Bloomberg News, a prominent US-based business and financial publication, has forecasted that the first day after the occurrence of a no-deal Brexit out of the European Union by the United Kingdom will likely be a chaotic one.
The publication made its prediction in a special report entitled: “The Day After Brexit: What a Crash Out of the EU Might Look Like”, which was published in the Bloomberg Businessweek section of its website on Wednesday.
The UK triggered Article 50 of the Treaty on European Union in March 2017, following a June 2016 referendum in which 51.9 per cent of the country’s population voted to leave the EU.
However, what was meant to be a two-year withdrawal process ending on March 29, 2019, has been extended after arguments on whether to leave with the EU with a deal brokered by the government of Theresa May, the immediate past British Prime Minister, or without a deal as proposed by her successor, Boris Johnson.
Bloomberg noted that it created its scenario of the effect of a likely no-deal Brexit situation based on interviews with manufacturers, financial experts and business owners, government documents, and academic research.
According to the publication, the Pound, the British currency, is expected to take a humongous dive; leading to protests and counter-protests outside the UK parliament in Westminster.
It anticipated the situation at the English-French border will become a lot more topsy-turvy from midnight of 31 October as about 200,000 British traders will need to make export declarations for the first time to ensure their products cross over to the French side. There could also be a mass exodus of persons as queues may likely be formed at the border between Spain and the British territory of Gibraltar.
It also forecasted that the traffic on the English side of the border will get heavier, particularly as many as 10,000 articulated vehicles will use the road alongside other private and commercial vehicles to access the Port of Dover and the Channel Tunnel, Britain’s most important trade arteries.
The report read: “The Port of Dover and the Channel Tunnel are two of Britain’s most important trade arteries. As many as 10,000 trucks rumble onto ferries every day, carrying a sixth of all trade in goods, while 6,000 lorries per day cross on the undersea rail link. Increasing processing times by just 2 minutes on average could lead to 17-mile-long traffic jams and 60-hour delays.”
Also, British citizens moving with lots of objects into an EU country may be required to pay as much as £500 for a temporary international customs document to enable their passage, according to the report. For EU citizens coming into the UK, they need to apply for “temporary leave to remain” permits. Such obstacles, Bloomberg foretells, will make it harder for sectors that rely on lower-skilled EU workers, especially the health, hospitality and construction sectors, to recruit EU citizens.
On the controversy surrounding the Irish border on whether to create a backstop deal or not, Bloomberg envisaged that British sheep and other animal farmers will find it difficult to conduct business as all animals must be checked for health reasons and farmers will no longer get to enjoy subsidies since their country has exited the EU.
It added that the animals now face an export tariff to the EU of almost 50 per cent increase from the pre-Brexit price of £80 per head. This, according to the publication, will have cost implications on transportation and other expenses such as feed, diesel and rent; thereby forcing farmers to either smuggle their animals over the border into Ireland or slaughter them all.
The UK’s financial sector will also face severe consequences as companies will continue either a partial or total relocation out of the country, thereby affecting a sector which constitutes seven per cent of the economy’s output.
“Big banks such as HSBC, Deutsche Bank, and JPMorgan Chase triggered Brexit plans long ago, sending bankers to Paris and Frankfurt and setting up EU subsidiaries to ensure continuity. Still, there are some headaches. Listing European shares for trading on both the Dutch and U.K. boards—having two platforms and a split trading volume—may mean less competition, fewer trades, and higher prices. Whether small and midsize firms are as prepared as the big banks is a nagging question.
“Then there’s the £16 trillion in uncleared swaps potentially hanging in regulatory limbo,” the report read.
UK’s industries are also not left out of the potential chaos as industrialists will continue to cut jobs and be unable to either consistently pay or increase salaries due to the weak pound and a decline in sales, the report notes. This might force manufacturers to look towards central and eastern Europe to set up factories to satisfy their pro-EU customers and prevent the closure of their businesses.
Certain licences for UK manufacturers might also be revoked, temporarily halting exportation of such products and high fee payment to secure a new licence.
Bloomberg stated that despite assurances of Johnson, the UK Prime Minister, of mitigating a heavy backlash and the government’s best effort to transport critical supplies of medicines, chemicals, and fuel, the supermarket inventories are likely to dwindle and prices of products will probably skyrocket.
The publication added that several companies might be caught up in the legal wrangling over cross-border activities within Britain and EU, thereby creating lesser competition, fewer trades, and higher prices for the UK economy.