Wednesday 19 October 2016

Will we get an EndoBrexit or an ExoBrexit ?

In chemical reactions, the energy you put in (shown by the humps) can either take you to a higher energy level or a lower level~:


With Brexit there is an equivalent situation.  Will the transition take the UK to:
  • A higher level - an #EndoBrexit, or
  • A lower level - an #ExoBrexit ?
Furthermore, if it looks like an #EndoBrexit, will all the investment in time, cost and energy for the transition have been low enough to be worthwhile?


WHAT ARE THE ANSWERS?

Let's look at the transition first.  It is likely to take many years, whether it is a "Hard Brexit" or a "Soft Brexit".

The UK's divorce from the EU, triggered by Article 50, will likely take the full two years allowed.  Any new trade deal with the EU will likely take years longer, subject to any interim agreement. A deal with the EU must be in place to set the foundations for any new trade deals with non-EU countries. So many years longer before all's in place.  A massive investment in time, money and energy.  Then you need to add the hidden cost of the people involved not doing anything else constructive that needs doing.  Yet any benefits of new trade deals will only arise many years away. 

Furthermore, all indications are that the economy will suffer during the transition.  This is through uncertainty and the opportunity for businesses to reassess their location and investment.  Jobs lost, growth slowed, and tax receipts down.

Brexit must be strongly "Endo" to even begin to consider such a massive cost and investment.

The problem is that it is not at all clear the UK is headed for an #EndoBrexit.  If anything, the likely damage done to the economy during the transition will never be recovered.  It's looking like an #ExoBrexit.

There is certainly no justification for an expensive transition.

Some will say that any cost is worthwhile for regaining UK sovereignty and control over the UK's borders. Others will wonder what's the point if the economy is going backwards as a result?

Recent polls suggest many voted to Leave on the basis that there would be little or no cost for Brexit - essentially expecting free trade with the EU would continue un-interrupted.  That is by no means guaranteed.

But that's only one view.


KEY QUESTIONS THAT STILL NEED TO BE ANSWERED

To come to a proper collective view, let's make every effort to answer three questions:
  1. Economically, is it looking like a higher #EndoBrexit or a lower #ExoBrexit ?
  2. If #EndoBrexit, is the investment in the transition worthwhile?
  3. If there's going to be a net cost, why bother with Brexit?

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