Chances and Challenges
The economic condition between China and The UK during Brexit
All parts of Britain will suffer economic hard time if there is a No-Deal Brexit, leading business representative group Confederation of British Industry (CBI) claimed in a report Tuesday. Meanwhile, Chinese economy is seeking for opportunities to make a “big deal” with British investment when Brexit happening.
The CBI’s report “Impact of a ‘No Deal’ Brexit Across the UK”, claimed that if Britain left the European Union (EU) without an agreement, every region and each of the three constituent nations outside England would suffer an economic loss running into billions of pounds each year by 2034.
The CBI, which represents 190,000 businesses employing seven million workers, said that the North East of England region would be hardest hit.
The North East would lose 10.5 percent of its real gross value added (GVA), which is a measure of the value of goods and services produced in the region, a cost of seven billion pounds by 2034.
Each of Britain’s constituent nations would suffer a fall in GVA — Northern Ireland 9.1 percent reduction; Wales, 8.1 percent reduction; and Scotland, 8 percent reduction.
When these figures are represented as monetary costs, the London the most, with an annual fall in GVA of 40 billion pounds (51.8 billion U.S. dollars), followed by the South East of England with a reduction of 28 billion pounds.
Carolyn Fairbairn, CBI director-general, said that a No Deal Brexit needed to be avoided, for the sake of businesses. The CBI has in the past backed British prime minister Theresa May’s Brexit Withdrawal Agreement.
“A March no-deal must be ruled out immediately. This is the only way to halt irreversible damage and restore business confidence,” Fairbairn said.
“Our analysis of the government’s own figures shows that Northern Ireland, Scotland, Wales and every English region would pay an unacceptable economic price.”
At the same time, Leading economists have warned that the British economy could suffer if the country leaves the European Union without a deal, following the overwhelming defeat of the Withdrawal Agreement in the British Parliament.
After surviving a no-confidence vote by a small margin on Wednesday in the wake of the rejection of the Brexit deal, British Prime Minister Theresa May will have to present an alternative Brexit plan to Parliament next Monday for another vote.
If the alternative plan fails to win the support of MPs, the so-called no-deal Brexit will become closer to occurring. Britain is due to leave the EU on March 29 as set in Article 50 of the Lisbon Treaty agreed by EU nations.
“If the UK crashes out with a ‘no deal,’ without transition arrangements, I think the shock would be severe,” Amit Kara, head of UK macroeconomic research at the National Institute of Economic and Social Research (NIESR), an independent think tank, told Xinhua in a recent interview.
Kara warned the impact on trade in goods and services and even on movement of people and transport would be instant and negative as a result of unwinding a decades-long relationship between Britain and the EU.
“No one knows really just how much disruption there will be at the ports and in supply chains. It is very hard to call what is going to happen,” Howard Archer, chief economic adviser to the Club, an economic forecasting group, told Xinhua.
Both the EU and Britain value highly their bilateral trade. In 2017, 44 percent of British exports were to the EU, while imports from the bloc accounted for 53 percent of all British imports, figures published by the British Parliament showed.
Kara said a sudden no-deal Brexit would bite into the British economy across the board, not just in trade data but also in jobs. “The effect would not just be on the manufacturing sector or just the services sector, it is much broader than that.”
“It is things like recognizing professional qualifications. For example, there is mutual recognition but overnight you may not be able to practise as a lawyer — or what happens to an engineer working in the UK on a short-term contract from France? I think that would be very disruptive,” Kara said.
Economists say there would be immediate effects on the sterling and British government bonds, which would cause equity market volatility.
Kara predicted divergence on the stock markets, with the major British firms represented in the FTSE 100 doing well, seeing share prices rising as much of their business is global and measured in U.S. dollars, benefiting from a falling sterling.
However, the next tier of firms on the FTSE 250, with a more domestic focus, will very likely see their stocks fall, or at least perform less well than the FTSE 100, he said.
With the Brexit deal now rejected, the possibilities for the final outcome of Brexit are open, whether it is a delayed Brexit, no-deal Brexit or even no Brexit.
For Archer, he believed the MPs want some kind of agreement before quitting the trading bloc to avoid a no-deal Brexit, otherwise the economy will certainly suffer, even risk recession.
Compared with “no deal” Brexit for Britain, Chinese economy got many good deals. Britain leaving the European Union, with or without a deal, will see the UK weighing more with Asian countries, analysts say, as they pinned China to be a major partner of Britain in its future economic development.
“After leaving the EU with or without a deal, the UK will seek strengthening cooperation with the countries outside of the European Union,” said Cui Hongjian, director of EU Studies at the China Institute of International Studies.
“Asia, which harbors wide markets like China, Japan and India, is likely to be a key part in Britain’s future plans for economic cooperation.”
British Prime Minister Theresa May is seeking for further talks with Brussels this week to salvage her Brexit deal after the agreed terms were rejected by the British parliament.
The deal, which reached by the May administration with the EU after nearly two-year-long talks, is non-negotiable.
If the British parliament could not approve the deal, Britain could crash out the EU with no deal on March 29, which worries many.
In an article published by the Contemporary World magazine in 2018, Sun Shengnan and Gao Jian, both research fellows with the Center for British Studies of Shanghai International Studies University, said that though there’s ideological divergence between the two countries, the bilateral trade is likely to remain on a high volume.
In 2017, a freight line connecting China’s Yiwu, an East China city famous for its small commodity trade, with London was established, making it possible for commodity containers to travel 12,000 kilometers in 18 days.
Financial service, a leading part in contributing Britain’s economy, will become the major sector that the UK would like to strengthen with other countries, Cui said.
“Leaving the EU, Britain seeks more independent rights in negotiating deals with other economies,” Cui told. “The UK will try to seal a free trade deal with countries like China to keep its economic development stable.”
May’s talks with other parties would continue, until the MPs vote on a range of possible next steps.
The main opposition Labour Party leader Jeremy Corbyn has refused to meet with May until she rules out “no deal,” but May has said the only way to do this was to agree on a deal — or stop Brexit altogether.
