Brexit Bulletin: Boiling Point

Brexit is 34 days away.

(Bloomberg) --

Today in Brexit: Tensions are boiling over and it’s affecting the chances of getting a deal.

What’s Happening? If Prime Minister Boris Johnson gets his way, five weeks from today will be the U.K.’s first day outside the European Union in almost half a century. Without an agreement with the bloc on the horizon and a no-deal crash-out looming large, the pressure is beginning to tell.

Brussels is losing faith. European officials are no longer convinced Johnson can get a deal, even if he wants one. Brexit Secretary Steve Barclay returns to Brussels today to meet the EU’s chief Brexit negotiator, Michel Barnier, but no one at the European Commission seriously thinks it’ll make much difference. Four U.K. idea papers on possible ways to manage the border between Northern Ireland and the Irish Republic — long the sticking point in Brexit — have been largely trashed by the European side. Much vaunted daily talks between the two sets of negotiators are barely happening.

The headlines tell the tale. MPs who don’t accept Brexit shouldn’t be surprised by the anger building against them, Johnson’s senior aide Dominic Cummings said, according to the Telegraph. Johnson’s senior allies have warned of mass riots if Brexit is thwarted, the Times reports. The Daily Express says that Johnson refuses to stop describing the Brexit extension law as a  “surrender” to Europe. Several papers report former Prime Minister John Major’s fears that Johnson will find a way round that law using a “piece of political chicanery that no one would forgive or forget.”

The EU still hopes Johnson will present more credible proposals after the Conservative Party conference next week. Although time is tight and leaders will refuse to turn next month’s summit into a negotiating session, there’s still a real appetite among the 27 remaining governments to keep all avenues open to a deal. Or at least to do as much a possible in order not to be blamed if there isn’t one.

But the tension doesn’t help. Across Europe, politicians and officials have been shocked by the heightened rhetoric coming from Johnson and his government, officials in Brussels said. They don’t like the inflammatory language and they worry about actions they see as undemocratic, such as the suspension of Parliament that was ruled unlawful on Tuesday. For the U.K. and EU to build a cooperative relationship in the years after Brexit, a certain amount of trust is needed. With trust in such short supply, getting a deal on Britain’s withdrawal just gets harder and harder.

Today’s Must-Reads

• The possibility of Jeremy Corbyn as U.K. prime minister has real-estate investors in a panic, Edward Robinson reports
• In case you missed it, here’s Bloomberg’s imagined account of the first 24-hours after a no-deal Brexit
• This week’s Economist says Brexit has infected British politics from top to bottom

Brexit in Brief

Changing Tack | Three unnamed U.K. cabinet ministers told The Sun newspaper they are preparing to push Johnson to reduce his demands over Brexit after the Tories’ annual conference in Manchester next week. They will insist that he abandon senior aide Dominic Cummings’s aggressive strategy and accept a last-minute offer from the EU.

Gone Backward | Medicine suppliers are less prepared for a no-deal Brexit now than they were in the run-up to the original deadline for leaving the EU, the government’s spending watchdog said. By Sept. 20, pharmaceutical companies surveyed by the Department for Health had sufficient stockpiles for 72% of medicine product lines, the National Audit Office found.

Currency Swaps | European corporate-bond issuers sold a record amount of sterling-denominated debt this month, but it’s not a vote of confidence in Brexit. Rather, they can use cross-currency basis swaps to borrow for less at home.

Not Ready | The average cost to a small business preparing for a no-deal Brexit is about 2,000 pounds ($2,470) — but only one in 10 of them have actually taken steps to get ready, according to a leading business lobby group. “Preparing for this outcome is coming at a high price,” said Mike Cherry, national chairman of the Federation of Small Businesses.

Feeling Fine | U.K. consumer confidence held up better than expected this month in the face of fresh political turmoil over Brexit, according to a survey published today. GfK said its key index, which hit levels in August that were last lower six years ago, rose by 2 points to minus 12 as households declared themselves modestly less pessimistic.

Everyone Out | Jaguar Land Rover plans to close its U.K. factories for a week in November to guard against disruption to supply chains from a possible no-deal Brexit, Chief Executive Officer Ralf Speth said.

Irish Misfortune | A no-deal Brexit could plunge Ireland into recession and necessitate an emergency budget early next year, according to a report by an Irish think tank cited in the Financial Times.

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To contact the editor responsible for this story: Anne Swardson at aswardson@bloomberg.net, Iain Rogers

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