On January 31, 2020, Great Britain is set to depart from the EU. As the prime minister now has the majority of the seats in parliament, the UK was able to pass the European Union Withdrawal Agreement Bill 2019-20 and the nation is expected to meet the latest deadline.
As such, businesses in the UK, Europe, and around the world need to once again turn their attention to the UK and the impact that the impending Brexit deadline will have on businesses in certain industries as well as on a wider financial scale.
Brexit has already made waves in money
Brexit hasn’t even taken place, and yet its numerous ‘deadlines’ have already had a huge impact on the financial markets. It all started once the EU Referendum yielded its results, sinking the value of the GB Pound against the US Dollar from around 1.48 to 1.33. By the start of 2017, it had sunk further to near 1.20, gaining in strength again by the start of 2018 to around 1.43, but then sinking once again in the middle of 2019 to around 1.22.
The sink in July 2019 to 1.22 against the US Dollar occurred due to Boris Johnson’s government toughening its rhetoric on Brexit, with the UK appearing to be barrelling towards the dreaded no-deal departure. It marked a 28-month low for the pound against the dollar, with the new valuations not even coming as a result of the UK officially leaving, or starting to leave, the EU.
The occurrence of a no-deal Brexit has weighed heavily on the minds of financial experts, with some even foretelling complete market meltdowns in the EU and the UK, which would, ironically, force both parties back to the negotiating table. UK and EU stocks would crash on both sides of the channel, claimed an American-based chief economist in October 2019.
Simple developments in the Brexit storyline have had the power to sink and raise the value of the British Pound and the Euro against the US Dollar – which has seen its own fair share of climbs and falls due to the China-US trade war – and more are expected to come. The event now known as ‘Brexit Day’ is marked as a high-impact event on the Economic calendar which will almost certainly impact the value of currencies around the world – but particularly the GBP and EUR.
The wide-spanning impact of Brexit on the value of currencies will have a huge knock-on effect on businesses that either trade on the foreign exchange or do business with the EU from the UK or vice versa. There are, however, certain industries that look set to be affected more than others when Brexit Day comes around.
Industries to be affected by Brexit
The UK has been a major faction within the EU, and so, as you would assume, multiple industries have to prepare themselves to deal with the consequences of Brexit. Expected to bear the brunt of the UK’s departure from the EU are businesses in agriculture and medical research, especially if the 40 percent tariffs are applied to lamb and beef exports in the instance of a no-deal Brexit.
Another major aspect of Brexit to consider is trade with the European Union, specifically the companies tasked with the import and export of goods and services from the mainland continent to the British Isles. It seems inevitable that there will be changes to VAT payments as well as implemented tariffs once Brexit becomes official, with some forms of import to the UK likely being required to undergo further custom and excise duties.
The automotive industry has already felt the sting of an impending Brexit. Several big-name companies like BMW, Toyota, and Jaguar Land Rover have endured days of stopped production around impending Brexit deadlines. Honda has announced that it will close its Swindon plant in 2021, and Nissan is ‘to review the future’ of its plant in Sunderland in case a no-deal Brexit becomes a reality. Toyota initially chose the UK as its first major European manufacturing operator due to its access to the European market and its skilled workforce – one of those aspects may soon be hindered a great deal.
Along with these industries, those in the pharmaceutical industry may have to change their practices due to a lot of research taking place across the channel and the change to the slower UK process of drug regulations. The UK’s airline sector may also need to alter its practices in keeping with EU regulations, due to them no longer being a part of an EU state as well as account for new expenses; such as visas and extended routes.
Due to the core message of the propaganda smeared across the UK during the Brexit campaigns nearly half-a-decade ago, retaining access to the single market seems very unlikely. The UK could have had the option to be a part of the European Economic Area, but as freedom of movement is a requirement of being in the EEA, it seems astronomically unlikely that parliament would defy the primary aim of the 51.9 percent segment of the voting public.
Brexit Day is on its way and will undoubtedly have an impact on the foreign exchange markets – as will every Brexit announcement thereafter. As the UK then embarks on a two-year trudge towards officially leaving the EU, dealing with the transition period and trade deal ratification, industries will begin to see real the impact of Brexit.