UK has to shift its focus
After months of havering, Prime Minister Theresa May recently announced that the United Kingdom plans to make a clean break from the European Union and not opt for “anything that leaves us half-in, half-out”. Such remarks mean Britain will completely abandon its EU membership and quit the single European market. However, a “clean break” from the EU is expected to have considerable consequences for the UK economy, given that it means the UK’s homegrown products will no longer enjoy the preferential treatment it received from the EU as a member, and enthusiasm for investing in the UK will be dampened. British enterprises’ attractiveness to foreign talents will also decline.
Such negative impacts on the UK economy will be longlasting. A recent International Monetary Fund report lowered its 2018 expectations for Britain’s economic growth by 0.3 percentage points to 1.4 percent and adjusted its long-term outlook to “negative”.
In a bid to salvage what she can, in her speech on Tuesday, May also said she will pursue a bold and ambitious trade deal with the bloc and hopes to preserve Britain’s membership of the European Customs Union. Nevertheless, the dissatisfaction among EU members toward the huge damage the UK’s leaving has done to the bloc’s cohesion means they may be unwilling to be so friendly toward the UK, and they may be reluctant to help reduce the negative impact of Brexit.
So the UK needs to shift its focus from the EU to the United States and China and try to strike trade accords with them to really make it a truly global trading country.
Against the backdrop of its now certain breakaway from the EU, the UK also needs to considerably lower its corporate income tax to sustain overseas enterprises’ continued investment enthusiasm. But such tax cuts are a double-edge sword that will either cause a higher fiscal deficit or prompt the British government to slash spending in other areas. At the same time, the lower tax rate policy is also expected to invite opposition from the EU.