Brexit Is Coming... but the Uncertainty Will Continue

The United Kingdom will officially leave the European Union (EU) on Friday, January 31, at 11 p.m. London time. This saga, which began with the June 23, 2016 referendum, will not end then, however. The divorce will become official, but from an economic standpoint, little will have really changed on February 1, given that the transition period is expected to last until the end of 2020. This transition period will be used to negotiate the future economic ties between the EU and the United Kingdom, among other things. The effects of Brexit on the economy therefore depend on these negotiations. In the short term, the as-yet-unknown conclusion of these negotiations may fuel uncertainty. In the medium term, the closer the relationship between the two economies remains, the more moderate the negative effects of Brexit will be.