EU LOOSING POUNDS (￡) IN BREXIT

Phases of war and peace among nations do have an expiry date with varied scale of its longevity. EU without frontiers was formed in 1993 with single market aimed at ending frequent conflicts among the neighbours. This unification coined Schengen and Euro. Now, after 27 years of EU formation, UK is finally parting ways with EU ending the alliance.

The last day of 2020 will be the end of transition for UK (with or without a deal). There are various theories propounded by the subject matter experts and academicians on what triggered this separation. The most common factor cited by them for Brexit fall out appears to be the unfettered rise of migration from EU in UK since past two decades. The hinge events like the fall of WTC and 2008 financial crisis seems to have further propelled this migration.

While immigration has been their apple of discord, this ageing continent seems to desperately overshadow the economic dimension of the fall out. Perhaps, the single market framework seems to have widen the aspirational gap among the EU nations with a perceived sense of a skewed distribution of wealth and economic power. Moreover, from a geo-strategic perspective, decline of EU and rise of China in the last decade might also have fuelled the Brexit Referendum in UK.

UK has secured first post Brexit trade deal with Japan. Many more will follow. Compared to US, China seems better placed to be the bigger beneficiary as EU and UK will desperately try strengthening their trade ties with China post Brexit. In fact, both the regions will indulge in fierce competition with each other. Only time will reveal if UK benefited more than the rest of the EU from Brexit.

Brexit symbolises arrival of protectionism. While it will be for the economists to gauge and weigh the benefits of protectionism, what looks imminent is the sunset of multilateralism. While the world thrives on connectivity, the EU continent is witnessing a disconnect with UK drifting apart. May be in 2021, the EU will further disintegrate with allied countries disbanding.

Financial, automotive, travel, aviation and pharma sectors are likely to suffer the most post Brexit. Economic downturns, mobility disruptions, higher tariffs, job losses and sights of logjams at ports, highways and airports looks imminent in short term. Businesses thriving on government spending through big contracts (like defense etc.) are also likely to witness falling top lines. What goes unnoticed here is the tapering off the social architecture of EU and UK. Even other countries connected with EU and UK will also not be immune to the emerging geopolitical and market access risks. From a risk perspective, businesses will brace up for delayed decisions and shifting risk appetite.

In 1973, UK joined EEC and in 1975 it had an “in-out” European referendum. 2/3rd of UK voted in favor of staying in. The referendum campaign of 1975 for (for and against) had food, trade and economic agenda. On the top of that, the referendum was about peace v/s pride as can be seen in the advertisements cited atop.

Referendum of 2016 saw a paradigm shift of voters’ ideology. With a wafer-thin margin, UK chose against staying in EU, preferring protectionism to globalisation. Their survival instincts preceded peace.

 The UK Govt has launched a new marketing campaign with a new strap-line : “ Check, Change, Go” for preparing businesses and citizen for post Brexit era in 2021. With one of the highest Covid fatality rate, UK is all set for a tumultuous time post Brexit.

The British Empire, which ruled more than 60 countries at different point of time is clamouring for its own independence from EU today.

( ** Image courtesy : https://flashbak.com/ephemera-from-the-1975-european-referendum-63088/)