Prior to EU’s 60th anniversary of its founding (Treaty of Rome, March 25th, 1957), London did trigger Brexit process invoking Art 50. Is UK opening Pandora’s box?
It’s not the beginning of the end (of Brexit) – it’s but definitely the end of the beginning. Despite the fixation in the UK on the precise date and the legal niceties of the Article 50 process, the most important event of the weeks to come will not be the notification itself but the EU response to it; and the political and economic dynamics that that sets into motion.
If things go according to plan, we're headed for the usual EU negotiating scenario: long interludes of tedium and small print, interspersed with episodes of late-night brinkmanship, ending eventually in a compromise no-one likes, but everyone will describe as a victory.
But if politics - either here or on the continent - derails the process, we could soon find that far from "taking back control", we have done precisely the opposite. The consequences for the EU would be very damaging; for the UK they could be disastrous.
However, the fears (or hopes in some quarters) that Brexit will lead to the disintegration of the EU seem overblown. If anything, the prospect of Brexit seems to have given an impetus to EU politicians to unite, and made electorates in the rest of Europe more nervous about electing anti-EU populists.
What development do you expect in labor markets in connection with UK’s separation from the EU given some big banks’ recent announcement to relocate some jobs?
I think the most immediate impact on UK labour markets will be a reduction in immigration from the rest of the UK to the EU, as the UK becomes a less attractive place to move to for the medium and long term, and as some EU citizens decide to return to their countries of origin.
Indeed, the latest figures already show some signs of this. Given the UK’s dependence on EU migration – at all skill levels – the potential negative impacts on the UK economy are significant.
It is very difficult to predict post-Brexit developments in the financial sector. My best guess is that London will remain Europe’s largest financial sector, but there will be some relocation of functions and jobs.
London will cope – it still has lots of advantages – but there will be a hit to the UK economy and to tax revenues.
What is your take on Europe’s future? Is the Euro going to end up as a currency without a country?
The Eurozone economy is finally beginning to see a reasonable recovery, and so far the EU-27 have remained reasonably united in the face of Brexit.
However, there are serious political and economic risks, ranging from elections in France and perhaps Italy to developments in newer Member States like Poland and Hungary.
While the most likely scenario continues to be that the EU continues to “muddle through” one way or the other, the potential for a return to crisis is certainly there.
In my view, for example, the election of Marine Le Pen would be catastrophic for the EU, and potentially terminal for the euro. After the events of the last year – Brexit and Trump – it would be foolish for a humble economist to venture a forecast..
Thank you very much.
Jonathan Portes is Professor of Economics at the King’s College London. His research interests include labour markets, fiscal policy, social security and welfare.
His current book “50 Ideas You Really Need to Know: Capitalism” is just published by Quercus Books, 2017.