Brexit Bulletin: The Cliff Edge is Back

Days to Brexit Deadline: 45

(Bloomberg) --

What’s Happening? Boris Johnson has dramatically revived the threat of a traumatic break from the European Union.

Britain’s newly empowered prime minister plans to enshrine in law that a post-Brexit transition period must not extend past the end of December 2020, just 11 months after exiting the EU on Jan. 31. If the U.K. is unable to reach a trade deal with the EU by then, it will default to trading on basic World Trade Organization terms.

Faced with the prospect of what would look awfully like a hard Brexit, the pound erased almost all the gains it had made since Thursday’s general election. Domestically-focused stocks fell 1%.

Why do it? First and foremost, it’s a sign of political intent. Johnson won his majority, in part, by pledging to get Brexit done. He explicitly ruled out any extension in his manifesto. The decision is still reversible: There is nothing to stop him from changing the law again. He is, after all, the man who said he’d rather die in a ditch than delay Brexit — and then delayed anyway.

Downing Street hopes that a tight deadline will focus minds in Brussels. EU officials are already cautioning that the 11-month timetable is short to reach a wide-ranging trade deal. The City of London’s policy chief has warned that services shouldn’t be sacrificed for a trade deal that only covers goods.

Johnson may have disappointed those who had hoped that his 80-seat majority might allow him to pursue a softer Brexit, one that would see the U.K. hew closer to EU rules in return for greater access to the single market. But this prime minister has been consistent on at least one thing: Brexit is an an opportunity to diverge from the rest of Europe.

What’s changed is that he now has a realistic shot of turning that into a reality.

Today’s Must-Reads

• Boris Johnson won his mandate at the ballot box. His Brexit strategy is not winning friends in the global currencies market, Bloomberg's Charlotte Ryan reports.
• Will the U.K. really turn into Singapore-on-Thames after Brexit? There’s little pressure for deregulation among British banks, RBS Chairman Howard Davies writes in the Guardian.
• The BBC is always fighting to retain its editorial independence, but the aftermath of this year’s election feels different — and more of a threat to its future, writes the corporation’s media editor Amol Rajan.

Brexit in Brief

The Survey Says | Age remains the biggest dividing line in British politics but Labour support among the young weakened between 2017 and 2019, according to a 40,000-strong YouGov survey carried out in the aftermath of last week’s general election. The survey also revealed that 33% of Leave-supporting Labour voters in 2017 switched allegiance to the Tories this time around, and the Conservatives also became the dominant parties with low and unskilled workers. The Times also has a full write-up of the findings.

Job Slowdown | Job vacancies fell below 800,000 for the first time in two years and wages grew at their slowest annual pace since 2018, the Office for National Statistics said Tuesday. Employment rose marginally, leaving the jobless rate unchanged. It’s the latest sign of nervousness in the U.K. labor market, though the Treasury did manage to emphasize the positive.

Natural Woman | Barry Gardiner, Labour’s trade spokesman, told the Bloomberg Westminster podcast he thinks the party’s next leader should be a woman and suggested she should be from the Midlands or Northern England. That rules out Brexit spokesman Keir Starmer and foreign affairs spokeswoman Emily Thornberry, who both represent constituencies in London. “I think it is natural that it should be a woman,” Gardiner said.

Second Referendum | No, not that one. Scottish First Minister Nicola Sturgeon reiterated her plan to demand the right to hold another independence referendum. “This is a watershed moment for Scotland,” Sturgeon told lawmakers in Edinburgh on Tuesday. “So this week I will take the next steps to secure Scotland’s right to choose.” She plans to submit a so-called Section 30 request for the transfer of power with the aim of holding a referendum in 2020. 

Global Britain | Boris Johnson will not attend the World Economic Forum in Davos next year, nor will any of his ministers, a U.K. official said. Johnson is now branding his administration as “the people’s government,” an image that might be undermined by the sight of him or his team brushing shoulders with the global elite at a Swiss ski resort. The annual Alpine get-together is being held from Jan. 21-24, wrapping up just a week before the scheduled date of Brexit.

Want to keep up with Brexit?

You can follow us @Brexit on Twitter, and listen to Bloomberg Westminster every weekday.

To contact the editor responsible for this story: Adam Blenford at ablenford@bloomberg.net, Caitlin Morrison

©2019 Bloomberg L.P.