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What does Theresa May's new Brexit plan mean?

Business and Finance Editor, Cassian Frost, explains Theresa May's proposed Brexit deal

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On Wednesday, Theresa May revealed the 585 page-long withdrawal agreement to her cabinet, alongside the outline political declaration on a future relationship. The PM told the press afterwards that it was "the best deal that could be negotiated" and she believed "with my head and my heart that this is a decision which is in the best interests of our entire United Kingdom". The negotiations had seen investor confidence spike as the pound grew against both the dollar and the euro, it was short-lived however, as it dropped to a 17-month low following the mass resignations that followed her cabinet meeting. Shailesh Vara, Minister of State for Northern Ireland was the fist Minister to resign after the Brexit deal, closely followed by Brexit Secretary Dominic Raab and Secretary of State for Work and Pensions Esther McVey. Jo Johnson also quit his role as Transport Minister on November 9th as he accused the PM of attempting to conceal the bitter price of leaving the European Union.

GDP forecasts have been bleak by almost all experts with the International Monetary Fund recently estimating an 8 per cent drop in long-term GDP if the UK were unable to achieve a deal and still a 3 per cent drop if a free trade agreement, similar to the Canadian model, were achieved. This echoes a similar report released by the Brexit Department earlier this year. The importance placed on the deal is of no surprise considering just under half of all trade conducted by the UK is done with the EU. Yet, it is important to note that this deal only forms a temporary resolution with a future agreement being of primordial significance.

According to the draft, the UK will enter a transitional period following the 29th March 2019 for 21 months to allow businesses and governments to ease into the long-term changes, during this time it will observe all EU rules and regulations, and this period of implementation will hopefully allow the creation of a free trade agreement. A free trade agreement is in the best interest of the economy as no import tariffs or quotas will be placed on UK exports, it is also in the best interest to the EU to complete a free trade agreement so UK tariffs are not imposed on its own exports to the UK. May told the Commons on Thursday it will be "a more ambitious free trade agreement than the EU has with any other country".

Should no deal be finalised after this period, however, it can be extended once (at the cost of the UK) or an emergency backstop arrangement will fall into place in order to prevent a hard border forming between Northern Ireland and the rest of Ireland. In this scenario the UK will fall into a de facto customs union, and will follow some specifically written rules which include, state aid, competition and tax rules, to name a few. These will prevent the UK from gaining an unfair advantage in trade with all 27 remaining EU member states.

The divorce bill also came out and is estimated to total £39bn by the Treasury, but the Public Committee Chair, Meg Hiller MP has spoken out to say that this omits some anticipated costs associated with EU withdrawal, which she said could total up to £10bn. The agreement does end free movement of people, and it is thought the Government will introduce a skills-based immigration model, similar to that of Australia. However, it has agreed to some concessions such that the administrative process for nationals seeking a right to residency in the UK will be "smooth, transparent and simple".

The UK is also allowed to start making trade deals with other countries from the 30th March 2019, but these cannot come into effect until the transition period ends. However, with its aversion to immigration, it will struggle to make definitive deals with other countries as when the PM met with India, who has been working on a trade deal with the EU since 2007, May was told easing migration barriers would be a necessary commitment for any trade deal to be finalised and according to Yashvardhan Sinha, India's high commissioner to Britain, such a deal was "not going to be done overnight".

What does this all mean? The draft withdrawal agreement only sets out the immediate terms of the UK's departure, and strongly relies on a free trade agreement being signed before the transition period lapses. Rolls- Royce, which employs over 22,000 people in the UK joins other big bosses in backing May's Brexit deal thus inspiring hope business confidence will remain high during Brexit uncertainty; such businesses major worry is crashing out of the EU with no deal at all as a large part of their business structure relies on strong sales out of the UK.

It is no wonder with so much at stake yet more pressure groups have formed to push for a second People's Vote on the deal, with now People's Vote group, Our Future Our Choice, among many others. It has attracted a lot of voter attention with approximately 700,000 attending the People's Vote March in London, and thousands took part in York.

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