No Bespoke Brexit Deal?

Theresa May’s bespoke (“made to order”) Brexit deal may not happen with weeks to go in negotiations. The U.K. may have to choose between a Norway-style Brexit or a Canada-style Free Trade deal. In the Norway-style Brexit, the U.K. will remain in the single market and accept EU rules with little influence in shaping it. In the Canada-style free trade deal, it would please Brexiteers but British businesses will strongly oppose it.

Downing Street wants to do a modified Norwegian model. The idea is to have frictionless trade (for goods) and an open Irish border whilst satisfying the Brexiteers. Theresa May has to water down her previous insistence that with Brexit, the European Court of Justice will have no influence in the U.K. The reverse is the case with a closer relationship with Brussels after leaving the bloc.

What is the cost? Each of the government’s four Brexit scenarios, including a bespoke deal would leave Britain poorer and cost the taxpayers millions of pounds each week. Global Futures estimates the government’s preferred option – bespoke deal will cost about £40 billion per year. A summary table shows the following:

	Net Additional Borrowing in 2033/34 (£)	Cost per week in 2033/34 deflated to 2018 prices (£)
1. EEA (European Economic Area)	17b	262m
2. FTA	57b	877m
3. WTO	81b	1.25b
4. Bespoke Deal	40b	615m

                              Source: Global Futures

Already British households are more than £900 worse off after the vote to leave the EU (Governor, Bank of England).

What about trade? Does it matter? Over 43% of U.K. exports in goods and services are to other countries in the EU (about £240 billion) and 54% (£320 billion) of all U.K. imports is from Europe.

Does it matter to Malaysia? Yes, if you look at the free movement of goods and services in Europe via U.K. It may no longer be there with bespoke Brexit. In 2017 we exported RM9.65 billion to the U.K. and imported RM6.73 billion. Some of which may have been re-exported or re-imported with other European nations. EU (excluding U.K.) exported RM73.1 billion to Malaysia and imported RM85.6 billion from Malaysia. This second part may not be impacted by Brexit. But we need to be nimble to reduce impact of any form of Brexit, proceeding from March 2019.