On Tuesday, UK PM Theresa May will deliver her much-anticipated speech addressing Brexit. While May has refused to reveal her negotiating strategy before the triggering of Article 50 in March, Tuesday’s speech is likely to indicate her preference for a “hard Brexit”.
A “hard Brexit” would involve the UK withdrawing from the EU single market and customs union. While the country could then trade with the bloc under WTO rules, London will need to negotiate a free trade agreement with the EU to regain preferential trade access. These negotiations will likely address whether the UK lowers its corporate tax rates to below EU levels. May is likely to use the threat of transforming the country into an international tax haven to gain leverage over her European counterparts.
While the long-term implications of Brexit remain unclear, the short-term ones are less so. If the prime minister signals a preference for a “hard Brexit” on Tuesday, the pound sterling – which has already hit a 31-year low – is likely to devalue further.