Hard or soft? It all looks a little bit scrambled to me…
Theresa May’s Conservative government now has less than two years of negotiations to secure her objective of a ‘deep and special partnership’ with the EU. With the BREXIT deadline clock ticking away, speculation remains over what kind of relationship the UK will be able to forge with the rest of its EU partners.
At this stage, there is a smorgasbord of potential divorce arrangements being discussed, and although no conclusive definitions have been made, the outcomes have generally been distilled by the media as either a ‘hard’ or ‘soft’ exit. Boiled egg comparisons aside, what could this mean for the UK?
Prior to the 8th June this year, the Conservative government had set its sights firmly on a hard Brexit. This would result in Britain sacrificing access to the EU single market and the customs union, favouring instead the full control over its borders and immigration, along with the ability to make new trade deals and to take back control of its laws. This option would be hailed by the purist ‘Brexiteers’ and, although it could provide Britain with a platform to become a truly global trading nation, the disruption to the current state of affairs would be enormous. Most notably, we would see the movement of goods and people immediately compromised by trade tariffs, strict borders (or new borders in the case of Ireland) air traffic control and transportation issues, as well as potential residency problems for British citizens living in the EU and vice versa.
The shock general election result whereby Theresa May ended up wiping out her majority in the House of Commons has left the Tory plans for a hard Brexit in tatters. Mrs May’s newly formed minority government may now be forced to seek a soft Brexit alternative. At its most extreme, this approach would seek to leave the UK’s relationship with the EU largely unperturbed, and is the preferred outcome for the Pro-European ‘Bremainers’ who deem retained membership of the European Economic Area, and therefore access to the single market, as a top priority. A soft Brexit would undoubtedly ease short term disruption concerns, but would offer little or no economic advantage over our current EU membership. Critics would immediately point towards the continued EU regulatory burden and it is difficult to envisage how the UK would gain any further control over its affairs from Brussels via this route.
With so much to negotiate between now and the March 2019 deadline, the one certainty that remains is that financial markets hate uncertainty and this will undoubtedly lead to volatility whilst the Brexit negotiations bubble away in the background.
If you would like to discuss your options with one of our team of Chartered Advisers or Investment Managers please contact Cave & Sons for a no–obligation initial discussion on 01604 621421 or email firstname.lastname@example.org