What would be the impact of a free trade agreement Brexit

Britain and the European Union are seeking a post-Brexit trade deal, with the potential failure of their efforts to boost bilateral trade and financial markets as well as huge financial costs.

Here are some implications of a failure in the London and Brussels negotiations.


Investors and banks have long predicted that a trade deal would be reached, so the case of a ‘no-deal’ would hit the pound, foreign exchange traders said.

However, the investment climate was affected when the two sides said on Saturday that there is still no agreement covering annual trade transactions worth almost 1 trillion. The pound has since fallen against the US currency.

The shocking result of the ballot box in the 2016 referendum on Britain’s withdrawal from the EU. led the pound to an 8% loss against the dollar, its biggest daily drop since floating exchange rates began in the 1970s.


In the event of a non-trade agreement, Britain will lose access to zero tariffs and quotas in the European single market of 450 million consumers overnight.

Britain will be subject to the terms of the World Trade Organization for its trade with the 27-member Union. It will impose the new UK Global Tariff (UKGT) on imports from the EU. while the EU will impose uniform external duties on UK imports.

Problems will also arise in trade, with prices expected to rise for British consumers and businesses.

There is also a risk of unrest at the border, especially at main crossings, with experts saying there may be shortages of certain foods in Britain as the country imports 60% of fresh food and problems with British exports. The difficulties will be greater in sectors that depend on the so-called ‘just-in-time’ supply chains, such as cars, food and beverages. Other sectors that may be affected are textiles, pharmaceuticals, chemicals and petroleum products.

The EU is Britain’s largest trading partner, accounting for 47% of its trade in 2019. It has a trade deficit of 79 79 billion with the EU, with a surplus of δ 18 billion in services offset by a deficit of 97 97 billion in products.

Even with an agreement, Britain expects thousands of trucks destined for European countries to be parked in the south English county of Kent, with delays of up to two days.

Automotive – Fisheries

The impact will be immediately felt for the car industry in both the UK and the EU, with British companies facing 10% tariffs on all car exports to the EU. and up to 22% for trucks and vans if no trade agreement is reached on Brexit, according to 23 industry associations.

The cost is almost certain to be passed on to consumers, according to the 23 associations, which forecast a cost of € 57.7 billion for European plants and € 52.8 billion for UK plants.

In Britain, the Automobile Manufacturers and Dealers Association (SMMT) said the failure to reach an agreement would reduce UK vehicle production by 2 million cars over the next five years and limit its ability to develop the next generation of zero-emission vehicles.

The outcome of the fisheries rights negotiations is also in the spotlight as it will have political and economic consequences, although fisheries alone contributed just 0.03% of UK GDP in 2019.

France is seeking an agreement to protect its access to British fishing waters for several years but has told its fishermen to prepare for smaller fish.

The economy

The long-term impact could be particularly great for Britain and the 27 EU Member States.

Failure to reach an agreement will deduct an additional 2% of UK GDP by 2021 and lead to higher inflation, unemployment and public debt, as predicted by the UK Budget Office (OBR).

The OBR said that tariffs under WTO rules and border problems would affect sectors of the economy, such as manufacturing, that emerged relatively unscathed from the COVID-19 pandemic.

According to an economic study by insurance company Allianz in November, a tough Brexit – a sharp, erratic exit – could cost the EU. up to € 33 billion in annual exports, with Germany, the Netherlands and France the hardest hit.

The shock will not be felt to the same extent in mainland Europe, with the countries most likely to be hit hardest being Ireland, the Netherlands, Denmark, France, Germany, Sweden, Portugal, Poland, the Czech Republic, Cyprus, Malta and Hungary.

The Halle Institute for Economic Research predicts that European companies exporting to Britain could lose more than 700,000 jobs without a trade deal.

Hylke Vandenbussche, a professor at the University of Leuven in Belgium, said in a report last year that Belgium would be an EU member state. with the biggest blow compared to its size, especially in the food sector, with the loss of 10,000 jobs.

North Ireland

Both sides want to avoid a tough border between the British province of Northern Ireland and the EU – which is part of the Northern Ireland. from the EU on January 31, will be complicated without a trade deal.

Under the treaty, Northern Ireland remains, in essence, the EU single market. for products and is in line with its customs regulations after 31 December – unlike the rest of the United Kingdom.

It is not yet clear how the controls, arrangements and bureaucratic procedures between Britain and Northern Ireland will work. But without a trade deal, the Britain-Northern Ireland divide will become even more acute.

A Brexit without a trade agreement will allow Northern Ireland to become the back door to the EU single market, increasing the chances of a tough border on the island of Ireland for the first time since the Good Friday peace deal in 1998.


Both sides are likely to unleash accusations of chaos following an unannounced exit, and Europe will be divided as it faces the challenges of China’s rise, Russian confidence and the impact of the Covid pandemic. -19.

There will also be bitterness within the EU, which will lose one of Europe’s leading forces in terms of military power and intelligence, its second largest economy and the only financial center competing with the New York.

Britain will thus be more dependent on its alliance with the United States.

At the same time, Britain is promoting legislation that would allow it to bypass parts of the withdrawal agreement linked to Northern Ireland, making it unclear to what extent the divorce agreement could be implemented.

City of London

The global financial capital is already largely ready for Brexit as a trade deal was never to cover Britain’s most internationally competitive industry.

While most banks and investors have found ways to manage Britain’s exit from the EU, the long-term impact of a difficult Brexit will be unpredictable and so will the EU. may want to acquire a larger market share than the City of London.

Source: Reuters