759 treaties to negotiate with 168 countries. The burden of the Brexit is here to stay

Brexit will be long and will have a negative and persistent impact on the British economy.

In a recent article from the Financial Times it is said that after the Brexit, after the U.K. will have left the European Union, in 2019, there will be a large number of treaties between the U.K. and other countries in the worlds that will become obsolete. These treaties that will have to be negotiated again are those between the EU and other countries. Being outside EU these treaties cannot apply anymore to the U.K.

The article says that there are 759 readies with 168 countries that has to be renegotiated. That’s enormous. These treaties are related to trade, to agriculture, to fisheries but also on the authorization of U.K. planes to land in the US.

Theresa May thinks that this period can be smoothed as it is the interest of all to continue and to renew current treaties with U.K. replacing EU. That’s naive and far from being realistic. Others brexiters suggest to come back to treaties U.K. had before its EU admission. That’s absurd. Others countries can be tempted to have new treaties. All this will be complicated and time consuming. It takes between five to ten years to negotiate a trade agreement.

The point is that probably the easiest part of the Brexit will be the negotiation with Brussels as all the resources will be focused on it. After the Brexit you have to imagine a giant matrix with 759 lines and 168 columns. We cannot anticipate that all the negotiations will go at the same speed and we cannot expect that resources will be equally distributed on every treaty at the same time.
This means that we have to expect a persistent negative shock on the U.K. economy as rules will change at different speeds in every part of the economy. This will have an impact on potential growth as UK will be perceived as a source of uncertainty for trade, foreign direct investment and many other topics.

Hard time is coming for the U.K.

Philippe Waechter – Chief economist – Natexis Asset Management