Phillip Hammond, Chancellor of the Exchequer, has announced in an interview with German newspaper Welt am Sonntag that the UK would seek economic alternatives if no deal could be reached with the EU over the UK’s future membership of the single market. While Mr Hammond emphasised in the interview that he was optimistic a deal could be done and that the UK would “remain in the mainstream of European economic and social thinking”, the EU’s refusal to allow the UK access to the single market would not bring economic damage to the UK in the long run:
“If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term.” “In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do”. “The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.”
It is widely thought that this change of business model could bring lower corporate taxation rates as well as reduced regulatory requirements for the City of London (much like the Singaporean business model). Singapore abides by World Trade Organisation and ASEAN (the Association of Southeast Asian Nations) trade rules, but is subject to relatively low regulation. If this approach is intended, turning a large G7 economy with a robust social model into a city state economy will bring significant challenges ahead. Scottish First Minister Nicola Sturgeon said it appeared Brexit would mean a “low-tax, deregulated race to the bottom”, with workers’ rights and environmental protections threatened.
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