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Prime ministers

Brexit's Unending Nightmare: A Threat to the UK and the EU

Strategic Insights

— 2 min read

The promise of a swift resolution to Brexit has given way to a reality of escalating tensions and fragile agreements. Boris Johnson's pledge to "get Brexit done" has stalled, with the UK's most contentious issues remaining deadlocked. The stakes are high, with the UK's trade with the EU shrinking relative to pre-Brexit levels, imposing costs in perpetuity. The Office for Budget Responsibility (OBR) estimates that the long-run costs of Brexit will amount to £80 billion per year, exceeding the costs of Covid-19.

Key Takeaways:

  • The UK's trade with the EU is shrinking relative to pre-Brexit levels, with the OBR estimating that the long-run costs of Brexit will exceed the costs of Covid-19.
  • The UK's exports to the EU have slowed sharply since the Brexit referendum, with exports of goods averaging Q4 2020=100 at 80.
  • The UK's export market share remains in line with the OBR's post-referendum forecasts, but is still significantly lower than pre-Brexit levels.
  • The UK government's threats to suspend parts of the deal on Northern Ireland have raised concerns that the EU may repudiate its post-Brexit trade agreement.
  • The UK's insistence on deviating from EU standards in foodstuffs has created problems in its trade with Northern Ireland, and its proposal to take "safeguard" measures under Article 16 of the protocol is likely to be met with EU resistance.
  • The breakdown of trust between the UK and the EU is a major concern, with the UK's reputation for being "perfidious Albion" at risk of being irreparably damaged.
  • The "game of chicken" between the UK and the EU is likely to end in a crash or a total EU fold, with potentially disastrous consequences for global trade relationships.

Statistics:

  • The OBR estimates that the long-run costs of Brexit will amount to £80 billion per year.
  • UK exports to the EU have slowed sharply since the Brexit referendum, with exports of goods averaging Q4 2020=100 at 80.
  • The UK's export market share is still significantly lower than pre-Brexit levels, with exports relative to total imports in countries the UK exports to averaging 70 (Q2 2016=100).

Sources:

  • [Office for Budget Responsibility. (n.d.). Economic and Fiscal Outlook. Retrieved from Refinitiv]
  • [European Commission. (n.d.). Article 16 of the protocol. Retrieved from Refinitiv]
  • [Ireland's foreign minister, Simon Coveney, suggested that the EU might repudiate its post-Brexit trade agreement if the British government went through with its threat to suspend parts of the deal on Northern Ireland. (Source: The Sunday Times, 20 February 2022)]

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