Multiple international businesses have pulled out of UK investments in the immediate aftermath of last week’s shock ‘leave’ result. While the UK remains in a state of uncertainty, what’s certain is a new trade deal with international and EU markets will not come into effect for at least two years.
The EU Trade Commissioner, Cecilia Malmstrom, told the BBC that the UK cannot begin discussing trade deals until it has officially left the EU, following an estimated two-year process under Article 50 of EU law: “There are two negotiations. First you exit, and then you negotiate the new relationship, whatever that is.”
Once the Brexit process is complete, UK trade will be carried out based on World Trade Organisation rules – that is, until a new trade relationship with the EU can be agreed upon.
A recent trade deal between Canada and the EU took seven years to negotiate, which gives an indication of how the long the UK should expect the process to take
The long road ahead
A recent trade deal between Canada and the EU took seven years to negotiate, which gives an indication of how the long the UK should expect the process to take. Once a deal is settled, it can then take up to two years for it to come into effect.
However, there is widespread concern that the UK is not prepared to do business under World Trade Organisation regulations, which restrict the circumstances under which countries favour one another in trade.
EU officials have said the UK’s best option is to mirror a Norway-style single market, following EU rules and regulations and therefore avoiding a similar situation to Canada. British businesses are already compliant with EU rules and regulations, and a single market could potentially speed up the negotiation process.
The leave vote shocked the nation, not to mention the remaining 27 members of the EU. As a consequence, the pound plunged to a 30-year low – twice the amount seen during the UK’s 2008 recession – and the UK lost billions of pounds in investment within the first few hours of Brexit.
Political turmoil among the Tory party and its candidates has added to the UK’s uncertain state, following the resignation of Prime Minister David Cameron, with consumer sentiment worsening further still.
Nonetheless, the market is now beginning to stabilise, pointing to a more optimistic future for international trade. With stable leadership, the UK could regain the trust of international markets within the next two years and confidently enter a post-Brexit world intact.