With Britain scheduled to leave the EU on March 29th, 2019, the realisation of Brexit is now less than a year away. Whether you see this as good or bad news, there’s no doubt that the UK has a huge amount of work to do if it is to maintain viable access to the single market and seek out lucrative trade arrangements with other countries.
With the latter point in mind, the UK government may be tempted to prioritise the cultivation of deals with the so-called BRIC nations. This acronym refers to the emerging economies of Brazil, Russia, India and China, which have experienced exponential growth since the turn of the century and are poised to become the world’s dominant suppliers of manufactured goods and services by the year 2050.
With this in mind, it appears as though Brexit offers a unique opportunity to pursue lucrative trade deals with these independent nations. This may be a little more complicated than anticipated.
A New World Order – Opportunity or Competition for the UK?
There is no doubt that the rise of the BRICs bloc is indicative of a new world order, and one that has its origins in the Great Recession. Make no mistake; the global financial crisis triggered a seismic power shift and one that destabilised traditional economic powerhouses while empowering emerging nations.
BRIC members are certainly performing well, as together they encompass more than 25% of the world’s land area and 40% of the global population. They also boast a combined gross domestic product (GDP) of $18.5trn, equipping them with the natural resources, manpower and finances to thrive on the world stage.
From a UK perspective, having the potential to tap into these economies post-Brexit is something to be celebrated. However, we should not forget that the UK is established as one of the economic powerhouses that the BRICs bloc is expected to supersede over time, and this arguably pits Britain in direct competition with nations that it aspires to treat as future trade partners.
While trade deals can still be sought, the UK would certainly not enter any negotiations in a dominant position. Similarly, the UK has also seen its projected economic growth reduced in recent times, having been overtaken by France and replace as the world’s fifth largest economy, partially as a result of the nation’s proposed withdrawal from a single market that is home to around 500m customers.
There are also questions surrounding the value that the UK would bring to the BRICs nations, with Britain reliant on financial services for around 79% of its exports. While the government may look to sell these services as part of any future negotiations, Brexit still has the potential to decimate the service industry in the UK while resource-rich nations like India and Russia will continue to offer tangible value in the form of goods, commodities and manufacturing services.
So, while northern locations such as Hull emerge as key players in the lucrative energy sector, it is hard to determine what the UK will be able to bring to the table when negotiating with the BRIC bloc.
The Last Word
At first glance, the notion of trading freely with independent BRIC nations is extremely appealing, and it seems like precisely the type of opportunity that Brexit was designed to empower.
With an ailing economy that is reliant on the retention of lucrative financial services, however, the UK may struggle to negotiate a competitive deal with nations such as Russia and China. Not only this, but these countries are also in a position to compete aggressively with the UK in the export market, which could theoretically drive further economic contraction post-Brexit.
In the worst case scenario, these countries may also look to claim some of the UK’s financial services market share post-Brexit, which in turn means that they would be more inclined to compete with Britain rather than extend beneficial trade arrangements.
This post appeared first on The Market Mogul.
