Views coming out of Wall Street analysts at the Bank of America seem to think so. Brexit could turn the UK into what is termed, an ‘emerging economy.’
Essentially an emerging economy is used to describe the economy of a “developing” nation as it connects itself to global markets. It’s not really supposed to be used to describe one of the wealthiest nations in the world. You can sort of see why the term would be used to apply to Brexit-Britain, because after all, the UK currently enjoys advantageous trade agreements with most of the world. On January 1st, 2021, all of that is going to change with the world’s major economies. The UK will have no trading agreements with any of the top 10 largest economies and precious few below them.
Switzerland would be the most notable in terms of agreement, but that’s just a copy of what the UK has now. Looks like the UK will be alright on the Rolex and Toblerone front anyway. South Korea is a larger economy, but because of the distance there’s little trade there – apart from the 4 billion GBP in goods exported. And let’s not forget that Johnson has also placed a trade barrier between Britain and Northern Ireland in the process.
“Does Brexit actually mean that the UK can’t even trade freely… with themselves?”
In general terms for the largest economies, it means world trading organisation terms for trading with the United States, China, Japan, India, France, Italy, Brazil, and Canada. It makes very little difference how optimistic you may be about replacing the hundreds of trade agreements quickly, when the UK has yet to manage the three that the UK targeted for completion this year. The fact is, the UK are losing agreements with the vast majority of the most important world markets. That part would seem beyond dispute at this point.
This means the UK will be seeking to connect itself to global markets in 2021 –hence the tag ‘emerging economy.’ And as Boris Johnson is all about being the best in the world – you could argue that the UK will indeed (by far) have the largest economy of any nation to have earned such a tag. However, these analysts are not saying this is going to be an instant thing, whereas in 2021 Britain is going to become an emerging economy – this is a long-term view. Although the Bank of America are suggesting investors may be considering that the currency (GBP) may be one of an emerging economy because the pound has been tumbling in value against both the euro and the dollar over time.
The fluctuations with the pound in these times have been described by one of these analysts as ‘neurotic at best, unfathomable at worst.’ I would add, it’s only unfathomable if you assume that a government’s concern is for their country and their country alone. The UK has been run by three Prime Ministers on the bounce, and what many would say have based their actions on their own private, political ambitions. So, in this case it would actually make it… fathomable.
Are we seeing a shrinking UK economy going forward… or backward, whichever way you care to look at it? It’s worth repeating that the analysts are not predicting an overnight decline for the UK, but rather a long-term one. The Bank of England is after all, trusted internationally, the GBP is a major currency, and the UK credit rating is still on the ‘A’ rating – which is crucial.
The UK deficit for this year is likely to exceed 300 billion pounds which could trigger interest rate increases if inflation shoots up. The negative difference between the value of exports and those of the imports, as well as the fiscal deficit combined, means that by next year, the UK is going to be in worse shape than Mexico or Turkey, countries actually considered to be emerging economies. Is that really where the UK stands as of today?
After all, the current mess has come partly due to the UK government making such poor decisions, some may even say that it’s greatly to do with having a Prime Minister who seemingly doesn’t do details, who listens to Dominic Cummings (a lot) along with Tory donors, and with the former being an expert in not very much but confidence tricks – and the latter being interested only in lining their own pockets, it’s not all that hard to paint the picture.
“So how much worse can the situation be given the analysts’ predictions for Brexit Britain?”
It makes no difference if it’s a group based in the UK, or as in this case, overseas, when coming to their conclusions through reasoning, they all work on the assumption that the UK is going to agree at least on the basic trade agreement with the EU – all without considering the scenario… what if they don’t? Because let’s be clear for a moment here… who in their right mind would be mad enough to leave the EU without the bare bones of the agreement, at least?
“I can think of one… rather disheveled looking chap who fits the bill. Can you?”