Merryn Somerset Webb – Moneyweek Magazine (Great Britain) –
This year has been full of political surprises. But the biggest one for investors in the UK was undoubtedly the vote in June to leave the European Union. Six months on we have a new prime minister and a new chancellor, but we’re still quite a way from knowing exactly what Brexit will look like.
Whatever else happens in 2017, Britain’s path to leaving the EU is likely to dominate the political discussion – and that means investors need to be prepared. Below I look at some of the main options – from “hard” Brexit to “soft” Brexit and what lies between – on the table. John Stepek looks at how things might unfold from here – and how it could affect your investments.
1. Hard Brexit: the WTO
The most radical Brexit option is simply to walk away from the EU. In this scenario we stop paying into the EU budget, abandon EU rules and laws we disagree with, and take control of our immigration and trade policies. The downside is that instead of having full access to the EU’s 420 million consumers, we’d deal with the EU under World Trade Organisation (WTO) rules under the same terms as any other country outside Europe.
This wouldn’t spell an end to trade, but it would mean facing tariffs (higher taxes on exports) and non-tariff barriers (higher costs in the form of additional red tape). The impact on trade would be exacerbated if the UK imposed tit-for-tat reciprocal tariffs.