Brexit: Everything You Need To Know

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Join date: 2012.10.01
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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
  • Article 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

Expect 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.

More from The Sunday Times here (gated).

Join date: 2012.10.01
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Brexit Bulletin: Hedge Funds Against the Pound

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.

Data out already today show weakness in the London house market this month. Properties are staying on the market for longer even after sellers cut prices.

Still to come this week: inflation, retail sales, unemployment and budget data.  Farmers are OK ... (full story)

Join date: 2012.10.01
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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)

Reuters reporting.

The 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 Brexit vote.

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 the bloc.

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"

Reuters add:

The 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.

France 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.

Italy is eager for greater European consolidation in the wake of Brexit, but Merkel is more concerned about preserving the integrity of the eventual 27-member bloc

Full article here .
Join date: 2012.10.01
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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

On 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.

The 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.

Now 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 'neverendum',"

"For 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."

More from the BBC here.

The 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.

Join date: 2012.10.01
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Paralysis Risk Two Months after Brexit Vote

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 uncertainty.

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 trade deals.

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 performance.

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 cost advantage.

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.


Join date: 2012.10.01
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Merkel says Brexit is a deep watershed moment in EU history

German chancellor Angela Merkel speaking to reporters in Warsaw 26 Aug 2016

  • we all regret UK's vote to leave EU

Not all of us Angela.

  • need to prepare Bratislava summit thoroughly
  • EU has to build an agenda on issues we agree on

Good luck with that one.

  • security is of central importance in EU's future
  • EU needs to push ahead with digital economy
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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 specifying sources.

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 "Remainers".

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.

Senior 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 is unprecedented.

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 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.

The 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.

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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.

The 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.

The 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 circumstances, w

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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 plain sailing.

"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 this year.

"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.

"The 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."

Ahead of 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 relationship.

Obama added:

"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 future."

Full BBC interview here

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EU Council president Tusk tells May the ball is in UK's court to start Brexit negotiations

EU Council president Tusk visiting UK PM May 8 Sept 2016

  • Our goal to establish closest possible EU-UK relations
  • Ball in UK court to start negotiations
  • In everybody's best interest to start asap
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EU needs to prepare itself for a lengthy Brexit process

So says Nordea Bank AB CEO Casper von Koskull speaking on YLE TV1

Bloomberg reporting.

  • the 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."

"I 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 years."

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 finish."

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 future.

Join date: 2016.05.14
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British Chambers of Commerce lowers GDP forecast for the UK after Brexit vote

A report on the BCC growth prediction for Britain

  • Expects the UK to grow 1.8% this year (lowered from its March estimate of 2.2%
  • And by 1% in 2017 (down from its original forecast of 2.3%)
Cites (have a guess):
  • Uncertainty surrounding the UK's negotiations over its EU exit
On the bright side:
  • The UK "would skirt with" but avoid a recession
  • The slide in GBP will help exporters
'Skirt with'? Huh?

Its BCC's first GDP forecast since the EU referendum
There is more at the BBC report
Join date: 2012.10.01
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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.

Answering 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.

The 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.

“My 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.”

The 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.

Trade Strengths

“Most 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.”

In 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 Off.”

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.

“I 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.”

Join date: 2012.10.01
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Slovakia's Fico ready to veto Brexit deal with EU

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 citizens".

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.

He 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.

The Visegrad group has consistently opposed EU efforts to introduce mandatory quotas for migrants but  Fico said the EU had shifted from a debate over mandatory quotas to a new principle of "flexible solidarity" over the migrant crisis.

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.

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Brexit? What Brexit? EU on cruise control

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.

Beneath 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.

Book-ended 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 economics.

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.

The 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".

Tusk's 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 her along.

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