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January 28, 2021
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No Deal Brexit – Consequences for Romania

No Deal Breaxit – this is what Boris Johnson, the British PM, announced this week, telling the British people to prepare themselves for the worst case scenario.

The official communication is that the negotiations stuck in the fishing clauses of the deal. Though important for the UK, fishing is not something to overthrow a huge deal such as Brexit. It seems that the will of those who want a hard Brexit won this time. Both UK leaders and the EU ones prepare the population for a no-deal result after 3 years of negotiations.

Experts say that UK will have more to lose than the EU countries from a no-deal Brexit. Let’s have a look at where the situation’s at from the Romanian point of view.

What are the consequences of a no-deal Brexit for the Romanian economy and for the Romanian people?

The situation looks bad enough wherever you’re looking at it from, UK or Romanian side. Still, UK has to lose more in relation with all the remaining EU countries. Romanian economy will suffer, but the British one will suffer more.

According to the international law, if no deal is agreed until December 31, on January 1st the WTO rules will apply for the relationship between UK and EU, including border controls and economic tariffs.

According to an assessment by Oxford Economics cited by Deutsche Welle into the economic implications of Brexit, EU exports to the UK will be subject to an average 3.1% tariffs and 1.4% “nontariff barriers.” Besides, there will be a 3.3% tariffs on goods going into the EU, meaning expensive pricing and with a direct consequence over the intention of the EU consumers to buy the British goods. Moreover, cars and agricultural goods will be subject to 10% more and dairy products to even 36% more. It seems that the British goods we were used to see on the shelves or in the stores will no longer be available or, if available, will no longer be attractive.

But the UK will suffer the most in this case as well: 80% of the UK food is imported from the EU countries. The European exporters, including the Romanian ones, will find it harder to sell their products to the UK, as there will be additional tariffs and also different standards to be reached.

The textile manufacturers will be also affected and, as we mentioned in a previous post, the bankruptcy of the UK based fashion retailers already affects the Romanian factories. Still, a no-deal Brexit will affect 12,000 jobs in Romanian textile factories and 130,000 in all the EU countries.

The British investments in Romania will also suffer, as the barriers between the two countries will be physical this time and the border control will definitely impact the time spent during the transport of goods.

Above that, all the British investors will have to reconsider their presence in Romania and in the EU countries, as their business model will have to adapt to the new circumstances. More than 5,500 British capital firms were registered in Romania in 2020 and the value of the share capital of more than EUR 1.5 B.

More, a part of those 650,000 Romanians who applied for residence in UK will reconsider their presence in the kingdom along the way. The reality might get worse than it is at the moment and the EU countries could look more appealing to the Romanians and all the other nations working in UK. Romanians form the second largest expat community in the UK after Poles, but the situation could change.

The tourism will also be impacted by a no-deal Brexit and “Visa for the UK” will become mandatory in certain circumstances. It seems that in the beginning the EU citizens will be able to travel without visa, if the period of staying is shorter than 90 days, but no one knows what will really happen.

Is there any chance to avoid a no-deal Brexit?

At this time we see both the EU and the UK leaders preparing the general public for the worse, meaning they already know there are no reasonable chances for a deal. Only a miracle may save the situation.

What is to come? The UK will become a country such as Turkey for the EU, in terms of economic relations. In doesn’t mean that the British firms won’t be able to conduct business with the European companies, but it would be more difficult than it used to be.

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