Brexit could be delayed until late 2019 with UK government departments not ready yet
The Sunday Times with the story. Reuters reporting 14 Aug 2016
City sources cited as having been privately briefed by UK govt ministers
Brexit govt departments not ready/fully staffed
50 could be invoked later than currently thought as outlined by PM May
and intl trade minister Liam Fox both of whom had pointed to early 2017
for pressing the trigger
elections in France (May) and Germany ( Sept) could also push back the timing says the report
As I mentioned in my previous post re
the late fall in GBP on Friday ( albeit amidst general USD demand
but with most GBP pairs closing on session lows) it's not unreasonable
to suggest that reports of these latest comments were circulating
already in advance of publication.
The words "City sources having been privately briefed" offer a bit of a clue.lol
the pound to remain on the back foot though, even if some of this is
already in the market, as both Haldane's comments and this report mean
more, and prolonged, uncertainty.
Large speculators raised net bearish wagers on the British currency to
the most in Commodity Futures Trading Commission data going back to
1992, Bloomberg's Kevin Buckland and Narayanan Somasundaram report.
out already today show weakness in the London house market this month.
Properties are staying on the market for longer even after sellers cut
Still to come this week: inflation, retail sales, unemployment
and budget data.
Farmers are OK ... (full story)
Merkel, Hollande and Renzi meet tomorrow to discuss post-Brexit threats to EU
The three EU leaders will hold a second set of talks tomorrow (Monday)
leaders of Germany, France and Italy will meet tomorrow to discuss how
to keep the European project together in the second set of talks between
the premiers of the Eurozone's three largest economies since Britain's
Italy's Renzi hosts Merkel and Hollande on an island
off the coast of Naples ahead of September's EU summit called to discuss
reverberations from the Brexit vote.
Officials in Brussels and
Berlin fear the June 23 vote could lead to a referendum in the
Netherlands - a founding member of the union - on whether to also leave
Noting that the aim was to prepare for the groundwork for the forthcoming Bratislava summit a French source says:
"Monday aims to show the unity of Europe's three biggest countries, but not to create a specific club"
three leaders differ over how to boost economic growth - which slowed
across the 28-nation bloc in the second quarter and stagnated in France
and Italy - and cut unemployment.
supports Renzi's push for expansionary measures and against austerity,
Germany is likely to oppose any undermining of Europe's deficit and the
debt constraints that Italy and France have struggled to comply with.
is eager for greater European consolidation in the wake of Brexit, but
Merkel is more concerned about preserving the integrity of the eventual
UK PM May under more pressure to trigger Article 50 and start Brexit process
UK PM Theresa May is under mounting pressure to start Brexit talks 21 Aug
Friday Adam reported that Bloomberg were carrying a story that May was
poised to invoke Article 50 in April ahead of French and German
elections. Now Bloomberg have elaborated on their header here.
news sent the pound tumbling before recovering coming as it did after
reports last week-end that the City had been told that May could wait
until 2018, a story I carried here and one that provoked a rally in pound pairs.
Iain Duncan Smith, a prominent Leave campaigner and ex-govt minister
under Cameron, has added to the pressure from EU leaders and called on
May to begin formal negotiation as soon as possible saying she should
start the process "early" in 2017.
"Waiting for forthcoming elections to take place in Germany and France
would be "another attempt to turn this referendum result into a
too long membership of the EU sapped our sense of self-worth and our
self-confidence. Now we have the chance to believe in Britain again
"Let us leave as soon as possible, so that we can get on and make the most of our new found independence."
timing of firing the starting gun for the Brexit process, and thus the
start of establishing a clearer picture where the UK stands in the
aftermath, has been a major cause of the GBP fragility. Pulling the
trigger ahead of the French and German elections might help our
cause although that's debatable but there's little doubt that May has
one eye on the UK's own election in 2020 and she'll want the Brexit
process to be done and dusted by then.
Expect further GBP volatility as more comments/conjecture on Article 50 hit the headlines.
With consumer spending resilient, there will be hopes that the
short-term economic outlook will be better than expected, especially if
global growth improves. There is, however, an important risk of
political paralysis with the UK government potentially not in a position
to invoke Article 50 until late 2017. There is, therefore, the risk of
chronic uncertainty, which will continue to undermine investment and the
underlying economic performance.
Former Prime Minister Cameron never intended of course to lose the
referendum vote and may not have seriously considered the consequences
of a leave vote, but the timing of the June referendum has had a
particularly negative impact given the political calendar.
