UK Prime Minister Theresa May is set to deliver a comprehensive speech today (January 17) that will confirm Britain’s intention to leave the single market.
As she speaks to an audience of press and ambassadors from around the globe, May will attempt to carve the road to triggering the fabled article 50. Despite a clear intention to scrap the single market, it is believed that May will insist that Britain will remain a “best friend” to their European neighbours. During the long awaited speech, the prime minister will also endeavour to outline 12 key priorities for EU negotiations that include a stance on trade and control of borders.
In a point that reflects her views that shipping and trade will be unhindered, May will say that she does not see Brexit as an either/or choice. May firmly believes that whatever final deal on trade and customs duties is decided, lorries will be able to pass through Dover and other ports unobstructed. It is also believed that May will advocate ambitions to extend trade beyond the continent, suggesting that UK is also destined to leave the customs union.
The move to leave both the single market and the customs union is seen by some as a bold one. Back in October 2016, Cabinet ministers were given detailed warnings from thinktank NIER that the UK pulling out of the EU customs union could lead to a 4.5% fall in GDP by 2030, and would ultimately result in the congestion of trade through Britain’s ports. Estimations from NIER are that if Britain is to make an out-and-out withdrawal, they would need to develop trade growth with the 10 largest non-EU partners by 37% by 2030 just to create a trade stand-still. In addition, James Hookham, of the Freight Transport Association, claimed that there would be a “profound” impact if there is a sudden exit from the customs union as over half of Britain’s exports go to the EU.
There was also doubt from the Leader of the opposition, Jeremy Corbyn, who has said that May’s plans are rash and that the prime minister “appears to be leading us in the direction of a sort of bargain basement economy on the shores of Europe where we have low levels of corporate taxation”. Corbyn also added, “It seems to me an extremely risky strategy.”
Additional major concerns surround the negotiations for EU workers being able to freely work in the UK. Restrictions on the right of EU workers to work in the UK maritime sector would have a severely detrimental effect on the UK shipping cluster that is reliant on such labour to thrive.
Conversely, some shippers believe that Brexit offers opportunities for more favourable trade agreements to be decided on a bilateral basis between the UK and countries in Asia, Oceania and the Americas. Politicians in Australia have already said that they are happy to discuss a bilateral deal. U.S President Elect Donald Trump also seems to favourably look at Britain’s decision to “take their country back” and despite Obama’s “back of the queue” warning, it appears that Trump will look to secure a quick UK-US trade deal after he takes office on Friday (January 20).
In line with some of the more optimistic forecasts, shipping analysts Drewry believe that container lines will continue to call directly at UK ports because UK volumes are large enough to justify direct calls with mainline vessels, particularly at ports in the South of England.
It would appear one of the major reasons for Theresa May and the government’s decision to seek a ‘hard Brexit’ is an easing of financial forecast worries. On Monday (January 16) the International Monetary Fund (IMF) claimed that their negative outlook for the British economy in the wake of Brexit was slightly misjudged. In some instances, trade within the UK has been more favourable due to the crash of the pound.
Essentially though, what May is offering is a clean cut from Europe. No single market, no free movement, no ‘soft Brexit’. This may ultimately equal a deal that in time works for the UK shipping industry, but it is the very nature of the gamble that creates such uncertainty. Especially considering the tariffs that may be on the horizon. Steady yourself, because there may be some rough waves ahead.