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Wednesday, February 21, 2018

The UK has taken the first real step towards withdrawal from the EU

Britain called the start date, withdrawal from the European Union – March 2017. So, London decided not to wait for election results in Germany, as previously assumed. How then will change the structure of the European world order, I do not know yet neither the British nor the European elite. But in some ways their interests are evident now.

UK will start the procedure of withdrawal from the European Union by the end of March 2017, said Prime Minister of the United Kingdom Theresa may, reports BBC News.

“We must do everything we can to help British companies to remain competitive in the global market”

Mei has confirmed the timing of the introduction of article 50 of the Lisbon Treaty, which will begin a two-year process of separation. Article 50 of the Lisbon agreement assumes that any state can take the decision to withdraw from the European Union. In accordance with this document the British intend to formally notify the partner on the block that a country leaves the Union.

Earlier on Sunday, may announced the abolition of the European communities Act 1972, which enabled the legislation of the European Union to come into force in the UK. “The power of EU law in the UK will end”, – said the Prime Minister.

Thus, Britain will not wait until parliamentary elections in Germany, which will be held in September 2017 in order to begin the formal process of leaving the European Union.

However, it is a purely legal-technical solution which still leaves the major questions unanswered. It is not clear how it will be changed or modified commercial, financial and other ties of Britain with the EU, if Britain is not to lose your preferences or to minimize losses from out of the EU.

In fact, a British exit from the EU may change the entire structure of the European world order, and not to change practically nothing. And what will happen in the end, I don’t know today, even the authorities themselves, the EU and Britain. Ahead of lengthy approval procedure the many nuances in every field – from social and political to economic and financial.


A possible British exit from the EU referendum was the main topic of the main European media. In particular, the Paris magazine Charlie Hebdo cartoons depicted the parting of London with the EU as the return of men from his wife to the old mother, which symbolizes Queen Elizabeth St the opinion that whatever it happened, but the main beneficiary of the transformation of the EU will be USA. Simply because on the background of instability in Europe, the cash flows will be nowhere to run now, in the United States. In the global economy there are only a few strong financial zones: this is the dollar area, the Euro area and the pound. Also area a strong yen, but there are problems and there are limits to global investors. When the EU and UK problem, it is logical as an alternate airport using US.

To compete for the cash flows can only be China, the yuan since October 1 officially became the reserve currency. However, Beijing may not be able to weave into this fight, because the yuan is only at the beginning of the conquest of the world market. Moreover, while financial instruments in China focused primarily on domestic market, and he needs to do more in order to win the global market.

While the situation in the economy was not so terrible as everyone thought before the decision on the exit. The situation in the UK economy in the second quarter of this year, in a good way surprised analysts. UK GDP grew in annual terms by 2.2%, quarter-over-quarter by 0.6%. However, more recent data portend an imminent slowdown in growth after the referendum on leaving the EU, the IMF said. Next forecast will depend on the degree of preservation of the benefits of economic integration and trade within the framework of future relations with the European Union”, – stated in the report. In fact, there are no real transformations in the relations of great Britain and the EU did not happen, because the mechanism of exit from the EU is not running.

When it starts, then you need to resolve a number of issues. In particular, one of the problems of London to help British manufacturers not to lose their business, their force and export markets. “We must do everything we can to help British companies to remain competitive in the global market”, – said recently the Finance Minister of great Britain Philip Hammond. He met with local exporters, to find favorable terms for the country’s exit from the EU. At the meeting were representatives of the companies of Honda Motor Europe, GSK, Airbus Group UK, and representatives of British professional industrial and trade associations. But nothing concrete yet.

The United Kingdom is, of course, wants to remain a great trading nation. The volume of British exports is more than 500 billion pounds a year. Although since 2000, Britain has significantly increased its exports to China (increased seven times) and the USA (growth twice), the European Union remains the main buyer of British goods and services. More than half of the exports go to the EU. So, at the end of 2015 outside of the EU were exported British goods and services to 300 billion pounds. The most successful articles of British exports are financial services (3.5% of GDP in 2015), mechanical engineering – 3.3% of GDP, transport – 2,4% of GDP and pharmaceuticals – 1.3% of GDP.

Whether to keep Britain preferences for trade with the EU after exit is a complex issue that requires long and resolute struggle. Brussels is not ready to bear the loss. Warns the head of the European Council, Donald Tusk, Britain will not be able to maintain full access to the single EU market after leaving the EU if it does not comply with the four freedoms of the EU – freedom of movement of goods, services, capital and labour.

Freedom of movement of goods and services is an exception to the trade wars, the policy of zero fees and the preservation of the common customs tariffs against third countries. Freedom of movement of capital means the simplified procedure cross-border transactions, investments, sale of assets (from real estate to stocks and other financial instruments). Finally, the free movement of labour means simplified migration of people between States, in particular, in the framework of the Schengen agreement. It also includes the issue of refugees, which severs Europe.

On these principles a huge number of agreements, treaties and legislative acts. And all of them will have to change, to transform. To what extent and in whose favor the result of long discussions.

Before the Kingdom is another challenge: what will become of the world financial center after leaving the EU? Do not lose London its financial power?

The city of London is already on the heels of Asian markets such as Hong Kong and Singapore, and so strengthen their positions as global financial centres-the-counter trading, the weakening of the positions of the major harbors. In the last three years, the share of the city of London in the market trading of foreign currency began to decline rapidly. According to the Bank for international settlements (BIS), the share of great Britain in April dropped from 41% in 2013 to 37% in 2016) And it happened even before the decision of the majority of British subjects to withdraw from the EU.

Now, Asian countries benefited from a more favourable economic environment compared with Europe and the United States. The British elite really do not want to London has lost its reputation as a financial centre because of Brexit.

The structure of the UK economy is built so that it has a deficit on current account in the 140-170 billion per year, which kompensiruet solely by the net influx of international investment. In other words, London is heavily dependent on the favor of international investors. If London will lose this huge inflow of capital, then the British economy can go down. After all, the country has no reserves in the form of gold reserves to gently plan in such a situation.

All this means that the British elite will tend not to dramatically transform the relationship with the EU. Whether it will turn out – will show time.

Meanwhile, the Bank of England after the referendum lowered the key interest rate and re-launched a bond-buying program to pump money into the economy and stimulate its growth. The next meeting on 3 November, the Bank of England may again ease monetary policy. The government, meanwhile, is preparing to announce new tax measures in response to the Brexit.

Because of the risks of the economy, the pound continues its decline against the dollar. The pound headed for a fifth quarterly decline. This is the longest period of decline of the British currency to the dollar since 1984. Among the 16 major world currencies this year, the British pound shows the weakest results. Currency is too vulnerable to news about the future of the UK, and volatility may rise to the extent that, as will be negotiating with the EU. In addition, after a significant economic shock because of Brexit, will need a significant devaluation, the Bank of England. Such statements are also added to stability.


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