The UK parliament has an extended summer break and European
politicians are also in the middle of the holiday season. This prevents
any serious political negotiations, adding to political uncertainty.
At least there is a new Prime Minister in place, which should allow
negotiations to start during the autumn, but the full Brexit negotiation
team is still not in place and progress will inevitably be slow.
The opposition Labour Party is still in the middle of a leadership
election and there is also the distraction of calls for a second
referendum to reverse the initial decision.
German Chancellor Merkel has been forceful in insisting that Brexit
negotiations need to start soon and that the decision is not reversible.
The other EU leaders are extremely anxious to avoid any further
tensions within the area and need to avoid the impression that
referendums can be used as a bargaining tool to gain concessions.
Prime Minister Theresa May had hinted that the triggering of Article
50 could be delayed until late 2017, although there is strong internal
and external pressure to start the process by spring next year given
French and German elections. Once Article 50 is triggered there is a
maximum negotiating period of 2 years.
A crucial factor is that the UK government will need to settle on a
preferred status with the EU as quickly as possible. Despite political
pressure, there is still a high risk that Article 50 will not be
triggered until late 2017, prolonging political and economic
Looking at the acute phase, initial data releases covering the period
since the referendum suggest that consumer spending has held firm and
immediate damage to the industrial sector has been limited.
The next round of PMI releases at the beginning of September will be
very important for underlying confidence and expectations surrounding
the outlook. There will be a reassessment of the outlook if there is a
significant recovery in PMI data, while a further deterioration would
certainly intensify recession talk.
Fiscal policy will be an important focus with the Autumn Statement
due to be presented by November. There is a strong probability of fiscal
support measures to the housing sector and a potential reduction in
corporate taxes in an attempt to keep companies in the UK. The 2020
budget surplus target has already been abandoned and fiscal policy
overall is likely to be relaxed.
The Bank of England
will maintain a very loose monetary policy in the short term and will
consider a further cut in rates, although the chances of further
monetary easing could fade, especially if fiscal policy is expanded. In
this context, there will be strong pressure on the bank not to take any
further action ahead of the Autumn Statement.
On balance, the most likely risk is that monetary policy will be
slightly tighter than expected with a looser fiscal policy and better
than expected economic performance.
The longer-term outlook remains very unclear and clarity could be
elusive for an extended period given difficulties in securing global
The main concerns will surround investment, especially given the
structural weaknesses already all too evident in the economy. There is a
high risk that companies will delay capital-spending plans and there
will tend to be a cumulative effect if uncertainty is prolonged as
further delays to investment will weaken the underlying economic
Potentially the most important element will be the attitude of large
companies towards their position in the UK. There is a serious risk that
companies will relocate away from the UK and base headquarters
overseas, which would sap underlying economic performance.
There will also be the risk of manufacturing bases being relocated,
although the short-term risks should be limited, especially given the UK
There is a case for optimism if the UK can position itself as a
free-trade hub, but this could be a very long-term process at best.
British PM to trigger Brexit without vote by lawmakers: Telegraph
British Prime Minister Theresa May will not hold a parliamentary vote
on Brexit before formally triggering Britain's withdrawal from the
European Union, The Daily Telegraph reported on Saturday, without
May will not offer opponents the chance to
stall the withdrawal and has consulted lawyers who say she has the power
to invoke the exit without a parliamentary vote, the conservative
newspaper said. A majority of the 650 lawmakers had declared themselves
Opponents maintain that since the EU referendum
result is not legally binding, elected lawmakers should review the vote
before the process is started.
The UK voted to leave the EU on
June 23, but May has said she will not invoke Article 50, the formal
two-year process for divorce from the bloc, before the end of the year
to allow time to prepare the exit strategy.
No one at the prime minister's office was available to comment.
members of the opposition Labour party have suggested that the issue
could be subject to a vote by lawmakers or even a second public vote,
and a law firm has initiated a legal challenge.
Two months ago 52
percent of Britons opted to leave the EU, but since then the process
and what it could mean has been shrouded in uncertainty because the exit
Gus O'Donnell, a former head of the civil
service - the UK's professional administrative departments - said he
hoped that by the time Britain leaves the EU it could be part of a "more
loosely aligned" EU bloc because the process will take "years and years
"While we can leave relatively quickly, what leaving
means is a huge administrative and legislative change because of all of
(the) rules and laws and directives that have been implemented over
this last 40 years. My instinct is we will almost certainly stick with
them and say, 'OK we'll keep them for now, so you can leave with
everything in place,'" he told The Times newspaper.
economic impact of Brexit is also unclear because, beyond a more than 10
percent fall in the value of sterling against other currencies, the
signals are so far mixed.
