In London, the capitals of continental Europe, political leaders are prepared to discuss the modalities of the forthcoming UK branch of the European Union.
There are two main types of events: "Hard Brexit» and «soft Brexit». British Prime Minister Theresa May is inclined to "hard» Brexit scenario.
1. What is meant by "hard Brexit»?
It is the symbol of one of the possible outcome of negotiations between the UK and the EU: the United Kingdom renounces its membership in the single market for goods and services in exchange for full control over its own budget, its own legislation, and most importantly, on immigration.
If this happens, British leaders will be under pressure to sign a new trade agreement, or individual transactions with the EU. Otherwise, the company will be subject to the standard rules of the World Trade Organization, which will impose tariffs on them. Banks lose unrestricted access to the EU banking system, they know right now.
2. How does it differ from "soft» Brexit?
"Soft" exit from the EU scenario would allow the UK to maintain a certain duty-free access to the single market with 450 million consumers. Under this scenario, the United Kingdom is likely to continue to contribute to the EU budget and will have to preserve the freedom of movement and will follow EU rules. So now does Norway, which is a member of the European Economic Area, but not the European Union.
3. Why is "tough" scenario raises concerns?
Investors are concerned that the "hard» Brexit reduce the pound to a minimum of thirty years. Theresa May, and her colleagues from the Conservative Party, gave a hint of what they prefer a clean exit from a single unit.
The concern is that the economy will suffer in this case, as trade with major trading partners the UK will be a big question that will lead to weaker growth, lower investment, higher inflation and higher current account deficit of the UK operations.
The Confederation of British industry and the British retail consortium is one of the business groups, who warn of the evils of breaking ties with the EU trading zone. Banks are particularly concerned because the output of the single market could cost them the so-called rights of the certification, which allows them to sell financial services in the EU, based in London at the same time.
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4. May says?
October 2, she said that she wanted to give British companies maximum freedom to trade and operate in the single market and European companies to do the same here. The parliament continues debate on this issue.
5. When did "hard" scenario?
The distinction between "hard" and "soft" scenario Brexit existed before the referendum on 23 June. In one of the early performances, John Reith from UBS AG, told Bloomberg Radio in February that "softer Brexit» will be "quite friendly" and means "quick recovery of trade agreements", while the "hard Brexit» will mean a "tough "nature of negotiations and" the establishment of trade barriers. "
Earlier it was reported that the depreciation of the pound will help to cope with the shock after« Brexit ».
6. What will it be?
On October 10 in a research note Morgan Stanley economists estimated the chances of "hard Brexit» 70%, compared to 55% in their preliminary analysis. Strategist Alberto Gallo from Algebris Investments predicts a 60% chance of a "hard Brexit» and warned that it would lead to a recession in the economy and reduce the £ 140 billion, equivalent to 7.5% of gross domestic product.
Stuart Jackson, Assistant Secretary for "Brexit» David Davis, said the government would not compromise on payments to the budget, immigration, law and freedom from the jurisdiction of the European judges. European governments, on the other hand, argue that it can not be given the right of free trade, without respect for the right of free movement of citizens.
7. Is there a happy medium?
Eventually, the expected long negotiations with compromises, probably on both sides. The golden mean is achieved if the United Kingdom will give way on the issue of removal of immigration bans, and the EU, in turn, will provide access to the single market, albeit with some nuances.
Based on materials WELTRADE