Mendoza School of Business

Brexit steals some of Britain’s Christmas cheer

Published: December 15, 2017 / Author: Associated Press

Finance Professor Jeffrey Bergstrand

VILLEVENARD, France (AP) — Frederic Berthelot has eight hectares (20 acres) of vines on the slopes above this tiny village in France’s Champagne region, his vineyard distinguishable from others in the area by the tiny rose bushes planted at the base of each vine.

The roses are a bellwether for parasites. But as Britain and the European Union crawl through a protracted divorce, Berthelot has more to worry about than bugs. His century-old business decided to start exporting to Britain for the first time just as the country voted to leave the EU. The pound immediately plunged, making imported wine more expensive in Britain. Eighteen months later, Berthelot and his British trading partner are still waiting to find out what rules will govern future trade.

“We are in a period of transition, of uncertainty,” he said. “There are worries.”

While British and EU officials last week trumpeted their success in reaching a deal on preliminary Brexit issues such as the rights of citizens in each other’s territories and the status of Britain’s physical border with the Republic of Ireland, the future relationship between the two sides remains in limbo. Even if European leaders authorize the start of trade talks during a meeting this week in Brussels, it may be another year before any concrete decisions are reached.

That is likely to take a toll on economic growth —and jobs — because businesses will delay investment as they wait to see what the final deal looks like, said Jeffrey Bergstrand, an expert on international trade at the University of Notre Dame in Indiana.

“It creates uncertainty about the direction of economic activity,” he said. “The uncertainty creates waiting, and waiting creates a negative impact.”

Read the entire story on the Associated Press website.