GBP: Manufacturing PMI Survey Highlights Brexit Vote Pessimism Has Eased
The pound rebounded further yesterday supported by
further encouraging evidence that initial Brexit vote fears over the
outlook for the UK economy were overdone.
Heightened uncertainty which followed the Brexit
vote weighed heavily on business confidence in July. However, the
release yesterday of the latest UK manufacturing PMI survey for August
revealed a sharp snapback higher in business confidence.
improvement in the manufacturing PMI survey was the largest on record
increasing by 5 points to 53.3 in August which was the highest level
since October of last year. Markit noted that companies reported that
work that had been postponed during July had now been restarted, as
manufacturers and their clients “started to regain a sense of returning
to business as usual”. The sharp decline in the value of the pound over
the last year has significantly improved the UK’s external competiveness
which should continue to benefit the manufacturing sector. The new
export orders sub-component increased sharply by 3.5 point to 54.9 in
August reaching its highest level since June 2014.
BoE can claim that the improvement in business confidence could have
been supported as well by their pro-active and aggressive monetary
policy response last month, although the surprising resilience of the UK
economy so far also casts doubt on whether the scale of easing
delivered was appropriate. If the economy continues to hold up better
than expected, the BoE is unlikely to follow through with their current
plans to lower rates again to close to zero by year end. In these
PM May says UK needs to be prepared for some "difficult times" post-Brexit
UK PM Theresa May speaking to the BBC before she left for China 4 Sept 2016
Interview shown this morning on The Andrew Marr Show but covered extensively by the press already
Brexit would not be plain sailing" for the UK.
rules out a snap election. Says the UK needs stability
the referendum result had shown voters did not want free movement to continue in the way that it has done in the past.
ministers were looking at "options" for new EU migration controls.
the UK would "make a success" of leaving the EU
"optimistic" about new opportunities for Britain outside the EU.
"We have had some good figures and better figures than some had predicted
would be the case. I'm not going to pretend that it's all going to be
"I think we must be prepared for the fact that there may be some difficult times ahead. But what I am is optimistic.
May said the government would not trigger Article 50 - which will
begin the formal two-year process of leaving the EU - before the end of
"I'm very clear also that the British people don't want the issue of
Article 50 being triggered just being kicked into the long grass because
they want to know we're getting on with the job of putting Brexit into
place and making a success of it."
She added that her govt will set out in the coming week how it plans to shape its relationship with the EU after leaving.
Brexit Minister (David Davis) will be making a statement to parliament
this week about the work that the government has been doing over the
summer and obviously how we are going to take that forward in shaping
the sort of relationship we want with the EU."
the G20 she has had talks with President Obama who said afterwards that
the US would "consult closely" with the UK over Brexit negotiations to
ensure there were no "adverse effects" in the US-UK trading
"We're going to do everything we can to make sure that the consequences
of the decision don't end up unravelling what is already a very strong
and robust economic relationship that can become even stronger in the
EU needs to prepare itself for a lengthy Brexit process
So says Nordea Bank AB CEO Casper von Koskull speaking on YLE TV1
European Union needs to brace itself for the possibility that it will
take up to 5 years before Britain can extract itself from the bloc
the Brexit process that has rocked the EU is still plagued by "a lot of uncertainties."
think this came as a bit of a surprise for the Brits themselves.Now it
may well be that this will be a process that lasts three, four or five
Because there's still no clear
roadmap for how to proceed, "it may be that the Brexit process will not
be started until after two years and then it will take many years to
Von Kuskull stating what many are already believing.
