Brexit Jargon

1 April 2019

As the UK continues to flounder over a decision with regard to Brexit, I have noticed that many people are confused as to the different terms being used when discussing it. In this week’s article I will try to explain the main terms:

No Deal Brexit

A ‘No Deal Brexit’ means that the UK leaves the European Union immediately without a deal in place. This is the default option now that will happen on the 12th of April if no arrangement is made before that date. The UK would have to follow World Trade Organisation Rules. This option would have the worst effect on the Irish economy with GDP expected to drop by 1.2% by 2020 and employment to fall by 3.2% over 10 years.

World Trade Organisation Rules

If countries do not have free-trade agreements, they usually trade with each other under rules set by the World Trade Organization. For example, cars passing from non-EU countries to the EU are charged 10% of their value, but, tariffs on some agricultural products are much higher. If the UK chooses to put no tariffs on goods from the EU, it must also have no tariffs on goods from every WTO member.

Customs Union

If the UK remains in the Customs Union it means that they will benefit from free trade with other EU members and some smaller countries that are also part of the Customs Union. For the UK, the disadvantage of the Customs Union is that they will not be able to negotiate independent trade deals with other countries as the rules forbid members from negotiating trade agreements separately. Instead, trade agreements are negotiated collectively.

Single Market

A single Market is a deeper form of integration than a Customs Union. A Single Market involves the free movement of goods, services, capital and labour. Countries such as Norway and Switzerland are outside of the European Union, but they are members of the EU Single Market, paying into the EU budget to take advantage of some of the benefits of the free flow of capital, labour, goods and services.

Withdrawal Agreement

Theresa May has agreed a deal with the EU on the terms of the UK's departure. It does not determine the UK-EU future relationship. It does include how much money the UK must pay to the EU as a settlement, details of the transition period and citizens' rights. It also covers the so-called "backstop", which ensures that no hard border exists between Northern Ireland and the Republic of Ireland after Brexit.

Backstop

The Backstop is a measure in the Withdrawal Agreement designed to ensure that no border is erected on the island of Ireland after the UK leaves the EU. It comes into effect only if the deal deciding the future relationship between the UK and EU is not agreed by the end of the transition period (December 2020). The backstop could keep the UK effectively inside the EU's Customs Union but with Northern Ireland also conforming to some rules of the Single Market. Critics say a different status for Northern Ireland could threaten the Union and fear that the backstop could become permanent. This is the main reason that Teresa May’s deal is continually voted down in the House of Commons.

The outcome of Brexit seems uncertain with different people and parties in the House of Commons voting for different options such as No Deal, Customs Unions, the Withdrawal Agreement and a Second Referendum. If you are concerned that your Investment or Pension may be affected by Brexit I advise you to contact your Financial Advisor to review your options.

Marie Carr QFA RPA is a Qualified Financial Advisor. You can contact her through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on marie@jfl.ie

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