‘10 years for Britain to strike final Brexit deal’

It could take the UK up to 10 years to strike a final agreement to leave the EU, a leading economist has said.
‘10 years for Britain to strike final Brexit deal’

Philip O’Sullivan, chief economist at Investec Ireland, said working out all the details of the divorce accord that will govern the UK’s new relationship with the EU after it leaves the bloc will go on for years.

Speaking in a personal capacity and not on behalf of the bank, Mr O’Sullivan said it took tiny Greenland years to reach an agreement before it finally ceded from the EU in the 1980s.

The process for the British state will be much more complicated, and its leaving will likely take much longer, he said.

Economic and Social Research Institute associate research professor Edgar Morgenroth is a leading adviser to the Government on the implications of Brexit for the economy and people here.

He said that the UK and EU may strike an interim standstill arrangement before striking a final agreement.

He said that triggering Article 50, which determines the start of the departure process, would not take years.

However, reaching a definitive agreement to cover all parts of the UK’s new relationship with the EU covering trade and people could take several years.

Mr Morgenroth said the bill over the amounts Britain may owe various EU programmes would have to be agreed first and could spark long-running disputes.

Reaching an interim agreement over trade could be struck “relatively quickly but the final outcome could take several years”, he said.

He likened the initial negotiations to a divorce agreement that could be reached quickly, but a final agreement may be more like a custody battle that could last for years.

Meanwhile, Investec Ireland has forecast that sterling will trade close to current levels against the euro through 2017.

Sterling has plunged from 76p ahead of the June 23 referendum to trade yesterday at 85.5 pence. The sharp appreciation of the euro is widely seen as harming Irish exporters selling across the Irish Sea.

Over the last year, the euro has gained dramatically, having soared from a low of 69.9 pence last November.

The Investec forecasts see the currency reaching 86p in the fourth quarter next year, as modest growth in the eurozone helps support the euro.

Against the dollar, sterling yesterday fell below $1.30 for the first time in almost a month as investors prepared for data that will give further clues on the state of the UK economy in the wake of the decision to quit the EU.

Sterling dropped for a fifth day and ceded ground to all of its 16 major peers amid speculation the reports, due next week, will show an economy reeling from the Brexit vote.

Sterling is suffering its longest losing streak since May after the Bank of England cut interest rates for the first time since 2009 last week.

Sterling was depressed further after Bank of England policymaker Ian McCafferty warned in The Times newspaper further rate reductions and quantitative easing may be required.

That is all the more surprising because as recently as January, he was voting to raise rates.

“Investors are gradually coming to realise that the Bank of England is going to cut this year. That’s going to be negative for the currency,” said Charles St-Arnaud, a senior economist at Nomura International.

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