#Lukáš Kovanda, Ph. D.

“It will help the Czech economy a lot”, says economist on new Brexit deal

28 December 2020

After nearly five years of negotiations, Britain and the European Union have reached an agreement on trade relations after Brexit. The announcement came on Christmas Eve, the traditional day when Czechs give each other presents. But was it a welcome gift for Czech businesses? I asked Lukáš Kovanda, the chief analyst at Trinity Bank, what he thinks of the Brexit deal.

“I think it is great news for the Czech Republic, as well as for other EU member states and Britain itself. After nearly five years of uncertainty, which was quite damaging for international trade in Europe as well as worldwide, this is good news. It will help the Czech economy a lot, because we are very dependent on exports and Britain is one of the key export partners of the Czech economy outside of our immediate neighbours.

“We have particularly strong trade relations with Germany, Poland and Slovakia. The United Kingdom then follows, intermittently shifting between the fourth and fifth largest export partner of the Czech Republic with France. It is good news and it will help our economy a lot to have this agreement.”

There were several haggling points between the two parties before the agreement was reached, the issue of fishing waters being perhaps the best known. Are there any key takeaways for Czech business from this deal and do you think that any sectors are likely to be more affected than others?

“You are right that it is quite premature now to assess the whole agreement. It is quite difficult to foresee what will come in the next months and years. It will be a challenging time and our exporters will certainly have to adapt to the new reality of Britain being outside the European Union. That said, it will be much easier with this agreement than without one.

“We should be aware that the EU Parliament or one of its member states’ national parliaments could make some provisions that would make it harder to pass the agreement. However, I think it is much more advantageous for both sides to have a deal rather than not.”

On that note of the deal having to be approved by EU member states, I will just mention that Czech Prime Minister Andrej Babiš said his country will do everything to get it passed.  As an economist, have you had any chance to observe how the deal has been welcomed by Czech business representatives?

“The deal was announced just on Christmas Eve, so there have not yet been many opportunities  to communicate with Czech businesses. However, I am sure that 99 percent of them will welcome this agreement, because after nearly five years of uncertainty this is a positive statement from their point of view.

“They were quite nervous before it was announced. They were expecting an agreement to come sooner. This deal has come a little bit late, but it is still good that it was reached. Had it come to no deal our exports would probably have shrunk by CZK 40 billion, so it is very helpful, especially in the challenging times we are in now, to have this deal.”

“Czech entrepreneurs and firms know that it will be more difficult for them to be successful in Britain after Brexit, even with this agreement. Nevertheless, for our car manufacturers, toy exporters and machinery producers it is very important to have zero tariffs and zero quotas, which is a major component of this deal.”

Lukáš Kovanda

Lukáš Kovanda, Ph.D., je český ekonom a autor ekonomické literatury. Působí jako hlavní ekonom Trinity Bank. Analyzuje a komentuje makroekonomická témata, investice i nové fenomény typu sdílené ekonomiky, kryptoměn či fintechu. Přednáší na Národohospodářské fakultě Vysoké školy ekonomické v Praze.
Je členem vědeckého grémia České bankovní asociace.

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