Page 10 - ISQ January 2021

INVESTMENT STRATEGY QUARTERLY

initially wanted an 80% reduction in the value of the fish caught by be adversely impacted, especially through the impact of school
EU trawlers in UK waters, but ultimately settled for a mere 25% cut, closures.
and phased in over a five-and-a-half-year period, a much shorter
period than that which the EU originally bargained for. Once over, the In Europe, any adverse impact associated with Brexit is likely
UK will fully control access to its waters, but any exclusion will result to be much more muted and concentrated more in those coun-
in compensation for losses either through tariffs on fish (or other tries with strong trading links to the UK, or geographic proximity.
goods) or through the prevention of UK trawlers fishing in EU waters. Indeed, the EU has moved swiftly to negate any long-term
Dispute resolution, needless to say, will likely take years of negotia- negative consequences announcing, with great fanfare, a bilat-
tion to work through. eral investment treaty with China. This latest pivot away from
decades of interdependence with the US, whilst celebrated
More generally, the deal covers a wide range of issues, from law in Beijing will likely be poorly received in Washington DC.
enforcement to transportation. Tariffs and/or quotas will not be The US is thought likely to need European support if it is to strong-
imposed immediately upon goods moving between the UK and arm China into some sort of acquiescence.
EU, maintaining the existing arrangement. However, by leaving
the EU customs union checks and other procedures will be In conclusion, notwithstanding the adverse impact that COVID-19
required, adding to disruption and delay at the border. is wreaking in both the UK and Europe, the Brexit deal should help
reinforce the belief that 2021 might be a year of two halves, with a
In terms of individual travel, visitors to the EU planning on strong economic recovery evolving as the year progresses.
staying for more than 90 days in a 180 day period, will require a
visa. European Health Insurance Cards (EHIC) will remain valid
until expiry. Both sides have agreed to cooperate regarding inter- KEY TAKEAWAYS:
national mobile phone roaming charges, but there is nothing
stopping UK travellers from being charged by providers for using • A Brexit deal has been agreed and now ratified by both
phones in the EU, and vice versa. the UK parliament and by EU authorities. A disorderly
no-deal departure, in the midst of the pandemic, has
Notably, the deal does not cover financial services. The issue of been avoided.
“equivalence”, relating to UK rules governing financial services • Financial market reaction to confirmation that a deal
as roughly equivalent to those in the EU, would make it easier had, at last, been struck was muted.
for UK financial firms doing business abroad to continue to do
so. The European Commission is seeking additional clarification • By leaving the EU customs union checks and other
from the UK before reaching a decision on this matter. procedures will be required, adding to disruption and
delay at the border.
• Visitors to the EU planning on staying for more than
“ 90 days in a 180 day period, will require a visa. Euro-
Notably, the deal does not cover
pean Health Insurance Cards (EHIC) will remain valid
financial services. ” until expiry.

• The deal does not cover financial services. Negotia-
tions around “equivalence” continue.
TURNING TO THE ECONOMIC IMPACT • In Europe, any adverse impact associated with Brexit

Following agreement on Brexit, the UK economy had been expected is likely to be much more muted and concentrated
to deliver real GDP growth of around 1.0% on the quarter. How- more in those countries with strong trading links to
ever, the impact of the third UK lockdown will muddy the water. the UK, or geographic proximity.
Given that the latest lockdown will remain in place until at least 22 • The Brexit deal should help reinforce the belief that
February, UK real GDP is now thought likely to contract by around 2021 might be a year of two halves.
3.5% points over Q1.
Whilst not as severe as the impact of the first lockdown (factories
and construction sites will remain open and many service sector
employees can now work from home), the level of GDP will still

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