When Theresa May resigned as the prime minister of Great Britain, it was always obvious that Boris Johnson will take over. With his shock of tousled yellow hair, Johnson may have to move fast and way beyond histrionics if he has to find a solution to the intractable BREXIT problem. Broadly, Johnson has already articulated that the people of Britain have 3 options in front of them. Which option they select and how they handle the transition will determine the future of UK and its pivotal position in the global financial system.
Call fresh elections
This would be a political situation to an economic problem. Nothing much would change on the ground. David Cameron had opened the Pandora’s Box by calling for a referendum. With the referendum clearly voting in favor of BREXIT, UK really does not have too many options other than listening to the mandate of the people! Irrespective of whether the Tories return to power or Labor gets a chance, BREXIT will still have to be abided by. That is; unless of course, the people of UK themselves are willing to do a rethink. Boris Johnson has been a strong votary of BREXIT and in him UK has the best chance of finding a solution to the BREXIT issue. People may not be really keen on another election or another referendum so these options may be more about postponing the solution than attacking the problem. For now, this surely looks suspect!
Go for no-deal BREXIT
When he laid out the options, Johnson underlined that he would not let the problem of BREXIT fester beyond the 31st of October. In fact, Johnson even affirmed that he was willing for a no-deal BREXIT. However, such a no-deal would be easier said than done. The UK still relies on the EU region for most of its trade and once the preferential system goes away, then it could be a big hit on its growth. In fact, the Bank of England has already estimated that a no-deal BREXIT could lead to a short term compression in GDP by 7-8%. As a $3 trillion economy, that could have a huge impact on the UK economy, jobs situation and the rest of the world. Notwithstanding all the bluster and high talk, UK is just not prepared for such a drastic solution.
Stitch a BREXIT deal quickly
This is the most likely and also the most sensible option for Britain. In the past, UK had been demanding too much and the EU was holding back too much. As the deadline approaches, it is time to sit across the table. EU would realize that it has a lot to gain by having access to the highly matured and globalized London markets. None of the EU markets are even close to that. UK continues to be a key interlocutor for the EU’s relationship with the US. In a volatile world, that could be the key. A smart deal with some compromises is the best bet! ©