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reThe pound started the week weak, shedding nearly 1 percent against the euro and the dollar in early trading. However, this should only be the beginning of a painful correction for the British currency, for example Valentin Marinov, currency strategist at French commercial bank Credit Agricole. Other currency experts are already predicting an “ugly fall” for the currency.
“The pound ignored the Brexit news for weeks,” said Jordan Rochester, currency strategist at Japanese bank Nomura. In view of the statements made by the British negotiators during the last two days, this strategy no longer seems possible. Hedging as a hedge against significant price fluctuations has already become significantly more expensive in recent days.
Prime Minister Boris Johnson gave the EU an ultimatum for negotiations on Sunday night. “We need an agreement with our European friends by the time the European Council meets on October 15. If we don’t reach an agreement by then, I don’t see how we can get a free trade agreement, and both parties should accept it and move on, “he said.
Shortly before, the main British negotiator, David Frost, had told the “Mail on Sunday” that the country had nothing to fear from a no-deal Brexit. The country will not allow it to be made a “vassal state” of the EU.
According to information from the “Financial Times”, the British government is planning a “single market law” for the next few days that goes against the provisions of the exit agreement signed last autumn on relations with Northern Ireland. The Brexit dispute, which has been overshadowed by developments in the corona pandemic for weeks, has returned in full force.
Michel Barnier, the EU’s chief negotiator, will be in London from Tuesday for the next round of talks, scheduled as the penultimate meeting. He was “worried” about the latest events. “Everything that has been signed must be respected.”
Everyday life has hardly changed with Brexit
Britain left the EU at the end of January but will remain part of the EU internal market and customs union until the end of the year as part of a transition phase. So far, everyday life on the island has largely remained unchanged, but without a contract on future relationships, a sharp economic breakdown is likely in early 2021, including border controls, tariffs and other trade barriers.
Negotiations have not progressed for weeks. Issues related to state aid and access to UK waters for EU fishermen are particularly contentious.
“Our economists hope that the Brexit negotiations can conclude with a ‘reduced’ free trade agreement,” said Karen Reichgott Fishman, a strategist at US bank Goldman Sachs. But until there is more clarity, they would not invest in the pound. instead of advising against it.
Should a free trade agreement fail, analysts at JP Morgan recently quantified the negative effect on UK economic growth at 5.5 percentage points. Still, autumn and winter are likely to be tough for the UK economy.
The economic consequences of the pandemic have affected the island more strongly than most European countries. The government’s short-time work program will also expire in October, when unemployment is likely to rise significantly.
Meanwhile, observers are puzzled about the likelihood that the negotiations will fail. “What is still unclear to me is whether the government will really rush to do so or whether the saber rattling is trying to get the EU to make last-minute concessions,” said Anand Menon, professor of European politics at King’s College London and Director of the expert group “The United Kingdom in a changing Europe”.
Supply chains at risk
Even without the latest threatening scenario, many manufacturing companies are at the end of their patience. Last week, a dozen companies and trade associations urged the responsible ministers to hold an urgent meeting to discuss their to clarify the difficult situation again.
Fifteen weeks before the end of the year, countless questions remained open, from regulations on product labeling to finalizing the IT systems that will be used to control cross-border trade in the future. The continued operation of supply chains is at risk, warned representatives of logistics companies and the Road Haulage Association, the association of freight drivers.
However, the government is preparing for delays and waiting times at entry and exit. As announced last week, up to 29 large truck parking spaces will be built across the country in the coming weeks. No approval is required from affected municipalities or residents, even inland regions of the country will have large additional parking spaces according to plans.
