Brexit Watch

Brexit remains one of the historic and seismic event of 60-year European Union (EU) history. Brexit is the term given for the prospective withdrawal of the United Kingdom from the European Union using the Article 50 process. This is now being keenly watched across the globe due to its far-reaching implications.

Brexit: Latest news and events

  • EU leaders have approved the guidelines for negotiations of future relations with the UK after Brexit. The text on trade, security, and other issues was agreed, clearing the way for the next phase of Brexit talks to get underway.
  • Thousands of people have marched through Leeds in protest against Britain leaving the European Union. Campaign groups in Leeds have organized the rally and are calling for a second referendum on Brexit.
  • The Cambridge Analytica scandal is now raising questions over the tactics used to try to influence voters in the Brexit vote. Cambridge Analytica’s London headquarters was searched by enforcement officials from the UK’s Information Commissioners Office, following claims that the firm collected information about millions of people without their consent, based on a 2014 quiz on Facebook. The firm has been accused of using the personal data of millions of Facebook users to sway the outcome of the UK Brexit referendum. Meanwhile, Cambridge Analytica denies any wrongdoing.
  • European Commission president Jean-Claude Juncker has warned that the UK will come to "regret" the decision to leave the EU.
  • A new research shows that a ‘no deal’ hard Brexit could cost the UK retail industry £7.8bn in extra tariffs. The UK’s food and drink industry will be hit with higher tariffs more than any other sector, with tariffs of up to 80% on imported goods.
  • The UK Government had announced that the job for printing the iconic blue passport will not go to Britain’s De La Rue but instead to Franco-Dutch firm Gemalto. This decision is facing a huge backlash from Brexiteers who branded the decision a national humiliation. There is now extensive campaign to make blue passports in the UK, despite it being £120m more expensive than the French company.
  • Carlos Tavares, head of Vauxhall has said lack of clarity over Brexit threatens the future of its Ellesmere Port operation. He said that uncertainty undermined Ellesmere Port's chances of getting more work after 2021.
  • Shadow Northern Ireland Secretary Owen Smith has broken ranks with the official Labour Party policy as to call for another Brexit referendum.
  • Australia wants to start negotiating a trade deal with the UK on day one of Brexit next year, as Trade Minister Steve Ciobo stated
  • According to the results of a new poll by YouGov and commissioned by LBC, Britons think Brexit is more important than keeping Northern Ireland in the United Kingdom.
  • GERMAN Chancellor Angela Merkel has been dealt a Brexit blow after it was estimated the UK’s exit from the EU next year could cost Germany up to €7 billion per year.
  • Paris will overtake London as a center for LCH’s clearing of a core euro-denominated market after Brexit.
  • New research says that post-Brexit roaming charges will cost business travelers to EU up to £778 per month. This will put British businesses, either large or small, at a disadvantage.
  • The Migration Advisory Committee (MAC) said businesses are concerned about their ability to recruit workers from the EU after Britain leaves. This is because many employers expressed the view that migrants from the European Economic Area (EEA) are more reliable and more willing to work for long and anti-social hours than those that are UK born.

Brexit: What is Happening in the  UK and EU?

