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May’s deal fails- What now?

Wednesday 16 January 2019

IN THE wake of Theresa May's heavy defeat in the commons for her Brexit deal, our business experts look at what might happen next.

Dr Jonathan Owens, Lecturer in Operations Management at the University of Salford Business School, and expert in supply chains, said: “The UK parliament has rejected the Brexit deal agreed between Mrs May and Mr Barnier. Therefore, by default the UK will leave the European Union (EU) with no deal on the March 29 this year.  From then the UK would enter all future trade agreements set out by the World Trade Organisation (WTO), and indeed that is how we already currently trade with some of our international trading partners.

“If you are not sure how this applies, then look round your own home and see how many products you have purchased that are not made in the EU.  Many Government supporters of Brexit have consistently argued that failing to reach a deal wouldn’t be all bad and leaving with no deal would mean the UK could work to get a favoured nation status under WTO to trade with the rest of the world.  

“However, regrettably this would not be as simple as it sounds to develop, i.e. new trading channels, routes, tariffs, supply chains etc.  For example, if we consider tariffs, Britain currently trades with twenty-four countries and territories under the sole agreement of WTO rules.  However, with sixty-eight countries, it has either fully or partly in place the EU free trade agreement, that enables the UK to trade on better terms.  

“Inevitably, while there would be some disruption, these issues are not insurmountable.  After all, UK businesses are resilient, adaptable, resourceful and some have become the envy of their competition. 

“Finally, people should take with caution the long term economic forecasts that UK growth would be reduced by 8% with a no deal.  Many businesses will make alternative arrangements; otherwise (unlike the UK Government) they may not have a business to run.”

Dr Gordon Fletcher, retail and small business expert at the University of Salford Business School, comments on the frustration being felt by SME business owners over ongoing Brexit uncertainty.

Dr Fletcher said: “We live in the era of fractal politics - a time when anything can happen. The newspapers are emphasising the historic defeat of the government in what can also be described as the most predictable outcome of modern parliament. Immediately after the vote the opposition also predictably did what they needed to do in calling a vote of no confidence.

“During all of this playing out of parliamentary democracy, small and medium sized businesses have had very little voice and are struggling to plan for the future. The EU leadership is probably best expressing their frustration (perhaps ironically it could be argued) in asking, "what is it that Parliament really wants?" Without any clear answers the UK steps one day closer to the 29th of March without any stability or clarity.

“The immediate business reaction was a good gauge of the certainty of the outcome. Exchange rates wobbled - not because the defeat was surprising but rather because of the size of the defeat. Then sense prevailed as currency traders realised that a meaningful vote and an historic defeat did not offer any greater clarity or solution to Brexit. Given the equal uncertainty facing the current US government shutdown traders also recognised they were trying to play a zero sum game. Then stock markets started opening in parallel with the realisation that the government will probably win today's vote of no confidence as the DUP and dissenters from last night's vote come back to the party line. Another zero sum game in the world of fractal politics.” 

 

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Sam Wood

0161 295 5361