Britain has entered a new era. Four and a half years after a referendum to break from the European Union, Brexit was finally concluded in December.

After years of stalled talks to avoid an abrupt rupture, the British government and the EU reached a last-minute agreement on future trade on December 24.

Fortunately, these important changes for Europe are likely to have a limited impact on the Canadian economy.

Trade agreement with the European Union

The United Kingdom officially left the EU trading bloc on January 31, 2020, although a trade agreement had not yet been signed. Fortunately, the two parties agreed to extend the talks until December 31, 2020.

Some British sectors, such as finance and construction, will have more limited access to the European continent and its public markets and will face more bureaucracy when they want to operate in the 27 nations of the European Union.

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Additionally, the border between Ireland and Northern Ireland will remain fluid, forcing customs controls between Northern Ireland and the British mainland—another complication for British companies.

Limited impact on Canada

The vote in favour of Brexit took the world by surprise. The day after the June 23, 2016 referendum, the British pound depreciated drastically against international currencies, including the Canadian dollar. The value of the loonie against the pound sterling has since remained around C$ 1.70.

Following the referendum, economists expected Brexit to have a limited impact on the Canadian economy because trade with Britain is relatively small and concentrated in certain industries. It seemed likely a bilateral agreement could resolve issues without too much damage to the economy.

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The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union was negotiated and is now in force. The terms of this transatlantic pact will continue between Canada and the United Kingdom on an interim basis until a new bilateral agreement is agreed upon. This new, more focused agreement could be even more beneficial to Canadian exporters than CETA.

What it means for entrepreneurs

• As a medium-sized open economy, Canada depends on strong international trade. The vote in favour of Brexit in 2016 was part of a protectionist trend that has grown since.
• The agreement between the United Kingdom and the European Union assuages many of the concerns associated with a hard Brexit. While both economies will be negatively impacted in the short- and long-term, the December 24 agreement means the break-up will have more limited effects than the worst-case scenarios feared in 2016.
• Trade between the United Kingdom and Canada will follow the CETA model. This agreement, which eliminates tariffs on 98% of products exported to the UK, will remain in place until a new Canada-British pact is signed.