Brexit has dominated political and business discourse in the United Kingdom since a 52% majority voted to leave the European Union in a referendum on 23 June 2016. While Britain has not actually left the E.U. yet, the impact of the vote is already being felt, as members heard at a Chamber roundtable on 24 June.
Three years on from the referendum, the shape that Brexit will take remains uncertain. The E.U. has made clear that the withdrawal agreement it signed with outgoing Prime Minister Theresa May is not open for renegotiation. However, British lawmakers failed to ratify this deal and this seems unlikely to change.
Potential scenarios include a no-deal exit on 31 October, a further postponement of the exit date, and a second referendum on the details of a withdrawal agreement – which could also include “remain” as an option.
Simon Shen, Adjunct Associate Professor of Social Science at the Chinese University of Hong Kong, said that the result reflected British people's desire for a change to the current political system. Westminster has long been dominated by two political parties: Conservative and Labour.
“The internet played a crucial role in the in the Brexit referendum,” Shen added. “It helped swing a significant number of voters.”
Brexit will also have an impact far beyond Britain, particularly on a weakened E.U., which is changing in other aspects. Some southern European nations like Italy and Greece could follow Hungary and pursue closer relations with Mainland China through the Belt and Road Initiative, Shen said.
Meanwhile, the U.K. needs to reposition itself and find alternative trading partners, such as Mainland China, the United States and Japan.
“It is certain that globalism will be affected, and Brexit is just the beginning,” he said.
Also at the roundtable, Carlos Casanova, APAC Economist of Coface, shared his insights on Brexit's economic impacts in Europe and beyond.
He said he expected depreciation of the pound, and further falls in consumer and business confidence. A survey carried out by the Institute of Directors earlier this year also showed that 29% of more than 1,200 companies surveyed were making plans to relocate their businesses outside the U.K.
Statistics also showed a 10% growth in company insolvencies in the U.K., particularly affecting industries including food service, construction and retail.
“Negative domestic sentiment and relocation of companies will result in a big decline in investment,” he said. “It is possible that a small recession will take place in the U.K.”
Looking closer to home, Hong Kong traders that depend heavily on exports to the U.K. are likely to experience a decline in demand.
Casanova noted that the situation at this stage is still too fluid to make any definite predictions.
If Britain exits the E.U. without a deal, this would likely cause inflation and tighter monetary policy, leading to higher interest rates. As Casanova explained, a no-deal Brexit means that trade with the E.U. will be conducted under WTO terms, so U.K. exports would face tariffs. Agri-food, automobile, construction, retail, pharmaceutical and chemicals are among the sectors likely to be hardest hit by a no-deal Brexit.
But regardless of what happens in the next few months, Britain's economy is not in for an easy ride, and the impact will be widely felt.
“The different options for Brexit would all have negative economic impacts globally,” Casanova said.