Paperjam.lu

S&P released a new report on 30 May outlining potential post-Brexit opportunities for the UK.Picture credit: Dave McLear 

By leaving the EU, the UK is launching a project to meet the global challenges of the 21st century, the report stated.

“The vision will be for the UK to become an even more critical link in the global high-value supply chain spanning both goods and services”, said S&P analyst Paul Watters in a press release. “At the same time, immigration will become more regulated on a needs must basis.”

Demographically the UK, like most of Europe, is an aging country that has a tendency for consumption over investment. However, the UK is in a good place for this role as a post-modern industrial economy. According to the S&P report, the UK’s “prosperity is driven more by value-added services, technological research, and development and innovation rather than basic manufacturing.”

The UK also has the competitive advantages of “English as the global language of business, respect for property rights and the rule of law, a long history as a free trading nation and a world-class education system.”

Plan for no agreement

There is a risk of no agreement that goes along with the uncertainty over how the next two years will play out regarding political negotiations over Brexit with the EU. Because of this, corporate contingency planning will have to include the chance of the UK abruptly departing from the EU on 29 March 2019.

S&P expects this to create a struggle for consumption and investment which would lead the UK economic growth to fall to 1.2 percent in 2018, below the expected 1.5 percent for the EU.

“Our base-case view is that, gradually, a pathway to an orderly transition to a new comprehensive relationship with the EU should materialize, including a transition phase to provide for the final details to be agreed, ratified, and implemented,” S&P stated.

Meanwhile, S&P said, the UK economy should be able to form closer trading relations with growing non-EU economies.

“This vision of a free-trade economy, open to the world, will require an increased commitment to investment, and research and development, from public and private sectors to counter likely lower levels of foreign direct investment,” said Watters. “And where skill shortages exist, immigration rules need to ensure that companies have the ability to recruit the necessary employees from overseas.”

S&P is one of the world’s largest credit ratings agencies. Its reports are followed by major investors globally and its credit scores influence the cost of borrowing for companies and governments in the financial markets.