Brexit Bulletin: Unhappy New Year
(Bloomberg) -- Today in Brexit: As politicians bicker in Westminster, the ever-increasing uncertainty is doing real damage to the U.K. economy.
It could be an unhappy new year for the U.K. economy as the escalating Brexit chaos leaves multiple warning lights flashing red.
As Bloomberg’s Anurag Kotoky reports, house prices are weakening. Meanwhile, retailers are already complaining about an abysmal Christmas period, businesses are holding back investment and the swooning pound is at risk of fueling faster inflation. The confusion is also derailing the Bank of England's plans for interest-rate hikes, with markets paring bets on any more increases in the benchmark next year.
The doom and gloom across the economy was further highlighted on Tuesday, as the British Chambers of Commerce forecast that even if a deal is eventually reached, business investment will grow by just 0.1 percent in 2019. Meanwhile, the Royal Institution of Chartered Surveyors said it sees house-price growth coming to a standstill next year, and the overall volume of sales dropping.
The stream of bad news highlights the fact that delays and uncertainty in Westminster have real — and damaging — consequences for the economy. Worse could be to come, especially if the nation hits its March 29 departure deadline without a deal and crashes out of the bloc with no transition period.
Prime Minister Theresa May has given herself another four weeks to save her deal, announcing to Parliament on Monday that it will finally be put to a vote in the week of Jan. 14. In the meantime, she’ll continue seeking concessions from the European Union — even as the bloc yesterday said it didn’t foresee any more meetings with the U.K.
Meanwhile, she told the House of Commons, the government's emergency committee, dubbed Cobra, is already meeting every two weeks to prepare for a no-deal, and that she’ll step up the pace next month. The cabinet will also discuss its plans for such an outcome at a meeting today, with the Times reporting that ministers are set to vote on three options for how the country prepares for the countdown.
The timetable for voting on the deal wasn’t good enough for Labour’s Jeremy Corbyn, who, after much to-ing and fro-ing, proposed a motion of no-confidence in the prime minister. Such a vote would be highly unlikely to pass, with even hard-line Conservative Brexiteers indicating they’d back May. In any case, the prime minister’s office said it won’t allow time for the motion and that time would only be made available for a no-confidence vote in her entire government. A loss would trigger a general election.
Pro-EU Tories were her most vocal critics on Monday, with former Education Secretary Justine Greening accusing the prime minister of creating a political cul-de-sac. Treasury Committee chair Nicky Morgan said that businesses won’t understand why lawmakers are going on holiday for Christmas without taking a vote on the deal.
May was also asked if it would be wiser to seek an extension of the Brexit deadline. Her answer — saying in the present tense that she doesn’t think it’s “right” to delay Brexit — risks prompting more questions about her intentions, questions that may grow after the Telegraph reported on Tuesday that the government has taken secret legal advice on extending talks with the EU.
- The Hampshire town of Basingstoke voted 52 percent to 48 percent to leave the European Union in 2016, bang in line with the U.K. as a whole. Still, when Jack Sidders and Lucca De Paoli spent a day there earlier this month, they picked up signs of a small yet palpable shift toward reversing the original decision.
- In a firm signal that financial firms are pushing ahead with preparations for a no-deal Brexit, Deutsche Bank and 16 other lenders recently held the first known dry run of a service that could see trillions of dollars of derivatives move from London to Frankfurt, Will Hadfield, Viren Vaghela and Steven Arons report.
- After months of internal arguments, May’s government is on the point of agreeing on its post-Brexit immigration policy. Preference will be given to higher earners and people from favored nations, Robert Hutton and Kitty Donaldson report.
Brexit in Brief
No Mini Deals | The EU will rule out doing mini deals with the U.K. to ease the chaos of Britain crashing out without a divorce agreement, and will instead take unilateral steps to protect its interests, Bloomberg’s Ian Wishart reports.
Brexit Advice | Private bankers at Credit Suisse have advised clients to consider moving assets out of the U.K. due to the lack of clarity around Brexit, the Financial Times reported on Tuesday.
Student Moan | Chancellor of the Exchequer Philip Hammond faces a £12 billion ($15 billion) hole in the public finances after a change to the way student loans are accounted for. The change is enough to all but wipe out Hammond’s fiscal headroom, designed to provide a cushion in the event of a disruptive Brexit.
Brady Hunch | May was on the brink of a no-confidence vote for weeks before it was triggered last week, and news of the leadership challenge was probably leaked by one of the prime minister’s own team, Graham Brady, who oversaw the process, told Parliament’s magazine on Monday.
Clark the Herald | May’s Brexit deal is “still the best way” for the U.K. to leave the EU, Business Secretary Greg Clark told Bloomberg TV on Monday.
On the Markets | Currency strategists are starting to doubt that the U.K. will exit the EU in March, with the market instead focusing on a potential extension to the Article 50 deadline and an eventual deal or second referendum, Bloomberg’s Charlotte Ryan reports.
Want to keep up with Brexit?
©2018 Bloomberg L.P.