Brexit Bulletin: Is Anyone Ready?

(Bloomberg) -- Today in Brexit: Boris Johnson’s government is ramping up the no-deal rhetoric. But is it all a high-stakes bluff?

What’s Happening?

The weekend messaging was clear: Boris Johnson’s new team wants us to know it is serious about a no-deal Brexit.

Chancellor of the Exchequer Sajid Javid used a Sunday Telegraph article to announce he is stepping up Treasury preparations. No-deal supremo Michael Gove said government was now “working on the assumption” that talks with the European Union would flounder. An abrupt divorce “is now a very real prospect,” and the government machine “is being retooled” for the task, Gove wrote in the Sunday Times. 

Brexit Bulletin: Is Anyone Ready?

However, a study of contingency plans by the Confederation of British Industry, the country’s biggest business lobby group, warns that right now neither the EU nor the U.K. is ready for an Oct. 31 schism. “There are no areas of relevance to the economy where the U.K., EU and the business community are all prepared well enough for no deal,” the authors write. “No one is ready.”

Separately, an Institute for Government report published today says that Johnson must follow through on his pledge to “turbocharge” no-deal preparations. In that context, Sunday’s pronouncements from Javid and Gove were the first revving of the booster engines. Johnson should not assume U.K. businesses are prepared, the think tank says, and should note significant potential impacts on Northern Ireland before and after any no-deal divorce.

The IoG is also clear that the Brexit boil will not be lanced simply by leaving without a deal. The prime minister would inevitably face complex EU negotiations and parliamentary showdowns after Oct. 31, according to Joe Owen, Brexit director at the IoG. “All his political bandwidth would be spent on Brexit issues instead of the domestic agenda he wants to pursue.” 

Government ministers are talking tough, but do they mean what they say, and can they pull it off? The reality might not be as clear-cut as the rhetoric.

Today’s Must-Reads

  • Europe’s leaders have failed to anticipate the risks of an overnight UK exit, Wolfgang Munchau writes in the Financial Times. Will they stand firm with the deadline approaching and thousands of EU jobs at risk?
  • Boris Johnson is channelling the spirit of punk to push through Brexit — and it could work, says John Harris in the Guardian. 
  • Johnson’s adviser Dominic Cummings has warned government aides they’ll be sacked if they’re found leaking to the press, according to a “leak” to the Daily Telegraph.

Brexit in Brief

Jobs at Risk | PSA Group, the French carmaker that owns Vauxhall, will pull all production from Ellesmere Port and switch to a plant in mainland Europe if Brexit leaves the British factory unprofitable, the Financial Times reports. “I have to protect the company,” Chief Executive Officer Carlos Tavares said.

Naysayer | Scottish Conservative Leader Ruth Davidson used her regular column in the Scottish Mail on Sunday to say she’ll work with the new prime minister but won’t countenance leaving the EU without a deal. “My message is simple,” Davidson wrote. “Not on my watch.” Johnson visits Scotland today.

Corbyn ‘Ready’ | Labour Party leader Jeremy Corbyn said he’s ready for a general election at any time. “We oppose no deal, and people should have a final say on it,” Corbyn said on Sky News’s Sophy Ridge program on Sunday. “In the event of a no-deal Brexit, we’ll campaign to remain.”

Summer Homework | Corbyn’s Brexit spokesman Keir Starmer has held private talks with Tory ex-Chancellor Philip Hammond, according to the Observer. Starmer told the newspaper that cross-party moves to block a no-deal Brexit were accelerating, and would continue over the summer ahead.

Rates to Remain | The Bank of England’s latest interest rate decision comes on Thursday, with economists predicting no change to the current rate of 0.75%. A sharp growth slowdown, Brexit uncertainty and a shaky global backdrop have bolstered the case for keeping rates on hold. Meanwhile, the U.S. Federal Reserve is expected to cut rates on Wednesday.

Robust Market | Investment in residential property projects in the U.K. rose by more than 150% in 2018, according to a report by broker JLL. London led the charge with 2 billion euros invested, almost doubling from 2017. London is now the fourth-biggest European city for multifamily investment, behind Berlin, Copenhagen and Paris.

On the Markets | The threat of a sudden slump in the pound is growing, analysts say. Although it rose slightly last week when Johnson took office, sterling then fell below $1.24 by the end of the week. It traded at $1.2368 early this morning, with an April 2017 low of $1.251 now in view. 

Brexit Bulletin: Is Anyone Ready?

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