Today British PM Theresa May officially requested to leave the European Union and triggered a full withdraw from the other 27 member states by invoking Article 50 of the Lisbon Treaty which takes 2 years to process before the decision is finalized with the European Union.
In her letter to Donald Tusk, President of the European Council, British Prime Minister May wrote that the June 23rd Brexit vote to leave the European Union was “no rejection of the values they share with their fellow Europeans” and was a vote to restore their national self determination.
“We are leaving the European Union, but we are not leaving Europe- and we want to remain committed partners and allies to our friends across the continent” May wrote.
European Council President Tusk replied in a press conference, “What can I add to this? We already miss you.”
The European Union remains the U.K’s largest trading partner with approximately half of the U.K’s trade being generated from the EU.
Membership in the EU has lowered trade costs between the U.K. and other member states.
Questions remain on the horizon about the U.K.’s trade deals and whether they will retain access to the EU single market.
According to a March 2016 research paper titled “The consequences of Brexit for U.K trade and living standards” from the London School of Economics and Political Science, Centre For Economic Performance, in an “optimistic” scenario similar to Norway, the U.K obtains full access to the EU’s single market, this results in a 1.3 percent fall in average U.K incomes (or £850 per household).
However, in a “pessimistic” scenario that includes the U.K. not being successful negotiating a new trade deal with the EU, resulting in larger increases in trade costs, Brexit lowers income by 2.6 percent (£1,700 per household).
The conclusion of the research paper determined that “the economic consequences of leaving the EU will depend on what policies the U.K adopts following Brexit.”
However, the researchers noted that “lower trade due to reduced integration with EU countries is likely to cost the U.K. economy far more than is gained from lower contributions to the EU budget.”
The U.K’s Independent released an article on March 15th that cites research from the Royal Institute of Chartered Surveyors showing 176,500 of the U.K. construction workers are EU nationals and if the U.K. loses access to the EU’s single market, it will impact the hiring of non-U.K. workers which are important to the success of their businesses.
PricewaterhouseCoopers (PWC) projects the U.K.’s real GDP will grow 1.6 percent in 2017 and 1.4 percent in 2018 due to “slower consumer spending growth and the drag on business investment from Brexit-related uncertainty.”
“We also expect business investment growth to remain relatively subdued in 2017-18 due to uncertainty about the UK’s future trading relationships with the EU and other geopolitical uncertainties” PWC wrote in a March 2017 outlook.
Long term, PWC expects the UK economy to grow at around 2 percent after Brexit unfolds in 2 years.
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