A “soft Brexit” is seen as the most preferable option for businesses and people who backed “Remain” because it would allow Britain to keep close ties with the European Union and continue its commitment to the four freedoms, such as freedom of movement.
However, Dr. Nariman Behravesh, chief global economist at IHS Markit told Business Insider, ahead of the World Economic Forum meeting in Davos, Switzerland this week, that if nothing much changes, this could spark greater political risks.
“I think there are two aspects to potential Brexit risks,” said Dr. Behravesh to BI.
“The first one, once Article 50 is triggered, what are they going to do in negotiations and how will this benefit the UK. There will be a lot of to-ing and fro-ing and to be honest, a lot of businesses and markets are starting to ignore it completely.
“However, actually from two to three years from now, if [Brexiteers] feel nothing has changed or there are no prospects of big changes, it could become more and more contentious and political risks could become quite [heightened].”
The World Economic Forum starts in Davos, Switzerland on Tuesday. According to the WEF’s benchmark “Global Risks” report for 2017, the five biggest risks to doing business globally do not include Brexit, populism, or terrorism.
Dr. Behravesh pointed out to BI that the people who feel “left behind” are the ones giving rise to populist politics that got President-elect Donald Trump the most powerful position in the world, as well as Britain voting for a Brexit by a slim majority on June 23, last year.
Since then, there has been much speculation on when May will trigger Article 50 and therefore start the two-year negotiation period. March 2017 is the current target date but a Supreme Court case will rule in January 2017 whether she will have to get permission from parliament to do this. This could slow things down.
While May said she will not give a “running commentary” on how negotiations are going, she has made it clear in various speeches that her government is prioritising immigration restrictions. This would imply a “hard Brexit” — leaving the EU without access to the Single Market.
However, a “hard Brexit” would be a seismic shift in how Britain operates with Europe and that would mean major changes to immigration — the single biggest factor for a majority of Brexiteers voting to leave the EU.