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$53Bln Brexit Divorce Bill: Big EU Agencies Moving Could Cause 'Magnetic Effect'

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UK Prime Minister Theresa May has offered to pay £40 billion (US$53bln) for the Brexit divorce bill. According to the Independent, the sum was agreed with members of May’s cabinet after a meeting on Monday, November 20. The proposal is expected to break a deadlock in the Brexit negotiations.

The Brexit talks between the UK and the EU, which started on June 19, are expected to wrap up before the end of March 2019. Sputnik discussed the Brexit deal with Vera Troeger, Professor of Quantitative Political Economy at the University of Warwick.

Professor Troeger said that public opinion is "divided" and that leave voters will be "outraged" as many Remainers "will understand that this is clearly necessary."

Prof. Vera Troeger: It looks like £40 billion pounds has been offered as a clear signal that UK government understands they cannot get a transitional or trade deal without settling the divorce bill first.

They understand the UK government is constrained by the voters and that is how far they can go, the £40 billion might just cut it – something relatively close will be the outcome.

British Secretary of State for Exiting the European Union David Davis speaks to the ECR Deal or No Deal conference in Central Hall Westminster, London, Tuesday Nov. 21, 2017. - Sputnik International
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Sputnik: Is the UK likely to see more European institutions moving out of Britain?

Prof. Vera Troeger: All official European agencies will have to move after Brexit. There is a lot of demand from the other 27 members to host these agencies. This is one of the biggest losses for the UK.

Sputnik: What will be the consequences?

None of the agencies currently moving are very big, but it could have a magnetic effect with banks and medical firms moving to where these agencies are based.

Sputnik: Will UK households be £800 worse off?

Prof. Vera Troeger: The £800 [US$1059] loss to households will be caused by the increase in inflation rising from 0% before Brexit to 3 percent. Poor households will suffer; they will have a much less money as real wages have been falling.

If the Center for Economic Performance predictions are true, there will be a fall in trade, a fall in productivity, and an increase in unemployment. The squeezed middle income households will be much worse off in three to five years' time.

Sputnik: What about the economic outlook following Brext in general?

Euro and pound banknotes are seen in front of BREXIT letters in this picture illustration taken April 28, 2017. - Sputnik International
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Prof. Vera Troeger: [The economy] will differ from the EU. What we really need to see if it really leaves the European Economic Area, we will see is a fall in trade. There is no way that the potential new trade deals that Liam Fox announced will come close to the loss of trade from increased customs with the EU.

It’s been predicted by the treasury that the UK could potentially see a fall in GDP by 10 percent.

Theresa May new strategy might alleviate negative consequences, but from what we see right now we will have to see if trade deals can be struck with countries outside the EU. Canada or India has much more interest striking trade deals with the EU. Because that.s the much larger market.

The US is the dictator here. The US will dictate all the conditions of the trade deal and that won't be favorable to the UK. The growth path will be very different pre-Brexit.

Sputnik: Is the PM’s job at stake if the UK economy continues in this way?

Prof. Vera Troeger: I think she has been very shaky. There are always fights between Remainers and Leavers, and there is now a mutiny of really important MPs. I think she will probably fall over Brexit and that will be way before bad economic consequences will be palpable in the UK.

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