In the European Parliament in Strasbourg, a small British flag is standing on the desk of a member of Parliament. The parliament speaker's podium and the large EU flag above it can be seen in the background.

Brexit – "After they leave is when the negotiations will really start"

It's now final, right? In 2016, the UK voted to leave the EU. Now, three-and-a-half years, two prime ministers and one European election later, the divorce papers have been signed, which means Great Britain will exit the European Union on January 31. To find out what comes next, we spoke with our Europe expert, Christian Kastrop.

Foto Katharina Gnath
Dr. Katharina Gnath
Senior Project Manager

All's well that ends well? Many observers are glad that the endless tug-of-war over the UK's departure is finally a thing of the past. Is the "Brexit drama" now really history?

Christian Kastrop: On the contrary. In some respects, it's only just beginning. Initially, however, nothing will change for the EU and UK as of January 31. We'll be in a transition phase: students and tourists can continue to fly to Cambridge and London without difficulty. Goods will be conveyed between Calais and Dover without customs duties being imposed.

But London and Brussels really need to have the next deadlines written in their calendars in red: In order to avoid a "hard" Brexit, the British government wants to negotiate a new free trade agreement by December 31, 2020. If the talks require more time, then the UK has to request an extension by July 1, 2020. Yet Boris Johnson has already made it clear that he wants to avoid that scenario no matter what. Which means the threat of Brexit happening without an agreement or clear ground rules for the business community is anything but over.

What's more, the "divorce" has taken roughly three years, so why should the new relationship's status be resolved in just a few months? As the new president of the European Commission, Ursula von der Leyen, recently said very clearly, a fair deal must be struck, and the two sides' positions – including their views on Ireland – are still far apart. The coming negotiations will therefore be crucial for the shape our relationship with the UK ultimately takes.

Do people really need to worry about how or even if these legal details are cleared up?

Naturally it won't be the end of the world. But people should indeed be concerned, since there's quite a bit at stake for businesses and, as a result, employees. A free trade agreement will have to set out how the EU and the UK deal with customs duties, security standards and health regulations.

This, in turn, could impact production processes. If goods become expensive, consumers pay more. Or even worse: Higher tariffs could make it impossible for companies to cover their costs and they might have to lay off employees. That applies not only to end products, but also to entire value chains.

For example, before a Land Rover rolls off the assembly line at a British production site, countless parts have to be delivered, or they have to be processed or tested at sites outside the UK. As our analysis shows, that could also affect Germany. Global production chains don't stop at national borders. Having no borders is a major advantage for the EU. Brexit will make exports and imports more expensive. Production chains will adjust gradually but completely – and, in most cases, that will probably be to the detriment of the UK.

A hard Brexit would also hit Europe hard, as our study last year showed. Conversely, China and the US could benefit.

In our forecasts, we expect annual declines in income in the UK of some €57 billion – the highest amount across the EU – should there be a hard Brexit. At just under €10 billion, Germany would also be among the biggest losers in such a scenario. The German areas most severely affected would be export-oriented regions in the country's south, but also the state of North Rhine–Westphalia.

By "getting Brexit done," Boris Johnson has fulfilled one of his key campaign promises. Will the British now be able to come together again?

I actually fear that the country could become even more polarized. Brexit didn't win the election. Rather, the country's first-past-the-post system is what gave the Tories a hefty majority in the House of Commons. Johnson didn't strike a particularly conciliatory note during the election campaign and many disappointed Remainers could now use that to generate political capital. In Scotland, calls for independence are again getting louder, in Northern Ireland more and more people are saying they prefer having closer ties to Dublin than to London. Johnson won the election, but he could lose parts of the kingdom as a result of Brexit.

The interview was conducted by Benjamin Stappenbeck.