brexit - the grand finale - pwc · 6/14/2018 · brexit - the grand finale strictly private and...

Seminar - Hot topics treasury

Brexit - The grand finale

www.pwc.com

Strictly privateand confidential

14 June 2018

PwC 14 June 2018

Strictly private and confidential

1 Welcome and introduction 3

2 Brexit: The Process 5

3 The Economic Impact: the UK versus the EU 9

4 The Impact on Trade 17

Contents

2Seminar - Hot topics treasury

PwC 14 June 2018


Welcome andintroduction

1 Welcome and introduction


PwC 14 June 2018


With you today

1 Welcome and introduction


Erika CarlssonResearch AnalystClients & MarketsT: +31 (0)88 792 28 50M: +31 (0)631 77 72 [email protected]

PwC 14 June 2018


Brexit: TheProcess

2 Brexit: The Process


PwC 14 June 2018


Brexit: the context



No à la carte fourfreedoms

East vs West

Immigration andtrade

Timing Art 50

Brexiteers versusThe City

North vs South

PwC 14 June 2018


PwC’s main scenarios



No accessagreement(WTO terms)

Significantdisruption to UK-EUeconomic relations

•WTO terms applied• Independent migrationpolicy

•No access to the internalmarket

•No UK contribution to theEU budget

•The UK not part of the EUCustoms Union and noaccess to intra-EU tradesystem

Free TradeAgreement

(Canada model)

Medium degree ofdisruption to UK-EUeconomic relations

•Market access dependingon the shape of the FTAdeal struck

•No application of fourfreedoms

•No influence over EURegulations or Directives

EEA member(Norwegian option)

Low degree ofdisruption to UK-EUeconomic relations

•Application of fourfreedoms

• Application of EURegulations and Directives

• Access to single market forFS via passporting

• Contribution to the EUbudget

BilateralAgreement

(Swiss option)

Medium degree ofdisruption to UK-EUeconomic relations

•Access to some areas of theinternal market, at the costof adopting the relevant EUregulations

•No application of fourfreedoms

•No influence over EURegulations or Directives

•Not part of the EU CustomsUnion and no access tointra-EU trade system

Lessdisruption

Moredisruption

PwC 14 June 2018


The timelines – where do we go from here?



PwC 14 June 2018


The EconomicImpact: the UKversus the EU

3 The Economic Impact: the UK versus the EU


PwC 14 June 2018


The immediate shock after the referendum



25 June2016

PwC 14 June 2018


But is the worst yet to come?



2016 2017 2018 2019

Source: PwC UK, UK Economic Outlook, March 2018

UK annual GDP growth, 2017-2019

PwC 14 June 2018


The UK at the bottom of the growth league in 2019



0 1 2 3 4

Italy

United Kingdom

Belgium

Portugal

Denmark

France

Greece

Austria

Germany

Sweden

Finland

Spain

Netherlands

Luxembourg

Ireland

Annual GDP growth in 2019, selected EU economies

Source: HIS Markit

PwC 14 June 2018


But the inflation shock in the UK will subside



0,00

0,50

1,00

1,50

2,00

2,50

3,00

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

UK annual inflation, 2013-2023

While the Brexitnegotiations willkeep the pound

range bound

PwC 14 June 2018


Meanwhile Europeans seem to have found back their confidence …



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8

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EU Euro area

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Consumer Confidence Indicator, EuropeanCommission

Business Confidence Indicator, EuropeanCommission

PwC 14 June 2018


But Europe is still astonishingly diverse



GDP per capita developments since 1997, selected EU economies

Source: The Financial Times

PwC 14 June 2018


And some trading nations will be more affected than others



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-3

-1

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3

5

7

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erland

sG

erm

any

Den

mark

Malta

Hun

gary

Bulg

aria

Slo

venia

Luxem

bourg

Sw

eden

Irela

nd

Italy

Cro

atia

Austr

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Spa

inLatv

iaC

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epu

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Port

ugal

Belg

ium

Pola

nd

Fra

nce

Gre

ece

Lith

uania

Fin

land

Slo

vakia

Rom

ania

Cyp

rus

Current account balance, selected EU economies

PwC 14 June 2018


The Impact onTrade

4 The Impact on Trade


PwC 14 June 2018


Some countries have a larger exposure to Brexit



Trade in goods, Exports to the UK as a % of GDP

0%

1%

2%

3%

4%

5%

6%

7%

2015 2016

PwC 14 June 2018


And some sectors more than others



Relative importance of exports to the UK, estimated economic impact of WTO scheme andindustries at risk

PwC 14 June 2018


Especially if tariffs are re-introduced



UK and EU industries facing the highest tariffs in a WTO scenario (weighted %)

PwC 14 June 2018


And there are non-tariff barriers too: shipments and time delay at border



Dispatch

Shipments UK to Germany pre-Brexit

Shipments UK to Germany post-Brexit

Preparation Dispatch Arrival

12 hours

Preparation Declaration Clearance Dispatch Preparation Declaration Clearance

72 hours

PwC 14 June 2018


So what is your perspective?



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brexit - the grand finale - pwc · 6/14/2018 · brexit - the grand finale strictly private and...

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