This year’s summer in the UK was exceptionally hot at many levels. The actual temperature was as high as 37 degrees Celsius for the first time and high humidity made it even worse. However, worst of all was the long and heated discussions on Brexit, which is to be a done deal by March 2019.
The Brexit talks continue to make headlines across UK media, particularly after the resignation of the minister who was in charge of negotiations with the EU. The discussions and disputes among the British themselves on the same subject continues to generate headlines, and will continue until the due date.
The discussions now focus on two key topics: Will Brexit be done in agreement with the EU? Or will it be completed without reaching a middle ground?
The other moot point is the cost of Brexit, estimated at around $50 billion, which is seen as a high price to pay by some British. Therefore, there are now many calls to conduct another referendum, which may lead to the winning of those opposing Brexit.
This has created a state of uncertainty, which can afflict any economy. It goes without saying that uncertainty leads to the flight of companies and of capital, especially as there would be lots of regulations that will need to be amended, including the legal status of companies and workers, tax rates, fees, commercial transactions, border crossing for goods and of people, which thereby casts doubt on businesses in general.
What is even more puzzling is that even within the Conservative government of Theresa May, there is no agreement on the exit process, its cost or consequence, as evidenced by the resignation of foreign minister Boris Johnson.
Meanwhile, the Labour party is being elusive, trying to take advantage of all these contradictions to call for new elections in a bid to come to power. In any case, the losses have begun accumulating due to the uncertainty and the legacy of the “sick man” that is Britain today will be distributed to other EU cities, from Frankfurt to Paris, Amsterdam and Brussels.
Several European and non-European financial institutions and companies have already announced a transfer of their regional offices from London, which was once seen as the financial hub of Europe, to other cities on the Continent. This in itself represents a great loss to the UK economy, directly impacting the price of sterling, which has fallen to its lowest level in years.
The HSBC bank has announced the transfer of seven offices from London to Paris early next year, which means the transfer of its main operations there. Some Japanese companies have also announced a transfer, including Nissan, Honda, Mitsubishi and Panasonic, which decided to relocate its European headquarters to the Netherlands by the end of this year. Bear in mind that Japanese companies have invested an estimated $60 billion and employ more than 140,000 in the UK.
For its part, Britain is trying to find alternatives by restructuring its economic and trade relations through free trade agreements with others, including those of the GCC, or enter new economic agreements similar to previous ones while being an EU member. One such was signed by May last week with six African countries.
As a result, until the Brexit due date in March, the UK will be in real trouble because of the prevailing pessimism and the ambiguous vision put out by its politicians, whether in government or opposition, and even among Brexit supporters. All of which means more companies will exit the UK and the business sector and wider economy will suffer even more.