  • The key bits of the new Brexit guidelines approved by EU are as follows
    • There is no legal certainty, including over the transition deal, until the whole agreement is ratified.
    • Last-minute wrangling by Spain has led to the inclusion of a reference to the EU's position on Gibraltar. It says that Spain and the UK have to reach a separate deal over it.
    • The EU's big offer is a close future relationship based on a free trade agreement with no tariffs on goods and a close partnership on security and defense, both of which the UK wants.
    • The UK's "red lines" will limit the closeness of the future relationship. A source  stated that  Brexit will cause severe economic consequences for both sides, which was tweaked to specify that the UK would probably be the worst  off.
    • What has been dubbed the "evolution clause" indicates that the EU will reconsider its offer to Britain if the UK government compromises on its red lines, such as by remaining in the customs union.
    • The EU fears competition from the UK and is demanding a "level playing field" between the two - including ways to prevent potential undercutting on tax, environmental and labor standards.
    • While not directly mentioning financial services, the EU says it will guard its financial stability.
  • There is no legal certainty, including over the transition deal, until the whole agreement is ratified.
  • Last-minute wrangling by Spain has led to the inclusion of a reference to the EU's position on Gibraltar. It says that Spain and the UK have to reach a separate deal over it.
  • The EU's big offer is a close future relationship based on a free trade agreement with no tariffs on goods and a close partnership on security and defense, both of which the UK wants.
  • The UK's "red lines" will limit the closeness of the future relationship. A source  stated that  Brexit will cause severe economic consequences for both sides, which was tweaked to specify that the UK would probably be the worst  off.
  • What has been dubbed the "evolution clause" indicates that the EU will reconsider its offer to Britain if the UK government compromises on its red lines, such as by remaining in the customs union.
  • The EU fears competition from the UK and is demanding a "level playing field" between the two - including ways to prevent potential undercutting on tax, environmental and labor standards.
  • While not directly mentioning financial services, the EU says it will guard its financial stability.
  • The UK will not regain control of the country's fishing waters on Brexit day, 29 March 2019. Instead, it will be subject to EU rules for 21 months until December 2020. The fishing industry and many coastal MPs are unhappy with this news. Protesters have thrown dead fish into the Thames outside Parliament as a sign of opposition to the Brexit transition deal.
  • U.K. Labour Party’s Brexit spokesman, Keir Starmer, said that they are seeking an amendment to key Brexit legislation to prevent Britain leaving the European Union without a deal, as former premier Tony Blair renewed his own call for a second referendum.
  • The talks aimed at reaching a deal on what will happen to the Irish border after Brexit will start in Brussels. The UK and EU agree there should be no hard border, but differences remain on how to achieve that goal. The upcoming negotiations will cover customs, food safety, animal health and the regulation of other goods.
  • EU brands post-Brexit UK a ‘risk to security’ in a bid to ban the UK from key GPS system. Galileo Network, due online in 2020, will deliver ultra-accurate encrypted GPS navigation data and has key military and financial uses. The UK, which is due to pay about 15 percent of its £2.3billion cost, wants to stay in the security system.
  • A political storm is brewing over the revelations by Observer that Vote Leave – fronted by Boris Johnson and Michael Gove – channeled money through another campaign to a company linked to the scandal-hit data miner Cambridge Analytica.

Impact on the Markets

 

  • With a  potential Labour government after May the 3rd, local elections in England, and Brexit uncertainty are hitting confidence in shares. The latest Bank of America Merrill Lynch investor poll rated UK equities as the world’s most unpopular asset class out of 22 groupings that include bonds, utilities, and energy, as well as the US, Eurozone, and Japanese equities.
  • After the UK and the EU reached an agreement for a 21-month transition period, GBP appreciated. Deutsche Bank has told clients that they are turning tactically bullish on the British Pound. Soc Gen also remained positive. However, Barclays warns that Pound Sterling’s current surge may not continue for the long-term.
  • The higher wage growth has solidified market expectations for a May Bank of England (BoE) rate hike. Bank of England is tipped to raise interest rates in May and February 2019. Higher interest rates will, in turn, may possibly boost the Pound, since they generally attract greater inflows of foreign capital drawn by the promise of higher returns.

Sources: bbc.com, independent.co.uk, bloomberg.com, express.co.uk, thesun.co.uk, www.smh.com.au, qz.com, ft.com, poundsterlinglive.com, theguardian.com

Brexit: Latest news and events

The UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill has now been formally introduced at Holyrood. This is the alternative Brexit bill by the Scottish government.
Former PM Tony Blair has urged European leaders to reform the EU so British people "change their mind" about Brexit. He believes that if "comprehensive" immigration reforms are offered, voters will realize their "genuine underlying grievances" can be addressed and Brexit can be averted.
Many English-language courts are popping up in the Netherlands, Germany, and Belgium, seizing opportunities from the UK's departure from the EU. These courts will offer companies the chance to settle cross-border disputes in English. This would be bad news for the UK's legal sector, which says it is worth £26bn to the economy.
Ex-prime minister Sir John Major has argued that MPs should be given a free vote on whether to accept or reject the final Brexit deal.
Labour leader Jeremy Corbyn has backed the UK being in a permanent customs union with the EU in a speech setting out his approach to Brexit.
In case of no-deal Brexit, the EU will no longer recognize UK-issued licenses after Brexit and could ban all drivers and vehicles without an alternative agreement. This is expected to trigger a wave of red tape for UK drivers and haulers and Britain may have to fall back on international treaties requiring new licenses and registrations.
A nationwide survey of all council leaders across the UK found 61% believed Brexit would have a negative or very negative impact on their regions. Council leaders believe Brexit will damage their local economies, putting them under greater pressure to push up council taxes and cut yet more services.

