Source: Straight talking and business advice from PwC (1)
We spend a lot of time dredging the silt of the Brexit debate looking for the odd nugget of information which might be of practical benefit to business decision-makers. There are quite a few in “The Signal from the Noise“, a report from PwC issued immediately after the triggering of Article 50 at the end of March.
In PwC’s eyes the core of the debate now revolves around whether the UK will be a “Third Country” in two years’ time, trading with the EU on the basis of World Trade Organisation (WTO) tariffs, or whether it will have a Free Trade Agreement (FTA).
“Looking at these two outcomes and considering recent statements from the UK government, we think businesses should base their model on Outcome 1 (Third Country) as a worst case scenario. This would not be a good outcome for Ireland or the UK.”
One of the great problems in the Brexit debate is the tendency for commentators to conflate what they want, or what would be sensible, with what we are likely to get. There is a strong belief in the UK that the EU cannot afford to refuse an early FTA. Even if that were so, there would be consequences for Brexit adherents.
“Existing free trade agreements require adherence to the four principles of the EU – the free movement of goods, services, capital and people.”
In other words, an FTA is not compatible with the UK desire to limit migration from the EU. We can’t remember that point being highlighted in UK media coverage of the potential for an FTA. But there is more: migration limits may also make it difficult to get trade deals elsewhere in the world.
“This is unlikely to be simply an EU– UK issue. Countries such as Australia, India and China are already asking for assurances around the access rights of their nationals employed in the UK, while indicating that they are still keen to do trade deals with the UK.”
And there are other shocks in store for those who believe life will be simpler on the other side of Brexit.
“There is no free trade agreement with the EU where the external entity does not make a contribution to the EU coffers. For example, Switzerland pays €450m per annum. On a roughly pro-rata basis, the UK would need to pay £3bn in annual contributions.”
Even if the UK voters could swallow all this, there is no way an FTA can be in place in 2019: “There simply is not enough time to agree Brexit arrangements within the two year period. The UK government have admitted that a full suite of trade deals could take 10 years to agree. When they left the EU, Greenland’s trade deals took three years to negotiate. They mainly export fish … “