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Original title: What if a Brexit deal is reached? The UK still faces four major challenges! Looking ahead, the institutions remain concerned,GBPFear of continuous pressure
On December 24 local time, the UK and the EU finalized a “Brexit” trade deal. On December 28, the British government began urging companies to prepare for Brexit. Market analysis believes that while an agreement has been reached to help the UK avoid a no-deal Brexit, it will still face many challenges in the future, including the tragic isolation of the UK due to bans issued by many countries, the risk of Scotland leaving the UK and UK economy after Brexit. And the dream of “globalizing Britain” is not easy to realize. Many institutions have hinted that the Brexit deal is not perfect and that there may be many problems to deal with, which could put pressure on the pound.
Brexit transition period is coming to an end, UK government urges businesses to prepare
There are only a few days left until the Brexit transition period ends. On December 28 local time, the British government urged companies to prepare for Brexit.
The UK Government Cabinet Office secretary said in a statement: “The Brexit deal has been finalized and the challenges and opportunities will continue with major changes.”
The statement also indicated that companies must adapt to the UK’s exit from the single market and the EU customs union. Companies and individuals in the UK must be prepared for actual and procedural changes, and the time to make these final preparations is very short.
The Brexit transition period will end on December 31 local time. On December 24 local time, the UK and the EU finalized a “Brexit” trade deal. However, due to the late announcement of the agreement, the companies have less than a week to make adjustments to the new regulations.
According to the agreement reached between the UK and Europe, from 2021, the two sides’ commodity trade will continue to enjoy a tariff- and quota-free deal. Then the draft agreement still has to be approved by both parliaments.
Despite ditching the ‘no-deal Brexit’ haze, the UK still has four major challenges to tackle
Britain and the European Union have reached a post-Brexit free trade agreement, marking a new page in the relationship between Britain and the European Union. On December 27 local time, the British Finance Minister said that Brexit would provide opportunities for the British financial industry. At the same time, the UK is in the process of signing trade agreements with many countries.
Although the UK reached a Brexit deal and successfully avoided the risk of a no-deal Brexit, the UK still faces many challenges ahead.
① The new strain of the disease in the UK led to the enactment of bans in many EU countries, leaving the UK isolated
After the emergence of a new strain of the disease in the UK, the people of the country embarked on an “escape trip”. They all rushed out of London, which was about to be sealed. But at this point, most of the surrounding countries suddenly issued a ban, banning anyone from the UK from entering. Over 40 countries and regions, including Canada, Japan, etc., immediately cut off the UK after the emergence of new diseased strains, instantly turning the UK into an ‘island’.
Many EU countries have enacted bans, allowing Britain to get a taste of “Brexit” in advance. Even British Prime Minister Johnson publicly interceded with other countries, hoping that everyone would “raise their hands” and leave a path for Britain. Britain is a country that relies on tunnels and air transport to maintain a supply of materials for people. Once these channels are cut, not only will people’s lives be seriously affected, but the British economy will also be severely affected.
②Scotland is dissatisfied with some of the content of the Brexit deal, which may intensify its feelings of leaving the UK.
Analysts noted that some of the content of the “Brexit” deal has caused discontent within the UK, especially in Scotland, and may to some extent intensify the region’s independence.
UK Scottish Government Chief Minister Sturgeon said after the UK-Europe deal was announced that there is no agreement to offset the losses caused by British “Brexit”, and that the British government’s concessions on fisheries they violated their original agreement with the Scottish fisheries. “Great Commitment”.
Some analysts believe Scotland is quite dissatisfied with the agriculture and fisheries related content in the Anglo-Europe Agreement. Due to complicated historical, economic and other reasons, Scotland has long sought to “get out of the UK.” This arrangement may further enhance Scottish independence.
③Even if a Brexit deal is reached, the UK economy will still be affected
Under the Brexit deal, starting in 2021, UK-EU commodity trade will continue to enjoy a zero-tariff, zero-quota deal. Analysts believe that the agreement prevents large-scale increase in trade costs between the two parties, which is undoubtedly a great benefit for Britain and Europe, which are affected by the epidemic, but still, the fluidity of the Trade between Great Britain and Europe is comparable to that of Great Britain remaining in the EU single market. The proportion is still not the same.
The British Government Office of Budget Responsibility previously predicted that with the Brexit deal, the British economy will contract by 4% in 15 years compared to staying in the EU.
④The dream of “global Britain” isn’t easy
Analysts believe that after the completion of “Brexit”, how the UK maintains political stability, economic prosperity and international influence, and then fulfills the vision of “globalized Britain”, it will face many challenges.
In October, the UK and Japan formally signed the Comprehensive Economic Partnership Agreement, but the trade volume between Great Britain and Japan only accounts for 2% of the UK’s foreign trade, so the symbolic importance of the agreement far exceeds the real benefits. In November, the UK and Canada reached a continuation trade agreement to ensure that the trade relationship between the two countries remains stable after the British “Brexit” transition period ends. The two countries also agreed to start negotiations on a new trade deal starting next year.
The UK is also currently negotiating post-Brexit trade deals with major trading partners like the US, Australia and New Zealand, but overall progress is slow. This shows that it is still not easy for Britain to realize its dream of “globalizing Britain”.
Institutions suggest that the Brexit deal is not perfect, and the UK’s future prospects are still uncertain, which may put pressure on the pound.
On December 28, the pound fell, once fell below the 1.3500 mark and finally closed down 0.80% at 1.3452. Except that profit taking has suppressed the exchange rate to some extent, the Brexit deal between the UK and Europe is unsatisfactory and optimism has faded. Investors are concerned about the impact of Britain’s withdrawal from the EU trade deal on the British economy, and they are also concerned that the epidemic will continue to affect the economy, putting pressure on the exchange rate to some extent. After entering on Dec. 29, although the pound rose due to the anticipated final approval of the Brexit deal, it was still trading below 1.35.
Andreas Steno Larsen, Nordea Ban’s global chief strategist, said that after the announcement of the Brexit deal, the voices of most London banks did not sound optimistic, which could be a sign.
It shows that the lack of consensus on financial services is an uncertainty that the pound must face in the first half of 2021
。
Thu Lan Nguyen, currency strategist at Commerzbank, said the pound’s weakness is likely due to profit-taking caused by high Brexit uncertainty. However, he noted that there are still some unresolved issues in trade in services, which are vital to the British economy because this is where the UK’s comparative advantage lies.
Gavin Friend, senior market strategist at National Australia Bank (NAB), cautioned that the Brexit deal is far from perfect and that there is not much content in important areas like financial services, or even as good as the status quo. He noted that trade between the UK and the EU has been frictionless for over 40 years, and now frictions will appear.
Analysts warned that while merchandise trade will not be subject to tariffs and quotas, from January 1, 2021 there will be some friction on the British border. Kenneth Broux, an analyst at Societe Generale, said border and customs inspections will increase red tape and drive up business costs.
The analyst at the financial website Fxstreet Bednarik believes that the Brexit crisis is not over yet. In his view, the more than 1,200-page Brexit deal still has some major issues that have not been resolved, putting pressure on the pound.
In terms of fair competition, UK and EU laws are inconsistent, and the EU may impose tariffs on the UK yet to be determined.
2:50 PM on December 29 Beijing time,
GBP to USD
Report 1.3483 / 85.
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