The newly joined policy maker Jonathan Haskel in his maiden speech after joining the monetary policy committee said that the chilling effect on Britain’s economy will last longer than expected. Speaking at Birmingham University, he warned that the Brexit uncertainty is unlikely to end soon and he also said that the investments in UK businesses have also reduced after the referendum of the country agreed to, and most of the firms have put off spending plans as they are taking a wait and watch approach.
There are mainly two reasons behind Haskel making this comment. The deal that Theresa May has proposed which the Members of Parliament have to accept does not specify any Withdrawal Agreement, and so the investors are not sure of what the future holds in terms of the relationship with the country and the European Union. Haskel spoke about it in length and said, “For business, the question of whether that is a customs union or free trade area is vital since that gives more of a steer as to whether there will be relatively frictionless trade with EU or not. This has to be decided so that negotiators can get started and firms can, in turn, make investment plans. The Bank of England’s forecast’s show that Britain will enjoy less trade and output growth in 15 years’ time than if it remained in the EU.”
He further reasoned that the possibility of an increase in investment in the coming few years is less due to which the growth and output will be less, and thus the chances of economy bouncing back look bleak.
The other reason for Haksel prognosis is because he feels that if the deal gets through and the MP’s approve it the transition is drafted to be 21 months, but it is unlikely that it will be completed in that timeframe. He says, “It is conceivable that like Article 50, the UK will require more time than the 21 months. Thus, it is possible there might be another round of negotiating and attendant uncertainty.”
Many companies in the country are wary of investments and have cut back in the year 2018 which is the longest since the UK decided to break from the EU. In the long-run, they will need to know if there is a free-trade agreement or a customized one to know how that will impact them. Due to these uncertainties, the companies are likely to put off investments until things are clear.