World economy

(Free) Trade or Bust: UK’s ‘Economic Shock’

“Economic shock” is quite an understatement of what the United Kingdom will experience, should it leave the EU without having brokered a favourable free trade agreement, according to a Government Minister. This would leave a significant impact on the country’s economy, and therefore the strength of its currency – something that is of interest to forex and binary options traders alike.

No deal = no Brexit?

According to Lord Price, who is also a minister in the International Trade department, there is a significant risk of damaging businesses in both the EU and the UK, once the trading between the two reaches a point of impasse. With a gap between their trading interests widening more and more every day, the Minister argues that steps need to be taken in order to protect the interests of businesses operating in the United Kingdom, or else they will undoubtedly leave the country in search of a more favourable business climate.

On the other side of the coin we can see the UK’s Foreign Secretary Boris Johnson who continues to apply constant pressure on the Prime Minister to conclude the negotiations as soon as possible. This is in stark contrast of what Mrs. Theresa May had in mind, as the limbo in which the United Kingdom has found itself presents a lot of opportunities for the nation, while still enjoying its EU status, for a time at least. Since the EU side is already in a hurry to get this over with, the last thing Mrs. May needs is her own political allies forcing her hand, and yet this is exactly what is happening.

Dillydallying

Try as he might, Mr. Johnson is not the Prime Minister, so the issue of timing of the Article 50 is entirely at Mrs. May’s discretion. His impatience has already been rebuked only days ago, and yet Mr. Johnson persists in lobbying for the activation of Article 50 as early as next year. As much as the status quo favours the UK business sector, who would prefer the Article never be activated at all, the issue that pushed the referendum to the pro-Brexit side is still very much a hot topic.

Immigration and all that it entails will not decrease on their own, so the longer this gray area continues, the more immigrants will be able to cross into the UK, or so Mr. Johnson believes – hence his speeches on “mainlining” immigration and comparing it to a drug. It should be said that Lord Price himself stands out among his peers, as most senior Tories believe that the UK does not need the EU or its markets in order to prosper.

Anachronism

While this may indeed have been the case six or seven decades ago, when the UK could still depend on the colonies for resources and other benefits, many UK politicians seem to have forgotten the reasons why their country joined this organization to begin with. If Lord Price has a point, then his peers as well as the people in the UK are in for a very rude awakening.

Of course, it is possible for the UK to leave the EU without a free trade deal and to soldier on, but the losses would truly be staggering. Current estimates go as high as several billions of pounds on an annual basis. And yet, both David Davis and Liam Fox, who outrank Lord Price have made suggestions in the past that the UK is perfectly willing to leave the EU, with or without that deal. Of course, they could have been bluffing in a bid to strengthen their nation’s position before the negotiations take place, but if they were serious, this could have some strong consequences for the economy.

Conclusion

Lord Price may believe that his role as a Minister will involve free trade deals and being a free trade advocate, but the decision is ultimately not his own. People who outrank him have already stepped out and claimed that they are perfectly willing to leave the EU, trade deal or not. Of course, this may simply be the result of their reluctance to reveal their hand before the negotiation process has even started, but nobody should have any doubts regarding what is at stake: the future of the UK as a whole, its currency as well as that of the EU.

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4 Comments

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