Britain Leaps Into Unknown With Split From EU at Critical Moment
A Brexit supporting placard rests against a statue of Winston Churchill on Parliament Square in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Britain Leaps Into Unknown With Split From EU at Critical Moment

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The U.K. completed its divorce from the European Union, leaving the bloc’s single market and customs regime more than four years after voting for Brexit and with the country gripped by a deepening crisis.

The end of the transition period at 11 p.m. in London on New Year’s Eve launched the U.K. on a new path on its own, free from EU laws, able to strike trade agreements around the world and to reshape its economy.

“This is an amazing moment for this country,” Prime Minister Boris Johnson said in his New Year’s message. “We have our freedom in our hands and it is up to us to make the most of it.”

Yet many areas -- including the critical financial services industry -- still need to be agreed to, while in the background the coronavirus pandemic is engulfing more people than ever and another lockdown is weighing on the nation.

Britain Leaps Into Unknown With Split From EU at Critical Moment

Much remains unknown about what that future will look like after Britain’s five decades in the bloc. Johnson wants to make the U.K. “a science superpower,” pioneering developments in biosciences, artificial intelligence, and battery and wind power technology to create millions of high-skilled jobs for the future.

The government’s immediate priority is to roll out vaccines and return life to some semblance of normality. In his message, Johnson talked of the “hard struggle” in coming months to fight Covid-19.

Johnson’s Choices

Then comes the task of making Brexit work, especially for the poorer northern areas of the country that voted for it with the most gusto, while trying to stifle Scottish calls for an independence vote.

Questions remain. How exactly will the U.K. choose to use its new-found independence from the EU, given the threat of tariffs from the bloc if Britain distorts fair conditions for businesses? Will London or Brussels look to rewrite the terms of the trade agreement, as the accord explicitly allows?

Will Johnson’s government be able to secure a agreement on financial services, a key part of the British economy? Or will the struggle with the pandemic -- and the devastation it is bringing to businesses and jobs -- blight his administration’s attempts to reform the economy after Brexit?

In the immediate term, practical challenges abound. Johnson’s government is braced for disruption at the U.K.-EU border in January due to companies not being ready to comply with new red tape.

Officials fear queuing trucks will be backed up for miles if businesses don’t have the right forms, creating chaos that could disrupt vital supplies of food, chemicals and medicines.

A new trade accord now governs commerce between Britain and the EU, avoiding tariffs and quotas on goods -- but adding extra bureaucracy for companies and significantly limiting the ability of businesses to offer services across the bloc.

Yet for Johnson, quitting the EU’s structures is a victory for British sovereignty, and the opportunity to “take back control” over lawmaking was always his main argument for Brexit.

Turmoil Over?

The premier has also argued that the finalization of the EU divorce will settle the question of Europe that has dominated British politics. The vote to leave four years ago has since plunged the government and financial markets into repeated bouts of turmoil, forced out two prime ministers, and seen the U.K.’s relationship with its nearest neighbors ripped up.

Even if the question of EU membership is settled, there is still plenty of room for argument over how close or distant the U.K. should be to its biggest trading partner. Over the months ahead, Johnson’s government has a more pressing emergency -- racing to roll out vaccines fast enough to roll back the spread of the coronavirus.

“We know that we have a hard struggle still ahead of us for weeks and months, because we face a new variant of the disease that requires a new vigilance,” Johnson said. “But as the sun rises tomorrow on 2021, we have the certainty of those vaccines, pioneered in a U.K. that is also free to do things differently, and if necessary better, than our friends in the EU.”

©2021 Bloomberg L.P.

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