As predicted back in the summer, many countries around the world are facing their second wave of Covid 19. As a result, several European countries, just like the UK, are going back into lockdowns, putting a stop to a large proportion of their economic activities.
With the Brexit deal talks still ‘in progress’, will we have a deal in time? Or will the effects of the pandemic combined with a ‘no deal’ outcome result in even harsher austerity measures in an attempt to recover the economy in the next few years ahead?
The EU bloc sees a gloomy future
The European Commission admitted that the outlook is bleak. The second wave of lockdowns spreading across the EU countries reduces their ability to bounce back from its worst economic crisis on record. The recent report published in Brussels reads: “Given the uncertainty about the future trading relationship between the UK and EU, it is also assumed, without any prejudice to the outcome of the ongoing negotiations, that the EU and UK will trade on WTO Most Favoured Nation rules from January 1, 2021, onward.[…] This implies a much less beneficial trade relationship with economic costs for the UK, and to a lesser extent, the EU.”
They are predicting a 7.4% decrease in the EU-wide economy and a 10.3% slump in UK’s GDP before the end of the year.
It is important to note that these predictions are based on a scenario whereby Michel Barnier and David Frost do not manage to reach a mutual agreement in time.
Serious divergencies – no deal likely
Over the last few weeks, Michel Barnier and David Frost, the chief negotiators, have been intensely discussing the outstanding Brexit deal matters, including the state aid and access to British fisheries. From recent tweets and comments, it seems, the one thing that Lord Frost and Barnier do agree on, is the fact that they still strongly disagree on the aforementioned elements of the deal.
Mr Barnier hinted a possibility of no deal by the 31st December deadline as he admitted there are still some “very serious divergencies”. Frost’s response was to agree with the comments and highlight his determination to “find solutions that fully respect UK sovereignty”.
The EU chief negotiator claims the bloc is ready for all scenarios, suggesting that they are now prepared to accept a no-deal outcome, rather than buck down on some of those key demands. With the UK holding their position, Barnier suggested this is a dangerous game of brinksmanship, and a “recipe for disaster”.
With the clock ticking, there is more pressure on Barnier and Frost to come to an agreement, which is still an uncertain scenario given the way both parties refuse to give way.
Boris facing legal action from the EU
While the Brexit deal talks are still going on, the UK has given the EU no choice but to move the court action against the UK to the next phase after Boris Johnson missed the deadline to explain why he is planning to break international law over Northern Ireland.
The bill proposed by Mr Johnson would overrule an agreement he previously signed, whereby border checks on goods moving from Northern Ireland to Great Britain would be banned as from 31st December. The prime minister now believes Britain should be exempt from parts of this agreement.
The EU gave Mr Johnson a month to respond to their letter and explain his position. Unfortunately, the EU received no response from the UK and so is ready to push the court case further.
The European Commission spokesperson said the EU is “fully committed to achieving full, timely, and effective implementation of the withdrawal agreement within the remaining time available”, adding that the “dispute will have to be resolved”.
Will aggravating the EU have a negative effect on the Brexit deal negotiations? Will Johnson’s disobedience here mean that the UK businesses’ trading future will be negatively affected? With less than 60 days left, we are yet to find out.
Are you ready?
The economic forecast based on a no-deal scenario is negative. Even with a deal in place, we can expect things to be tougher and trade across borders to be obstructed by formalities and unpreparedness. Our UKCS office of 80+ staff is here to support you and your business through this confusing time. Get in touch with us and see how we can help.