Whilst the achievements of getting a UK-EU deal over the line should not be understated, there are several areas that have been left with more questions than answers. The financial services industry in particular faces many uncertainties.
The delay by the EU over a decision on equivalence has meant a significant loss of share trading in London, however a memorandum of understanding on financial services could be agreed by March. A decision on equivalence could take much longer, but the government is keen to see Brexit as an opportunity for the industry, with bold statements of a ‘Big Bang 2.0’ and deregulation to make Britain the ‘Singapore of Europe’.
The post-Brexit message has always been of ‘Global Britain’, and since 2016 it has been used to signal that the UK can look beyond Europe to becoming its own independent voice on the world stage. Whilst many accuse Britain of straining its international relationships and reputation, Boris Johnson’s government will see the opportunity to set out its stall and build bridges when it hosts the G7 Summit at Carbis Bay in Cornwall on June 11-13th.
Whilst it is clear that ‘we are not out of the woods yet’, the conversation around Covid-19 has begun to turn to recovery as vaccinations provide light at the end of the tunnel.
March 3rd will bring the Budget in which Chancellor Rishi Sunak will be faced with two significant questions: when to withdraw emergency support and when to start paying for it. The furlough scheme ends on April 30th and will likely now be wound down with reports that officials may instead look to incentivise employers to retain staff to stave off mass unemployment. Substantial rises in corporation tax or a wealth tax seem too soon, however, Sunak clearly hopes to pivot towards rebalancing the budget and talk of how to tackle the economic damage will only become more prominent throughout the year.
Whilst the government may hope for calm waters now that Brexit is over, there is a sense that the real constitutional crisis has just begun. Whilst Prime Minister Boris Johnson may claim that the last referendum on Scottish independence was a ‘once in a generation’ event, Brexit has changed the context and now Nicola Sturgeon is riding a wave of momentum with 20 consecutive polls showing majority support for independence.
This makes the elections on May 6th ever more important, with the devolved nations set to take to the polls at the same time as the local and mayoral elections. Polls suggest the SNP is on course for a landslide, and if they win a majority, it would be hard to deny the mandate or appetite for a second referendum on Scottish independence.
The final issue that will gain impetus throughout the year is the topic of climate change and sustainability. In the first two weeks of November (1st – 12th), Glasgow will host the United Nations Climate Change Conference (COP26) which will bring together heads of state, climate experts and campaigners to agree coordinated action to tackle climate change. The government has already stated out its intentions for a green recovery, with policies expected to cover issues from green finance to renewable energy. Momentum will continue to build throughout 2021, as proposals to be involved in COP26 are due soon.