Pantheon Macroeconomics - Has the Internal Market Bill killed off the chances of a trade deal with the E.U.?

News | Question of the Week, WC 7th September 2020
Has the Internal Market Bill killed off the chances of a trade deal with the E.U.?

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Question of the Week, WC 7th September 2020

Question of the week: Has the Internal Market Bill killed off the chances of a trade deal with the E.U.? 

A: We tend towards the view that the Internal Market Bill was proposed by the government as a symbolic gesture, designed for domestic political consumption.  The Bill would overwrite parts of the Withdrawal Agreement that refer to the border between Northern Ireland and Great Britain, designed to protect the single market and the Good Friday Agreement.  The government surely knew that the Bill would have little chance of passing into law, given that the House of Lords would attempt to block its passage and legal challenges would be mounted.  Instead, the government probably is aiming to portray some politicians and the courts as “enemies of the people” again, as in 2019 with the failed attempt to prorogue parliament; this theme seems to play well with some Conservative voters.  The government also probably hopes that the Bill can be used as a chip that can be given away in trade talks, which have continued despite the furore.  Frequent U-turns from the government this year on non-Brexit issues also suggest that it will back down if enough pressure is applied, even though it has a large and stable majority in the House of Commons.  So, despite the developments of the last week, we continue to see a mere 20% chance of a no-deal outcome, a 40% chance that a Free Trade Agreement is signed before December, and a 40% chance that the bulk of the trade talks are extended into next year.

Samuel Tombs

Chief U.K. Economist

Posted: 11th Sep 2020

Consistently Right

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