US Sales Director, Woodland Group
The UK Referendum that opened the door to Brexit created a large amount of uncertainty globally. The UK government still have a great deal of work to do with their EU counterparts in order to get the deal they would like and political agendas are arguably not helping the process. The EU are very wary of agreeing to the UK wish list and understandably so, as any agreements will set precedent for future negotiations across Europe and beyond.
There is likely to be some form of negative economic impact for Britain, and possibly Europe, but how will this be felt in the US?
The ripple effect is almost certain to cross the Atlantic, affecting the US economy. With a fairly fragile economic recovery globally, could this be the catalyst for another financial bubble bursting?
Until the next round of trade talks in Brussels, no one truthfully knows how this will play out. Global supply chains are certainly going to require some strategic thinking. Currency fluctuations and interest rates will have an effect on the cost of imported and exported products, and potentially increased trade tariffs would almost certainly increase bottom line costs to consumers.
On the flip side, the UK will have more control over its own house post Brexit. The British government is open to reducing corporation tax to perhaps as low as 15%, lower than most major economies and perhaps attracting US business into the UK (or preventing them from leaving).
There has been much talk of a possible Free Trade Agreement between the US and the UK given the ‘special relationship’ between the two countries. Indeed, one of the main selling points of the Brexit leave campaign was that the UK could agree its own Free Trade deals. These do take time to put into place though, and, under Article 50, cannot be discussed until the UK officially leaves the EU. There is also a risk that if the US offers the UK a special deal, it could spur on a global trade war with the EU imposing more tariffs on US products.
The now apparently aborted trade deal between Europe and the US, the Transatlantic Trade and Investment Partnership (TTIP) hit a major obstacle when it came to certain foodstuffs supplied from the US that did not adhere to the EU’s so-called “farm-to-fork” approach. This may be an opportunity the US would like to bring to the table again, although it is still likely to provoke opposition from UK consumers.
Progress in Brexit talks has thus far been slow but there is still time. A transition period has been approved, extending the current deadline from March 2019 to December 2020, however, this is dependent on a number of major issues being agreed on, such as the Irish border and freedom of movement for EU citizens. It would not be a surprise if this transition period was extended further, as the practicalities involved in potential customs arrangements will require significant investment in infrastructure, technology and staffing.
Final terms of any Brexit deal are still very much hanging in the air, meaning businesses globally are as yet unable to make decisive plans going forward, resulting in economic challenges worldwide.