Collaborative Post

For SMEs, any Brexit deal is better than none at all

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This week, British Prime Minister Theresa May is set to address EU leaders in Brussels, as she looks to expedite Brexit talks and determine a course for future trade relations.

While both the UK and the EU have agreed that the negotiations need to speed up considerably, however, there remains a significant stand-off on issues such as immigration and trade. These differences cannot be resolved easily, but pressure is being applied by Brexit ‘ultras’, who have urged the PM to abandon talks and leave without a deal if further progress is not made soon.

European Union flag

This would be a huge error in judgement, and one that would cause considerable harm to the UK economy and devolved nations such as Scotland. Here’s why:

The importance of striking a deal, and why Scottish SMEs are pushing for this

While it is hard to determine just how Scotland and its businesses would fare once a deal has been agreed between the UK and the EU, the prospect of no deal is truly daunting.

According to the most recent analysis by the London School of Economics, nearly £30 billion could be wiped off the Scottish economy within five years should all parties fail to agree an amicable deal. This would be part of a wider, UK economic contraction of £430 billion during this period, with devolved nations like Scotland facing the brunt of this.

Even more worryingly, it would be Scotland’s major cities and economic engines that suffered the most. The Gross Added value (GVA) of Aberdeen’s economy would fall by 7%, for example, with the corresponding number for Edinburgh and Glasgow would decline by 6% and 5.5% respectively. This means that both small and medium-sized businesses north of the border would most likely see a decline in turnover, as economic sentiment dwindled and consumer confidence remained particularly low.

We should also remember that the economic climate in Scotland and the UK is already strained, as rising inflation and restricted real wage growth continues to squeeze customer-spending power. It is hard to imagine how protectionism and the decision to end negotiations without a deal will help to reverse these issues, particularly with China set to emerge as global power and influential trading block by 2030.

This means that China will sit alongside the U.S. and the EU as dominant trading blocks, leaving the UK and Scotland on the outside looking in. As a result, businesses in the regions would face inflated trading tariffs across the board, impacting on their cost of operation and ability to sell on the global market. So while the absence of any deal would have an immediate impact on the Scottish economy, this would only be exacerbated over time.

The bottom line: Why certainty, not speed, is important for Brexit Negotiators

When you consider that nearly half of all UK trade is conducted with the EU, the notion of completing Brexit without a deal would have an immediately devastating impact on Scottish commerce. The long-term picture is even bleaker, without a deal, and while there is a clear drive to hasten negotiations this must not come at the expense of sourcing a viable and amicable agreement.

In short, any agreement is better than no agreement for Scottish SMEs, and the same principle applies to investors. After all, while resources such as Forex news trading can teach investors about the basics of market movement and volatility, they cannot prepare them fully for the unprecedented economic crisis that would undoubtedly ensue if the UK and the EU failed to achieve a deal.

The saddest irony here is the devolved entities such as Scotland and Northern Ireland, whose members voted to remain in the EU, would ultimately suffer the brunt of this decision and lose significant value from their GDP.

 
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