BUS614: International Finance

Soft Brexit

When people talk about Soft Brexit, they are referring to a scenario where the UK stays either within the EU's Single Market by becoming a member of the European Economic Area (like Norway), or in the European Customs Union, or both. If this happened, the short-term economic impact of leaving the EU would likely to be small. However, if it remained in the Single Market, the UK would have to maintain free movement of EU citizens, it would remain subject to judgments of the European Court of Justice and it would have to contribute to the EU budget. If the UK remained in the Customs Union, it would be unable to strike its own trade deals with other countries. It would benefit from all trade deals signed by the EU. However, those EU deals signed after Brexit would be negotiated without any UK input.

Most recently, Boris Johnson said that UK would leave the bloc "Do or die" on 31 October 2019 - prompting some UK MPs to act to stop the UK leaving without an agreement. In addition, according to BBC news, confidential documents that reflect the ideas the UK has put forward on Brexit have been shared with the EU. Here we understand that more interesting and live discussions are taking place between the EU and UK about ruling out another delay to Brexit if a deal is agreed. Most recently, we find that Brexit Secretary Stephen Barclay holds optimistic talks with the EU's chief negotiator, Michel Barnier. The discussion follows that a new Brexit deal could still be reached before 31 October. For that purpose, we also notice that Mr Johnson is going to continue more talks with European leaders at a UN summit in New York soon.

Hard Brexit

Hard Brexit means UK would leave not only the EU but also the EU's Single Market (of which non-EU countries are also members) and the EU Customs Union (of which non-EU countries are also members). Hence UK would instead aim to secure a free trade deal with the EU, ideally covering both goods and services. In a hard Brexit situation, the UK would not have to sign up to free movement of EU nationals, or be subject to the European Court of Justice. It would probably not to contribute to the EU budget. It would also be able to sign free trade deals with other countries. However, the UK is unlikely to be able to sign a free trade deal with the EU or other countries before it leaves the EU in 2019. Unless a transitional deal with the EU is reached, it is quite likely that for a period of a few years, the UK would have to trade with the EU and other countries under the rules of World Trade Organization (WTO). Overall, this is expected to have a long-lasting adverse impact on the UK economy.