How will the UK economy be in the post-Texan era?

Posted by qianjiu on May 29th, 2019

The British "Brexit" will soon return to the center of world public opinion after the extension. The discussion is mainly focused on several topics: Can the UK and the EU reach a "Brexit" agreement, thus achieving "orderly Brexit"? Will "no agreement to leave the EU" really bring a fatal blow to the British economy? Once the United Kingdom withdraws from the EU on a "hard Brexit", can it really make up for the loss of trade between Britain and the EU by establishing new economic and trade relations with other economies outside the EU?

These unresolved and confusing issues have kept uncertainty over the British Isles, causing panic among investors and business people.

In London, the global financial center that chose to stay in Europe, the prospects for the British economy in the post-Brexian era are also foggy. Garbage bins and telephone poles on the streets of London are often affixed with eye-catching yellow leaflets, including “to cancel the Brexit and return the decision to the people” “The resources that will be consumed by the Bretagne for the UK economy” .

Those who support "soft Brexit" believe that the development of the British economy in the "post-Brexian era" largely depends on whether the UK and the EU can reach a "Brexit" agreement. British Chancellor of the Exchequer Philip Hammond recently criticized those who called for Britain's "hard Brexit" to be deliberately damaging the British economy. He warned that if the new prime minister gives up the negotiations with the EU to reach a "Brexit" agreement and chooses "no agreement to leave the EU", this will hurt the British economic interests and the values ​​of the British.

However, the "Brexit" stalemate has also made some British people who had hoped to reach economic and trade arrangements with the EU and ensure that Britain's "orderly Brexit" was disheartened. They simply turned to appeal, instead of essentially making Britain unable to truly "Brexit". "The economic and trade arrangement is not as good as letting the UK withdraw completely from the EU through "no agreement to leave the EU" and truly regain its borders and power.

According to a report by the International Monetary Fund at the end of last year, once the UK “no agreement to leave the EU” and trade with the EU to return to the framework of the World Trade Organization, the UK’s output will fall by 5% to 8% in the long run. This means that every Briton will lose about £1,700 to £2,700. This loss is mainly due to increased trade barriers, a potential decline in foreign direct investment flows and a decrease in the number of net immigrants.

A group of economists headed by Martin Wolf, deputy editor of the Financial Times and chief economic commentator, are not optimistic about the prospects for trade between the UK and non-EU countries. Their reason is simple – in this world of “smoothed by the Internet and fast traffic”, distance is still a decisive factor for trade.

Wolff studied the relationship between distance and trade volume and came to a conclusion: on average, for every 10% increase in distance, the bilateral trade volume will drop by 9%. This is also why the economy is only 14% of the United States in the United States, and the economic figures in the trade with the EU are very eye-catching - the EU's exports to the UK are about 80% of the EU's exports to the United States.

This gives a challenge to those “hard Brexians”: “After the Brexit era,” can the UK’s foreign trade really benefit from the far-flung countries outside the EU, as they expected?

Wonderful sharing：