Brexit: What is Happening @ UK and EU

UK and EU seem to be on a collision course over residency rights. British Prime Minister Theresa May has said EU nationals arriving in the UK during the Brexit transition period will lose some rights. This is a clear dismissal of Brussel's insistence that EU nationals arriving in the UK during the two-year Brexit transition period should have the same residency rights as those already living in the country.
The EU's draft legal agreement has proposed a "common regulatory area" after Brexit on the island of Ireland - in effect keeping Northern Ireland in a customs union - if no other solution is found. However, British Prime Minister Theresa May has ruled out the return of physical infrastructure on the border between Northern Ireland and the Irish Republic after Brexit. Theresa May has said 80% of firms would face no new customs checks between Northern Ireland and the Irish Republic and others would be simplified. Meanwhile, the Irish government has said that UK's latest proposal for avoiding a "hard border" on the island of Ireland after Brexit is unlikely to be accepted by EU.
EU council president Donald Tusk has said all member states will accept the first draft of the Brexit withdrawal treaty. This includes EU institutions and the 27 member states that will remain in the union when Britain leaves.
UK manufacturers seem to be on course to outpace GDP growth according to EEF and BDO. The factory output is expected to rise by 2% this year as demand for British exports grows, beating the 1.5% GDP growth forecast for the wider economy.
Nearly 10 percent annual revenue gap is expected to be left by Britain in EU budget post-Brexit. EU faces a tough target to get budget agreed early, in next year. While biggest countries like Germany and France are ready to pay more to EU budget with conditions, the smaller net contributors remain adamant that budget must not grow.
Key market services like Credit rating agencies and trade repositories licensed in the European Union to be hard Brexit-ready by year end.

Impact on the Markets

In reaction to Theresa May’s detailed speech to set out the UK's position on upcoming Brexit negotiations and raising prospect of the EU and UK failing to reach a transitional deal in March, the British Pound edged lower against the Euro and treaded water against other major currencies. In February, the pound had rallied on foreign exchanges to its highest levels since the Brexit vote due to weaker Brexit and sinking dollar. Then it had fallen due to rising fears over inflation and higher interest rates. This volatility is expected to continue.
FTSE 100 has suffered biggest fall since Brexit vote as concerns grow over febrile global markets.
After President Donald Trump said the U.S. would impose a 25 percent tariff on steel imports and 10 percent on aluminum, there is now raising fears of a potential trade war.
The UK stock market is the most unpopular asset class in the world among big international investors, with confidence languishing at its lowest levels since the financial crisis. This is due to worries about Brexit and the weak outlook for corporate earnings.

Brexit: Latest news and events

  • Bank of England Governor Mark Carney has said that the UK economy is hampered by ‘Brexit effect’ in the short term. Carney said that despite the acceleration in global growth, the UK economy is now 1% smaller than the Bank predicted due to the impact of Brexit.
  • The Norwegian Prime Minister, Erna Solberg said that Britain should push for a "soft Brexit" and that close ties to the European Union (EU) are very important for the UK and the European economy.
  • The findings of the Guardian/ICM survey shows that Labour voters are becoming increasingly receptive to reconsidering Brexit, wherein 65% of Labour backers want the public to have the final say on leaving once negotiations are complete, compared with 19% who oppose the idea. Meanwhile, voters support the idea of holding a second EU referendum by a 16-point margin, according to the survey.
  • The Scottish government has said an EU Continuity Bill is likely to be introduced at Holyrood next month. It said the move was needed to prepare Scotland's laws for EU withdrawal if it is not possible to find agreement over the UK government's own Brexit bill.
  • According to FT, Brexit Secretary David Davis has reportedly complained to Theresa May about EU guidance stating the UK would become a "third country" in 2019 with no reference to a possible trade deal.
  • French President Emmanuel Macron has suggested the UK could get a special trade deal with the EU after Brexit. But he warned that Britain would not have full access to the single market without accepting its rules like freedom of movement across the EU, budget contributions and the jurisdiction of the European Court of Justice.

