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Hard/Soft Brexit, what does it mean, what to expect and who will win?
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Loading...UK voted to leave the European Union (EU) and there is no doubt. It is planned to happen on Friday March 29, 2019, and at the moment what worries everyone is the three main issues stemming from the British decision. What will happen to free trade? What will happen to British citizens living in the EU? And what will happen to European citizens living in the UK?
What is the period of transition after the actual Brexit and what to follow through it?
The period to be voted is from March 29 2019. to December 31 2020. During this time the business, as well as all the bilateral relations between the two parties on the Brexit issue, need to be changed. What concerns all traders and investors is that during the transition period until 31.12.2020, the free movement of goods will remain in force. During this time, all who invest in GBP or British stocks will watch the trade representatives of the kingdom, what deals and who they sign with. This, as well as the decision on future EU-UK attitudes, will largely determine whether we will be watching Hard or Soft Brexit. During the transitional period, the UK will be able to enter into its own commercial transactions, but they will not enter into force until 01.01.2021.
What is Hard and what is Soft Brexit?
Hard Brexit will be watching if the UK completely abandons full access to the single market and customs union with the EU. The agreement will give priority to the fact that the UK will have full control over its borders by entering into new commercial transactions and applying laws on its territory without any EU consultation. Initially, this would mean that Britain would withdraw from the rules of the World Trade Organization (WTO) to trade with its former EU partners. With Hard Brexit, GBP and the UK stock market will see declines. However, judging by the current movement of GBP, traders are already accumulating "The worst case scenario". With an already accumulated worst case scenario, we can not expect a strong impact on GBP and British assets after the actual Brexit. Yes, there will be a crash, but it will be interesting if, however, the authorities clench their hands and observe Soft Brexit.
Soft Brexit will be an approach that will leave the UK's relations with the EU as close as possible to existing arrangements. The current moods show that this is the most preferred and expected option for both the EU and the UK. With Soft Brexit, Britain will no longer be a member of the EU and will not have a seat in the European Council. It will lose its deputies and EU commissioner, but will keep unlimited access to the European single market. Goods and services will be traded with the rest of the EU on a duty-free basis and financial firms will retain their "passport" rights to sell services and operate branches in the EU. Britain will remain within the EU customs union, meaning that exports will not be subject to border controls. National models for such a deal include Norway, Iceland and Liechtenstein, which are not EU members but have access to the single market, such as are part of the European Economic Area. With Soft Brexit, we will probably see positivism in the GBP as well as the British stock market, as most of the island's companies rely on the European single market. Let's not forget the accumulation of Hard Brexit in the price of the assets we are seeing now!
How Brexit will affect in the long run, most investors, analysts, politicians, and even citizens believe this will be negative. It is because of this feeling among all, both Brexit countries, that they negotiate in order to have less influence, both on the free movement of citizens and on the economies of the two countries.
Here is the timeline from here to 31.12.2020.
- October 18, 2018 - Key Summit of the EU. Both sides hope to reach an agreement on future relations to give time to the British Parliament and EU members to ratify the Brexit deal.
- December 13, 2018 - If the deal is not completed by October, it is the last date on which the two sides can reach an agreement.
- March 29, 2019 - Whether we have a trade deal or not, Brexit will happen on Friday, March 29, 2019. at 23:00.
- December 31, 2020 - If everything goes according to plan, the transitional period will continue until midnight on that date.
UK and EU will obviously get some negative impact after the vote for Brexit, but who will win all this?
After the actual Brexit, the UK will focus on attracting US and Asian companies by reducing taxes on their profits. Coca-Cola, Caterpillar, Ford and Tata are among the multinational companies that could benefit from tax breaks on the part of the UK after Brexit. Once EU state aid rules are no longer in place, Britain will be free to offer additional incentives to detain foreign.
Source: Bloomberg Finance L.P.
Picture: pixabay.com
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