As Britain and the world come to terms with Brexit, there is one overhanging question surrounding the debate: what will the UK’s role on the international stage be now? Throughout its long history, the United Kingdom has taken various positions, whether it be the queen of the high seas or the great partners of the US. However, the EU Referendum result has called into question the country’s direction and what its role should be now outside the EU.
A Financial Services Powerhouse
With the UK seemingly failing to source a new specialisation to export, the country should continue to exploit its dominant financial services industry to help provide economic prosperity. The financial services industry is lucrative, adding nearly £117bn to the economy and paying £65bn in taxes. This is not without controversy, with the banking sector still deeply unpopular due to the 2008 financial crisis, which it is still blamed for.
The current UK banking sector faces heavy regulation, and some major banks are still government owned. By removing the shackles of regulation and allowing the financial services industry to grow again, Britain could help create a new boom and encourage further growth in the economy. This could be done through removing the bank levy, which costs UK banks over £3.5bn annually and scrapping EU regulations, such as the bankers’ bonus cap. It remains to be seen, however, if the people of Britain would accept to reward what many see as a toxic sector.
Old Friends Are The Best
Amidst an onslaught of criticism from European partners, the UK could take full advantage of its “special relationship” with the US. With Britain now having to negotiate its trade deals, it could focus all its attention on achieving a large, widespread agreement to boost the nation’s economy. To do this, the UK would likely have to open up new sectors, such as healthcare, to the world’s largest economy.
By strengthening the current friendship between the two countries, the UK could firmly position itself as the US’s partners, allowing further cooperation. They may find further economic cooperation difficult, however, while President Obama remains in charge, with him reiterating that the UK is at the back of the queue regarding a fresh trade deal. Prime Minister May will have to hope that the incoming US president delivers a different message.
Throughout the EU Referendum campaign, there was much talk surrounding Britain rejoining the “rest of the world.” This was to indicate that, by leaving the EU, Britain would have the opportunity to strike new trade deals with emerging markets around the world. This certainly seems a viable option. Despite there now being warm Sino-British relations, China only makes up 6% of UK exports, less than the Swiss.
Furthermore, India only totals around 1.7% of exports, with Japan being even less. Such pitiful trade figures present an opportunity for the UK to obtain new trade deals, which will allow the country to increase exports and growth. By improving relations with emerging market nations, the UK will help present itself as a trade powerhouse, staving off any negative effects brought on by Brexit. As the UK prepares for life outside the EU, the “rest of the world” may be throwing the country a lifeline.
The Low-Tax Haven
Only weeks after the people of Britain decided to leave the EU, then-Chancellor George Osborne announced plans to cut the UK corporation tax rate to below 15%, the lowest of any major economy. By doing so, Osborne introduced the idea of Britain becoming a low-tax economy, open to overseas investment and trade.
The new Chancellor, Phillip Hammond, could decide to continue this mantra and introduce fresh tax cuts to incentivise new business into the UK. To do this, he would to announce further cuts to corporation tax or possibly relax the non-dom rules. By doing this, Britain can attract business from around the world that may have been put off by the Brexit vote.
The Unwanted Scenario
Instead of venturing off to new and exciting lands after the Brexit vote, the UK may see a steady declining path, possibly becoming the “sick man of Europe” once again. It can be argued that this steady decline has been going on for years now. The country’s share of the world GDP has been shrinking annually and currently sits at below 2.4%.
Although it is currently the sixth largest economy in the world, it could drop to the tenth position by 2030. And as the UK leaves the EU, many are also expecting a steady decline of the nation’s power. Is that famous British influence on the world coming to an end?
It has been over three months since Britain left the EU and one cannot help but feel that nothing has changed. The sky did not fall, the economy has bumbled along, and civility has continued. Soon, however, the government must decide what path to take the UK on. It will be faced with a tough choice, deciding which direction the country should head on while staving off any impending decline.
They could concentrate on what they know, helping build the economy by, as mentioned before, expanding the financial markets sector or lowering taxes. The country could extend its relationship with the US, or even offer a hand of economic friendship to the emerging markets. Only time will tell which direction Britain will go on.