HSBC: Journey’s end on road to Brexit
Even with the new UK-EU Trade and Co-operation Agreement (TCA) in place, there will be new barriers to the movement of goods, services, investment and people between the UK and EU countries, says HSBC in its latest economic commentary.
“Over the long term, it is likely that this will result in the UK experiencing slower economic growth, and weaker productivity growth, than would have been the case if the UK had either not left the EU or had opted to remain in the Single Market,” warned Mark Berrisford-Smith, head of economics, commercial banking HSBC UK.
HSBC points out that there are policies that could mitigate these effects, especially in the fields of trade promotion, deregulation, and migration. But such policies typically take many years to bear fruit; and, in the case of migration, political sensitivities mean that a return to a more liberal approach is unlikely in the foreseeable future.
With the Brexit process now completed, HSBC believes that the focus of ‘identity politics’ will turn inwards to focus on the constituent countries which make up the UK. In Scotland, opinion polls during the past 18 months have shown a majority in favour of Scottish independence. Should the Scottish National Party win an overall majority of seats in the forthcoming elections to the Holyrood Parliament, it will be hard for the Westminster government to resist demands for a second referendum.
For businesses who are now getting to grips with the frictions of trading across borders with the EU, and across the internal border between Great Britain and Northern Ireland, there is a prospect, albeit probably not until the 2030s, of even more frontiers to contend with. It was always a possible consequence of the UK’s departure from the EU that it would eventually lead to the break-up of the United Kingdom. It’s by no means a done deal, but that prospect has become more likely as the Brexit process has run its course.
Read the full economic commentary here
