eco TV Week

United Kingdom: A month after Brexit

1/29/2021

A month after the UK’s exit from the EU’s single market and customs union, the economic effects of Brexit are starting to be felt, although there are some mitigating factors. Looking ahead, the British will face an important dilemma between using their newfound autonomy and staying aligned with the EU’s regulatory framework to protect their exporters.

Hubert DE BAROCHEZ

TRANSCRIPT // United Kingdom: A month after Brexit : January 2021

A month has passed since the UK left the EU’s single market and customs union. Because a trade deal has been found at the last minute, the worst-case scenario of a return to World Trade Organisation base rules has been avoided.

Thanks to the deal, goods exchanged remain exempted from tariffs or quotas. However, contrary to Prime Minister Boris Johnson’s announcement, numerous other trade barriers have been put in place. New non-tariff barriers now hinder goods exchanges, including additional administrative procedures, paperwork and border controls. In addition, in order to be exchanged without tariffs, goods have to satisfy rules of origin, which means that a share of their production has to be local. 

Even if this new configuration is in place since 1st January, the effects of Brexit are not yet fully felt, for several reasons. Fearing an exit without a deal, many companies had increased their stocks at the end of last year, and their needs this start of year are therefore inferior to what they could have been. Moreover, measures taken to contain the Covid-19 pandemic have reduced economic activity and trade. Another reason is that full controls on goods entering the UK will not apply until July.

When it comes to services, their exchanges are not as fluid as they were before Brexit. They have been largely excluded from the trade deal. In addition, the regulatory framework of the UK’s financial services sector has not been recognised as equivalent to that of the EU, and there is no mutual recognition of professional qualifications anymore.

From now on, the British will face a dilemma. On the one hand, accepting to follow the EU’s regulatory evolutions without having a say in them will go against the idea of taking back control thanks to Brexit. On the other hand, diverging from the European regulatory framework would expose UK companies to additional trade barriers, as the EU would certainly protect its market against the increased risks of unfair competition.

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