Brexit: The UK Finally Departs the European Union
February 7, 2020
After four years, the UK has officially departed the European Union. Learn the impact to the global economy on this week's TrendsTalk.
Transcript by Rev
Hello everyone, my name is Alex Chausovsky and welcome to the latest edition of TrendsTalk with ITR Economics. Last week marked a fairly momentous occasion which really represented the fact that Britain, which had been a member of the EU for the past 47 years, was the first nation to leave the European Union. After its departure on Friday, January 31st, the UK will actually remain within the EU's economic arrangements until the end of this year, although it's no longer going to have any say in policy.
So when you're assessing the impact of this pretty historic development there are some interesting facts and figures involved. So, for example, the EU taken as a whole is the UK's largest trading partner in 2018, which is the lightest data that we have available. UK experts to the EU accounted for 45% of the total exports from the UK, and imports from the EU accounted for 53% of all the imports into the United Kingdom. Just as a point of reference, the US is the largest single country trade partner for the UK accounting for 19% of its exports and 11% of its imports.
It is interesting to note that the UK has been distancing itself from the EU for quite some time. So, for example, the share of UK exports accounted for by the EU for the UK, obviously, has generally fallen over time from 55% in 2006 to 45% in 2018. And a similar, although a little bit milder, distancing in terms of imports, back in 2002 imports from the EU accounted for 58% of total UK imports. Now, they are about 53% and that has been the case since 2014.
So the real question is what is the impact? How will this affect the UK? How will this affect the EU? And I'm here to tell you that both of the extreme positions in this are wrong. We don't think that this is going to be a huge boon for the UK economy. We also don't think it's going to cause a recession for the UK economy. I think it's important to remind us that business will find a way. Like that great quote from Jurassic Park, "Life finds a way," in this particular case, business will find a way to move forward. There are a lot of smart people involved in the negotiation process. They're going to find new rules, and they're going to write new laws that will govern trade, travel, policy and, certainly, the conditions in which businesses operate for a long time to come.
There are going to be, of course as any new geopolitical or trade developments are concerned, some companies that will win, in this particular case, and some companies that will lose. For instance, those companies that export exclusively to the EU are likely to come under some pressure. And those that actually have a diversified portfolio of places that they export to are going to be fine because they're going to be able to rely on some of the other sources of exports in order to continue doing business as usual.
There is a risk that the EU will actually come under some pressure in terms of what will the other countries now do? But, so far, everything that we've seen suggests that it's only brought the other European Union countries closer together, and they're more determined than ever to stick it out as a single entity. But, certainly, the future of the EU largely depends on the most powerful members. So it's really up to Germany and France to decide how long the EU will continue. If those guys are on board, we feel that the EU will likely hold together in its current form, even if some of the weaker members, like Greece for instance, decided they no longer want to be part of the union.
The other thing that's worth mentioning is, of course, now the UK will be very interested in negotiating a new trade agreement with the US, which will hopefully help the US economy some, and will diversify the UK economy from both an imports and an export's perspective, even more so than it has been in the past. So we think that although this has gotten a lot of fanfare lately it really does constitute a continuation of the status quo by and large, both from a business perspective and a trade perspective, and also from a people perspective. So in our minds, this is clearly a softer version of Brexit, and we think that, as I mentioned earlier, that business will find a way to move forward.
So I hope you've enjoyed this edition of TrendsTalk with ITR Economics. My name is Alex Chausovsky, and I look forward to speaking to you again soon. Have a great day.