Brexit: What is happening @ UK and EU?

  • EU is seeking to tighten the conditions which will apply to the UK during the transitional period which the EU proposes will last up to 31 December 2020. The UK's freedom to determine its own rules on immigration, trade, and fishing in a transition period after Brexit may be further restricted, according to revised EU guidelines on a transition.
  • International Trade Secretary Liam Fox has said that the UK may join a multi-nation Pacific free trade zone after Brexit.
  • Tory MP Jacob Rees-Mogg has called for a fundamental change in ministers' tone on Brexit, accusing UK negotiators of being "cowed by the EU". Chancellor Philip Hammond, meanwhile, has said he hopes the UK and EU economies will only move "very modestly" apart after Brexit.
  • Head of Confederation of British Industry (CBI), Carolyn Fairbairn has said that it would be best if the UK would remain in a customs union with the E, citing that there was a "lack of clarity" surrounding ongoing talks about the future of UK-EU trade.
  • The European Council President Donald Tusk has suggested that the UK would be welcome to stay in the EU if it changed its mind about Brexit.

Impact on the Markets

  • The rate of UK interest rate rises over the next year will depend heavily on Britain’s Brexit negotiations with the EU, as per Bank of England governor Mark Carney.
  • Sterling hits $1.40 for the first time since Brexit vote due to the economy benefiting from an upswing in global growth. The UK currency also dined off the weakening US dollar and employment data pointing to a record number of people in work.
  • According to a forecast by the International Monetary Fund this week, the UK is set to grow at almost half the rate of the US in 2018 and lag behind every other G7 nation except Japan.
  • Shares in blue-chip companies with big overseas businesses have done much better than shares in UK-focused businesses since the Brexit vote. Shares in global businesses are up 33% since the June 2016 referendum, whereas shares in UK-focused businesses are only up 2%.

Brexit: Latest news and events

  • Thanks to the agreement on three key issues: Britain's Brexit "divorce" bill, the rights of EU citizens in the UK after Brexit, and the Irish border; the deadlock on talks between EU and UK was broken and phase 2 of the talks have started. This is said to be the ‘Brexit breakthrough’.
  • The Government is facing a High Court challenge over the legality of Article 50, which can possibly bring Brexit negotiations to a halt.
  • British passports issued after October 2019 will be restored to its iconic dark blue and gold instead of the burgundy model prescribed under EU membership.
  • The Court of Session in Edinburgh has said that a legal action can go ahead for establishing whether the UK can stop Brexit if British voters decide the final deal is unacceptable.
  • British officials fear that Spain will veto Theresa May's Brexit deal in case she refuses to negotiate a separate agreement to cover Gibraltar. 

Brexit: What is happening @ UK and EU?

  • UK is scheduled to depart from EU at 11 pm UK time on 29 March, 2019. But instead of going cold turkey, there would be a temporary “transition period” after the UK leaves the EU and before the final arrangements kick in. EU has now set a 21-month limit for this period, ending by 31 December 2020.
  • EU is bracing for Brexit impact by proposing a bill to bring the biggest investment firms in the euro area under the supervision of European Central Bank (ECB). The access criteria for companies outside the EU is also aimed to be toughened.
  • Political and economic uncertainty from Brexit continues to affect the UK housing market due to high inflation.

Impact on the Markets

  • Thanks to the news of Brexit breakthrough, Europe's stock markets are surging and the pound briefly topped $1.35. Europe's banking index also boomed. However, all these are expected to remain volatile for near future depending on positive/ negative Brexit news.
  • Due to Brexit boost, 100 new firms back London on Stock Exchange in 50% rise in a year. This shows that London will remain a global financial player post-Brexit.
  • British stocks and Eurozone equities cut down by funds due to Brexit uncertainties.
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