The process will be a long one and fraught with uncertainty, and that's
not going to put any real support under the pound for the foreseeable
Brexit Vote Was BOE Governor Carney’s Worst Day at the Office
The night of Britain’s European Union referendum result was the
toughest moment of Bank of England Governor Mark Carney’s career and
policy makers “absolutely” got their response right, he said.
questions from school children at an event hosted by the BBC in
Coventry, in the U.K.’s West Midlands, Carney said he felt a “tremendous
responsibility” to keep the financial system functioning as it became
clear that Britons had voted to quit the bloc on June 23.
governor said he napped for about two hours before watching the first
results on television and going to the BOE’s Threadneedle Street
headquarters in London at around 3:30 a.m. to help oversee its
operations and coordination with central banks around the globe.
reaction was to make sure that the big fat plan that we had was being
put in place,” Carney said. “It’s our responsibility at the BOE to be
prepared for these contingencies. We had everybody in the financial
world focused on the event and we had to get it right. It’s interesting,
it’s exciting, it’s important and we did absolutely get it right.”
governor said a large number of countries want to trade with the U.K.
after it leaves the trading bloc and opportunities are “very large” with
new technology enabling smaller firms to do more business overseas.
countries want to trade with the U.K.,” he said. “You can be a small
firm of three-to-five people based here and you can sell around the
world. That’s increasingly going to be the case and that’s tremendously
exciting. It really plays to the strength of the U.K. because this is a
really, truly innovative country.”
a wide-ranging session, he also revealed his childhood nicknames were
“Carnage” and “Carnival” -- saying he preferred the former as it was
“more manly” -- that he likes the confectionery bar, Dairy Milk, his
favorite food is pizza, his favorite film is Gallipoli and that his
guilty pleasure is watching the television show “The Great British Bake
With U.K. interest rates at a record low 0.25 percent,
Carney also had a message for savers in his response to the question of
what advice he would give his younger self.
always tried to save something of what I earned, even if just for
discipline, and I would have taken some of that money and I would have
put it in some sort of equity fund, something that wasn’t just a pure
savings vehicle,” he said. “It’s not a bad thing when you’re young to
have something that will grow, something that is higher risk. You’ve got
a long life so you can ride out that risk.”
Slovakian PM Robert Fico has been stepping up his stance over Brexit 18 Sept
At an end of the first EU summit without the UK on Friday, Mr Fico said that he and other
Central European leaders whose citizens make up much of the EU migrant
population in Britain would not let those people become "second class
But in an interview with Reuters yesterday, he went further.
"V4 [Visegrad group] countries will be uncompromising.Unless
we feel a guarantee that these people are equal, we will veto any
agreement between the EU and Britain."
Fico claims to
speak on behalf of the Visegrad Four (Hungary, Poland, the Czech
Republic and Slovakia) but the Czech ambassador to the UK pointed out
this was not an "official statement" of the Visegrad
countries' common position on their approach to Brexit negotiations.
said that while he respected Mr Fico's opinion, it was for Poland -
which holds the Visegrad presidency - to speak on behalf of the group.
Visegrad group has consistently opposed EU efforts to introduce
mandatory quotas for migrants but Fico said the EU had shifted from a
mandatory quotas to a new principle of "flexible solidarity" over the
Add the comments to the rumours surrounding UK fin min Hammond's reported stance of giving up on EU single market access to take a stronger line on immigration and the plot becomes ever thicker.
The "Brexit cruise" didn't get very far. EU leaders drifted down the
Danube for an hour, said little about Britain over a leisurely shipboard
lunch, then circled back to Bratislava to resume Friday's summit.
the surface, though, things have been stirring on Brexit. Summit
chairman Donald Tusk later stirred them up more by saying Britain's
poker-faced prime minister, Theresa May, had let him glimpse her cards,
indicating divorce talks prompted by June's referendum may start in four
to five months.
Britain's plan to leave the European Union was
at the heart of the meeting of the 27 other member states in Slovakia,
where May was the notable absentee. But it seemed an empty heart.
by talks ashore on repairing the loss of trust in the EU exposed by the
British vote, the cruise conversation was minimal, according to Tusk.
This left leaders back where they started - waiting for Mrs May and,
when the summit ended, bickering with each other over migrants and
Tusk and others repeated their mantra of "no
negotiation without notification" - that the EU will not so much as talk
to the British until May triggers a two-year countdown to Brexit by
formally saying Britain will leave under Article 50 of the EU treaty.
legal mechanics, written to discourage anyone quitting, mean that
triggering it flips negotiating power from London to Brussels by binding
Britain to a deadline to strike a deal or lose favored access to its
main export market.
That poses dilemmas for both sides of how much to talk and when. Diplomats speak of a "chicken and egg situation".
apparently casual reference to a conversation with May from which he
concluded she was "quite likely" to be ready to invoke Article 50 in
January or February - a timing she herself is loath to commit to as her
government wrestles over strategy - was in line with EU efforts to hurry