an analysis of the impact of Brexit in different forms, over a 10 year period.
Although largely seen as the best outcome for Ireland, a so-called ‘soft Brexit’, where the UK would remain in the European Economic Area and custom union (and therefore the single-market), would still result in a 2.2% decrease in wages and a 1.2% rise in unemployment, compared to if the UK remained in the EU.
A ‘hard Brexit’, where the UK would be outside the customs union and relying on its WTO membership for trade, would be considerable worse however. In this case, the economy would shrink by 3.8%, unemployment would rise by 1.9% and wages decline by 3.6% over the next decade. This is largely a result of an hit to our exports, caused by lower growth in Britain, as well as the imposition of tariffs of up to 20-30% on food products such as beef and dairy.
Under either outcome, it is predicted that the value of sterling will be permanently weaker and that volatility will continue in the coming months.
By Alison Graham
European Affairs Executive
3 Aug 2017