(CN) — The Great Divorce between the United Kingdom and the European Union has been messy and agonizing, and it could get even messier as the two sides struggle to come up with a long-term divorce settlement over such critical areas as trade, law, security, border controls and fishing boundaries.
At the end of January, the United Kingdom finally left the EU after more than three years of emotional debate over the pros and cons of Brexit. It was a political fight that split the U.K. and continues to cleave the nation.
As hard as the divorce was, a potentially messier phase has begun: The U.K. and the EU are in negotiations over establishing the terms of their relationship with the goal of signing a free trade agreement.
But the talks are not going well, raising the prospect the two sides will not resolve differences by a Dec. 31 deadline and may end up in a combative relationship for years to come as Brits squabble with Europeans over tariffs, food and environmental standards, whose court rulings are more valid, whether to share police information, who can and cannot fish in British waters, and so much else.
Despite interruptions in talks caused by the coronavirus pandemic, British Prime Minister Boris Johnson, a right-wing champion of Brexit, is pushing a go-it-alone approach and his government is rebuffing Europe's call to extend the U.K.'s transition out of the bloc for one or two more years and allow more time to craft a trade agreement beneficial to both sides.
“Extending would simply prolong negotiations, create even more uncertainty, leave us liable to pay more to the EU in future, and keep us bound by evolving EU laws at a time when we need to control our own affairs. In short, it is not in the UK's interest to extend,” said David Frost, the lead British negotiator, in April. The U.K.'s position has not changed since.
As it stands, without an extension of the transition or the signing of a trade agreement, the U.K. will no longer be bound by EU laws and rules on Jan. 1, 2021, and trade relations between Europe and Britain will fall under World Trade Organization rules.
This is called the no-deal scenario and it looks like an increasingly realistic, though many say improbable, scenario. Already, many U.K. businesses are preparing for a rockier relationship with Europe and the possibility that trade barriers will be erected.
The Aston University, in Birmingham, England released a study on Monday showing that many smaller U.K. exporters are diverting their trade away from the EU in anticipation of a collapse in Brexit talks and the imposition of tariffs by Europe.
It looked at 340,000 export transactions by 26,000 U.K. firms over a five-year period ending in 2018 and found many small firms are switching to new markets. They are moving about $13 billion of annual trade toward old British colonies in the Commonwealth, such as Australia and New Zealand, and to Russia, China, India and South Africa, countries with growing wealthy classes. To a lesser degree, more British exports are headed to rich countries like the United States, Japan and South Korea. It also found the exports of bigger companies are not decreasing to the EU.
“This evidence suggests that U.K. exporters are jumping before they're pushed: finding alternative markets worldwide for their products even before we know the outcome of the current U.K.-EU trade negotiations and any potential new barriers,” said Jun Du, an economist at the Aston Business School.
The study found industries at the most risk of facing tariffs in the EU are the most keen to find new markets. Those include suppliers of food and drink, chemicals, textiles and transport manufacturing, the study said.