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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

28 Oct 2016

Hard BREXIT Vs soft BREXIT

Having completed my introductory post regarding Brexit and trying hard not to let it degenerate into a rant..The first question this blog is going to look at is:

 'What are the choices? Hard or Soft?'

So the first point to make is this: Will there be a choice?' and you have to say that it is in itself a question worthy of it's own discussion.
Whether Europe will be open to a 'negotiated' exit or not is difficult to gauge because each member state may have a different stance, which may show us which other states might have their eye on leaving too. But taken as a united body, the noises coming out of Brussels indicate that the UK will have to quit altogether (A 'hard' exit). It is in the interests of the EU to imply at least that there will be no negotiation, as the first step of...well...the negotiation.

I imagine that the other member states will be interested in keeping trade links intact, they won't want to cut the UK off as the UK buys a lot of stuff from member states. Of course, if the EU doesn't negotiate as a whole, then the UK would be free to negotiate individually with each nation separately - which is really not what they want either. I would assume there are measures already in place to stop member states negotiating deals that the EU would disapprove of, but clever lawyers would no doubt be looking for loopholes and looking to circumvent the rules.

So let's assume that there will be something to negotiate...and get back to the 'Hard or Soft issue'.
In a nutshell then, a Hard exit would be to ditch any EU rulings and trade internationally through the World Trade Organisation. No single market access, no interference in UK immigration or indeed any other area of trading or law-making. Your basic 'back to square one' approach.
The Soft option however is more like a EU membership in all but name kind of approach where there will be freedom of movement of goods, people, capital and services pretty much like it is now. I guess the major difference will be in the law-making department, certainly the UK would no longer be subject to the rulings of the European Court of Justice.
The likelihood is that there will be a 'soft' exit where all parties can trade relatively easily - this will suit most parties involved in the discussions.

There remains though, some huge questions around free movement of people - which the BREXIT voters will be keen to point out was a major player in the NO vote. Also, we are being shown how hard-line the EU can be with it's attitude towards Canada's request to be a trade partner. It's difficult to call at this time, it's going to depend on how the big characters in the EU want to play it. We are definitely in 'make it up as you go along' territory, no-one has done this before, and the default position will be 'Hard' exit if the negotiations come up short. However, I can't help feeling there will be some compromise especially with the suspicion that Nissan have been assured access to the single market, following on from similar investment promises from Honda earlier in the year.

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