This article seeks to analyse some of the consequences of Brexit whether a withdrawal agreement is reached or is not.

While the departure of the UK from the EU will have some effects, seen from a general political and economic perspective, that are quite easy to foresee, other consequences will be quite subjective and sectoral in nature. Undoubtedly, the best conclusion for all involved would be an agreement reached and approved in line with article 50 of the Treaty. This would ensure a serene conclusion to an otherwise rather burdensome process. However, given the current state of affairs and the now imminent conclusion to the negotiation process there is a lingering premonition of a possible no agreement.

The first obvious affect of Brexit whichever way the divorce process is concluded and a feeling that has been felt ever since the vote in the UK referendum, is a general reluctance towards the EU. The need to form part of the EU is unlikely to be felt as less necessary than during this period. The principles binding the peoples of Europe to the EU such as peace and stability are no longer seen to be guaranteed by the EU, primarily because of a much stronger national sentiment than an EU sentiment. Why now? Because the arguments raised in the UK prior to the referendum are very close to the arguments affecting the opinions of most EU citizens, first among which immigration. Voiced by Marine Le Pen back in 2016, she said "Whatever the result, it shows the EU is decaying, that there are cracks everywhere" and that the EU should give way to a "Europe of the nations".This further spells disaster for a continuing integration, with member states being growingly reluctant to relinquish their sovereignty any further to the EU.

Possibly the most evident consequence of Brexitis the uncertainty. Businesses, citizens, workers and all other members of society in the EU and operating in the UK or those in the UK that operate in the EU, in any form or other, do not know where they stand, what their situation will effectively be after March 2019 and therefore planning becomes difficult if not impossible. Businesses in the UK have early on, following the referendum, expressed concern about  a loss of their competitive advantage to their EU competitors should their situation not be clarified risking an increase in production and export costs. Moreover, with 2.4 million EU workers in the UK representing 8% of its workforce, there is a real risk of a brain drain hitting the UK and a need to replace lost specialised workers consequently requiring investment in alternative strategies to counter this. Back in December 2017 a draft agreement was reached between the UK and the EU in relation to the rights of EU citizens and their family members.This agreement is especially positive for those EU nationals already living in the UK and UK nationals living in another member state,by the end of the transitional period, December 2020, who will enjoy reciprocal rights.Nonetheless, the actual entry into force is dependent on the signing of a Withdrawal Agreement as evidenced by the phrase "nothing is agreed until everything is agreed" in the Joint Report of the 8 December 2017.

The main consequence of Brexit will however inevitably be the impact on the UK economy. While some projections made may be exaggerated, these can never be underestimated and although what the actual impact will be in the longterm is yet unknown there are several indicators of the likely short term effect. Earlier in September, Christine Lagarde, the International Monetary Fund's Managing Director warned that whichever the outcome of Brexit, this will entail costs for the UK economy, warning that whichever deal will never be better for the UK economy than the existing free movement of goods, persons and capital that it enjoys as a member state of the EU.  She however stressed on the importance of an agreement since the absence of such an agreement would be substantially worse for the UK than having one.  Although it is generally agreed that the impact of not having an agreement will be severe upon the UK exit, the long term effect will primarily depend on the type of trade deals it succeeds to achieve. Furthermore, the UK must ensure political and economic stability in order to attract investment in future.

As to the effecton the EU's economy, the repercussions will be different on member states depending mainly on the level of trade between the countries.The EU as a whole is likely to be much less impacted by Brexit than the UK, however, Jean- Claude Trichet, the former head of the European Central Bank insists that Brexit will be detrimental to the EU in terms of its place in global economic growth saying that "in a period when India, China, Brazil, Mexico, Indonesia and all emerging economies are growing very fast and are dwarfing Europe more and more, how can it be that we decide to separate ourselves, to split? It is contrary to the new world".

 

Dr Micallef Grimaud is the EU Affairs Advisory Partner, who heads  the EU Affairs Unit at Diplomatique | Expert within Corporate ID Group