Big Ideas 2021: The initial impact of Brexit will start to come into view

As we come to the end of a year of huge change, LinkedIn Influencers and experts have looked ahead at what we can expect to see in 2021. See the complete list of Big Ideas that will shape 2021 and share your own predictions using #BigIdeas2021.

Here, experts have looked at how the relationship between the UK and EU could develop as Brexit finally comes into view.

Though the UK officially left the European Union on 31 January, next year is when the reality of Brexit finally kicks in. On 31 December, 2020, the transition period will end and Britain will no longer be part of the EU customs union and single market. On December 24, UK prime minister Boris Johnson and European Commission president Ursula von der Leyen announced the agreement of a tariff-free trade deal that lays out the future relationship in many areas, mainly in the trade of goods, with rules around trade in services less clear.

Even before the deal was announced, experts said that even if tariffs were avoided, there would still likely be disruption and delays to trade simply because it will be more difficult than before. “Deal or no deal, from the 1 January, we will be trading on radically different terms,” says Georgina Wright, senior researcher at the Institute for Government think tank. “The ambition is a deal, but obviously a deal isn’t a panacea. We know there will be more friction as a result of the UK leaving the single market and customs union. As an illustration, if you’re a trader exporting to the EU, there’ll be more paperwork, and if you’re in the EU exporting into Great Britain, you’re going to have checks at the border.”

Though the details are still becoming clear, the uncertainty in itself has had an impact and could continue to do so. In mid-December, UK businesses had called for further detail from the government on what to expect and how to prepare for the end of the transition period, and the Confederation of British Industry and Institute of Directors were among those urging the government to push for a deal.

Deal or no deal?

If there were no deal, prices of imported goods such as foods would have risen due to “substantial” tariffs, according to Tesco chairman John Allen, and short-term there would be supply disruptions. There could also have been shortages of some goods and medicines, said Anand Menon, director at the UK In A Changing Europe, an independent research initiative. The prospect of no deal also raised questions over the trade of services – such as exchange of data – as well as goods, says Wright: “World Trade Organisation rules cover and govern some aspects of trade, but not everything. On trading services, we know that WTO rules are very limited.”

Even with a deal, changes to trade could mean some companies might decide it’s too expensive to trade with the EU in the same way. “Some big companies might think, if we’re going to have a manufacturing hub, we should have it in the EU where we can access the market of 27 countries rather than stay in the UK where we have costs to access the bigger market,” says Menon. It’s in the next five to 10 years that the macroeconomic consequences will be more evident, he adds, pointing to modelling that suggests the impact of Brexit will be “significantly bigger” than that of Covid-19 over the medium term, even with a deal. “In terms of the broader macroeconomic impact of Brexit, that won't be felt straight away. And I think more attention in the early part of next year in terms of macroeconomics is going to be on the unemployment crisis that is created by Covid,” he says.

Negotiations don’t end here

Establishing a trade deal is also just one part of the longer term future relationship between the UK and EU. According to Pepijn Bergsen of Chatham House, next year is likely to be the start of “quite a long process of the UK and EU coming to terms with what their future relations should be, and an almost constant process of negotiation over all sorts of different areas”. Getting a deal on trade could also help to smooth further relations, Bergsen says, particularly important given geopolitics and wider global issues such as climate change.

While it’s likely the UK will continue to work with the EU on the issue of climate change, the UK would rather not work in a “formal way of meeting regularly. They don't want any kind of institutional architecture to govern their relationship,” says Wright. And Mujtaba Rahman, MD of the Europe programme at the Eurasia Group, says that a key principle of Brexit for many who voted for it is establishing Britain’s ability to diverge from the EU. “For many, the entire purpose is to give the government regulatory flexibility,” Rahman says, suggesting that this presents a future relationship that will inevitably be characterised by “constant friction, tension and litigation”.

The UK on the world stage

Outside the EU, the UK will attempt to shape its new role as what the government describes as “global Britain”. “The UK hosting the UN Climate Change Conference in Glasgow will be an opportunity to demonstrate global Britain and also how they're going to cooperate with the EU and other countries,” Wright says. And the UK could seek to set itself up as a “force for multilateralism in the world,” says Rahman, particularly as it will hope to “work constructively with the Americans too”. However, Rahman adds, this UK government will, ultimately, be keen “to do things differently and challenge any perception of being a de facto member of the EU”.