Die Hard Brits Prepare for Brexit Collapse – E24

Time is running out for Brexit negotiations between the UK and the EU. This week he is set for a new round in London, but there is little indication of a breakthrough soon.

The transitional agreement with the EU expires at the end of the year and without a new agreement there is the risk, among other things, of chaos at the borders and higher tariffs.

Prime Minister Boris Johnson declares before the negotiations that he still has the possibility of a deal open, but that he prefers to abandon the negotiations rather than commit to key issues such as fisheries and state aid. It also sets the deadline for reaching an agreement on October 15.

“If we cannot agree within that time, then I don’t see that there is a free trade agreement between us, and then both parties should accept it and move on,” he says.

The EU has previously stated that an agreement must be in force by the end of October for it to be implemented by the end of the year. The chances of success have not increased after the failed negotiations in August.

Preparing new legislation

At the same time, the prime minister is preparing new legislation that could void the transition agreement if negotiations collapse, according to the Financial Times.

The new law will primarily ensure smooth trade between England, Wales, Scotland and Northern Ireland.

On Monday, the president of the EU Commission, Ursula von der Leyen, commented that she is confident that the British will abide by the transitional agreement.

“I am confident that the UK government will implement the agreement, which is a compromise under international law and a prerequisite for any future partnerships,” he wrote.

The chair added that the agreement is important for the protection of peace and stability between Ireland and Northern Ireland and the integrity of the internal market.

Significant weakening of the pound

The British pound weakened significantly after Johnson’s move. On Monday afternoon, a pound cost 11.74 kroner, about ten pounds less than on Friday at the same time.

DNB Markets currency analyst Magne Østnor is bullish on the situation.

– After so many rounds of negotiation, it is not surprising that there is some noise in the period in which you have to promote your negotiating starting points, but in general we think it will be an agreement, he tells E24.

– But with so little time left, there will probably be a lot of noise in the future too, he adds.

Pressure after corona manipulation

Britain is among the countries hardest hit by the crown, shutting down the partnership much later than many others. Almost 42,000 have died and the prime minister is under great pressure after the handling.

– He also needs to show some wins, so we have decided that we think it will be a deal, but time is so short that there probably won’t be a big global deal, Østnor says.

When the transition agreement expires at the end of the year, it will resort to the WHO rules for anything that has not been explicitly agreed. This will be the least favorable outcome for both parties, Østnor believes.

– Since we basically believe in a limited deal, it should be positive for the pound in the long term, says Østnor.

He explains that the pound is likely trading at a Brexit premium now, which means the currency is weaker (cheaper) due to the risk surrounding Brexit.

– Even if the result is not what everyone expects, you will reduce the uncertainty by knowing what you have to deal with.

Consequences for the Norwegian economy

However, DNB Markets believes that the krone will strengthen in the future, which means that the pound will still cost us Norwegians less.

For November, the brokerage believes that a pound will cost 11.57 kroner, down from the current price of 11.74. So the forecast indicates that the pound will stay around this level until next summer.

The Brexit negotiations are somewhat overshadowed by the crown pandemic and therefore Østnor believes that the development will have a somewhat limited effect on the market.

Therefore, the new complications of Brexit this time around are probably not enough to trigger market turbulence that brings with it a crown exchange rate and market sentiment at the same time.

Regarding the consequences for the Norwegian economy in general, a violation could in the first instance particularly affect Norwegian food exports in the form of chaos at border controls, but in the long term Østnor does not believe in big ripple effects.

“Before the crown, we thought investment in the UK, which means a lot to British trading partners, will rebound when the uncertainty surrounding Brexit ends, but has now been drowned out by the effect of the virus outbreak,” he says .

The UK is one of Norway’s most important trading partners and our largest single market for exports. Last year, we sold products worth around NOK 180 billion to the British. This trade is largely regulated through the EEA agreement, which also ends when the British leave the EU.

Norway is negotiating separately with the British, but Trade and Industry Minister Iselin Nybø (V) is preparing the business community for the new trade barriers.

– We must be open to changes. Although we have high ambitions for a deal with the UK, it will be demanding to achieve something that is equivalent to the EEA, she told E24 after the failure of the August negotiations between the EU and the UK.

The new round of negotiations begins on Tuesday.

Boris Johnson’s statement Here you can see the Financial Times case