One week after publishing its White Paper, the UK Government has killed off its own proposal by accepting amendments to the Customs Bill that directly counter the facilitated customs agreement that was put forth earlier. At the same time, the Customs Bill also forbids the Government to accept the EU`s proposal on keeping Northern Ireland in the customs union. In the absence of a third alternative, this may very well leave us with a Hard Brexit, which takes UK - EU relations back to WTO lines and will require border control around Northern Ireland.
I don't think this is the result of a Government not understanding Brexit and its implications. During the past two years several advisors, economists, policy officers, NGO and company representatives (including Fashion Roundtable) have explained the consequences both in monetary and socioeconomic terms, time and time again. This is about taking a stand and deciding to go for a full Brexit for the next two years and using the time to work on a comprehensive free trade agreement. Unfortunately, we are left to guess what had led to this outcome as there is limited transparency behind the Government`s actions, which in turn continues to fuel uncertainty and resulted in a halt to UK GDP growth (0.2% in Q1 2018).
In a way it is understandable that the Government would focus on a future trade agreement that may define the UK`s economic relationship with the EU for decades to come. What is difficult to comprehend is that this decision was taken without fully evaluating the impacts of Hard Brexit on the economy and communicating those to the general public. With less than nine months remaining until Brexit is implemented it is high time for companies and individuals – whether students or professionals – to evaluate their future status and prepare for the consequences of a Hard Brexit.
What we can expect for the next two years is that the UK will likely realign itself as a tax haven for investors; this future scenario has been talked about for some time among UK politicians. This would result in the lowering of VAT and corporate tax rates making the country a more attractive destination for start-ups as well as venture capitalists. At the same time it worth noting that these actions will likely result in an immediate increase in inflation with prices higher and fewer jobs available. The Government will encounter a drop in revenues and an increase in spending. Whether or not the drop from VAT and corporate taxes resulting from less trade and investment from EU supply chains can be balanced out by revenues received from new investors attracted by lower taxes (and perhaps looser regulations) is impossible to forecast and is no doubt a high-risk exercise putting thousands of jobs on the line.