This week the UK government gave Article 50 notice to the European Union of its intention to leave.
Knight Frank Chief Economist, James Roberts comments:
“Overall, the tone of the Prime Minister’s letter is realistic, conciliatory, and a step away from the hard Brexit rhetoric we heard at last year’s Conservative Party conference. The idea that there may be a comprehensive trade treaty in place at the end of just two years of negotiations seems fanciful. However, the call for a prompt start to technical discussions might point to an early interim agreement covering areas of the economy that are critical for both sides, such as financial markets, to act as a bridge to a full free trade agreement further down the line.
As talks progress between Britain and the EU we should expect some sabre rattling from both sides. Yet, whatever the outcome of the talks, the fact remains that the UK is a G7 economy with 65 million consumers. Global firms like Apple, Coca Cola, Google and Samsung will always want to access a market that big, as will EU firms like Axa and BMW. There are fundamental strengths within the UK economy that will outweigh the short-term effect of the Brexit talks, and draw business activity to the UK. This is just a two year road bump.”
Key points from the letter were:
- The Prime Minister called for a “deep and special partnership” with the EU “that takes in both economic and security cooperation”.
- The UK is not seeking single market membership, acknowledging that there can be no “cherry picking”.
- The government wants negotiations on settling the UK’s obligations to the EU to happen concurrently with talks on a future trade deal. The EU has so far insisted that trade talks can only happen after matters surrounding the UK’s departure have been settled.
- The letter calls for the UK and the EU to minimise disruption for firms and individuals.
- It calls for no hard border between the UK and the Republic of Ireland.
- The Prime Minister suggests technical talks should begin immediately to prepare a ‘bold’ free trade agreement between the UK and the EU, which “covers sectors crucial to our linked economies such as financial services and network industries”.