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Time is not on the UK’s side in these negotiations: The latest ONS annual Pink Book on the UK’s balance of payments shows a further deterioration of the current account to 6% of GDP (£114 billion) in 2016. The traded goods deficit was only partially offset by a massive surplus on services– mainly financial. It is this financial surplus that is so clearly at risk from an inadequate transition, but any impact on goods exports will underline the UK’s precarious position as they only cover 70% of our imports.
So the UK is becoming ever more reliant on the kindness of strangers- in BoE Governor Carney’s deft phrase. This acute vulnerability is only likely to be exacerbated by the debates on exactly what transition means, and how long it might last.
In the next few weeks, an agreement must be found on the divorce arrangements, or the cliff edge is clearly in sight. But if history is any guide, the strangers who are kindly funding our huge excess of imports are likely to panic well before we go over the cliff. The consequences of such a currency panic will bring Britain’s electors face-to-face with grim reality. Brexit may well not happen at all.
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