Bad news for those who have not followed closely the latest episodes of Brexit: negotiations are far from over. Admittedly, Boris Johnson's triumph in the legislative elections of December 12, 2019 means that the United Kingdom will leave the European Union (EU) on January 31. The House of Commons, now largely controlled by the Prime Minister, will ratify the withdrawal agreement in the coming weeks. Unless there are major surprises, the European Parliament will then do the same. 1st In February, a country will have left the EU for the first time, and will no longer have MEPs or a Commissioner.
However, this is only the first step. Then, an eleven month transition period will open, during which nothing will change on the ground. The economic rules will remain the same, there will be no customs duties or border controls. This gives time to negotiate the future relationship – the free trade agreement between Brussels and London – which should in principle come into force on 1st January 2021.
In political terms, Brexit will therefore take place at the end of the month. But in economic terms, the real consequences will not be felt until the end of the transition period. Theoretically, everything is possible, going from one extreme – the United Kingdom can remain aligned with European rules, like Norway for example – to another – it can choose to cut all ties, and trade by default according to the rules of the World Trade Organization (WTO).
Businesses can take action
For 2020, economists therefore predict that the United Kingdom will continue to experience weak growth. After 1.3% in 2019 (exact statistics will be known in the coming months), they expect on average 1% growth.
Certainly, in the short term, Mr. Johnson's victory has removed "A layer of uncertainty", explains Fabrice Montagné, economist at Barclays. The coming months are clear, and companies that have been waiting for a clear signal for a quick investment can finally take action. Ben Higson, partner in the law firm Hogan Lovells, believes that this clarification brings "An important reason to be optimistic about the level of M&A activity in the UK in 2020". Euler Hermes has revised its growth forecast for 2020 upwards from 0.8% to 1%.
