Brexit: Everything You Need To Know

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Join date: 2012.10.01
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Four EU countries ready to block EU/UK agreement

The UK Telegraph report on four EU countries (the Visegrad group, or V4) who say they'll  block any agreement between Britain and the EU unless V4 citizens are guaranteed the right to work in Britain

  • Slovakia, Hungary, Poland, and the Czech Republic
Robert Fico, the Slovak Prime Minister:
  • "V4 countries will be uncompromising"
  • "Unless we feel a guarantee that these people are equal, we will veto any agreement between the EU and Britain. I think Britain knows this is an issue for us where there's no room for compromise."
  • On Friday, European Union officials also warned that Britain would not gain access to the EU's single market unless Mrs May accepted rules allowing the "freedom of movement" of workers across Europe.
Join date: 2012.10.01
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UK  Foreign Minister Boris Johnson spoke over the weekend

  • He said there was plenty to do before Aritcle 50 is triggered
  • But once it is, developments will move quickly,
  • "... we are not going to do it before Christmas and I think we've got to do a lot of work to get our ducks in order and that is going on
  • "... not letting the process drag on is the key phrase I would use."
Also from Reuters:
Two books on the Brexit referendum have been published, current PM May wasn't much help to then PM Cameron apparently, and neither was BJ. For the real Brexit nerds this one.
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The legal challenge to the process required to trigger Article 50 will continue in October. 

The challenge seeks to provide constitutional clarity on the process required to exit the EU.

Following a preliminary hearing on 19 July 2016, a two-day judicial review will be held in the High Court before the Lord Chief Justice on Thursday 13 and Monday 17 October 2016 to clarify the constitutional process necessary to trigger Article 50 and enable the UK to leave the EU.

Gina Miller is the lead claimant in a judicial review claim against the Secretary of State for Exiting the European Union.

Miller is the co-founder of wealth management company SCM Private.

The claim seeks clarification from the court as to the constitutional process that must be followed by the Government in triggering Article 50 of the Lisbon Treaty of the European Union to withdraw the UK from the EU.

"This case is not an attempt to subvert the outcome of the referendum or to keep Britain in the EU. It is about ensuring for the future of this country that the legally correct process for leaving under the UK constitution is followed. There is only one opportunity for this to be carried out and it should be undertaken in accordance with our laws,” says Miller.

Ms Miller's case argues that the Government cannot trigger Article 50 without an Act of Parliament.

Her legal team will argue that this is required by the rule of law and the sovereignty of Parliament, the principles on which the UK's constitution is based.

“If we do not have clarity over the correct legal way to trigger Article 50, it could result in significant legal disputes and uncertainty over the validity of the notification. My case argues that the executive, i.e. Government, should be held to account by ensuring full Parliamentary scrutiny - and a vote by both houses of Parliament on the required Act – before Article 50 is triggered,” says Miller.

Article 50 of the Treaty on the European Union provides for a Member State to give notice of its exit of the European Union "in accordance" with the Member State's "own constitutional requirements".

This claim is to clarify what the UK's constitution requires before notification can be given. The Government's position has been that the Prime Minister can trigger Article 50 through the use of the Royal Prerogative powers.

Ms Miller will argue that the UK's constitution does not allow the use of the Royal Prerogative powers in this case, because the act of notification under Article 50 frustrates the rights of individuals and others enacted by Parliament in the European Communities Act 1972.

The Royal Prerogative powers cannot be used by the Government to remove or reduce rights granted by an Act of Parliament – the sovereignty of Parliament requires that only Parliament can change its own laws.

The Court indicated in July that, given the constitutional importance of the claim, any appeal will go straight to the Supreme Court and will be decided before the end of this year. This will ensure legal certainty prior to the Government's sending of the notice under its timetable.


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UK to trigger Article 50 by end-March 2017

UK PM Theresa May was speaking earlier today 2 Oct 2016

 "We are going to be a fully independent, sovereign country - a country that is no longer part of a political union with supranational institutions that can override national parliaments and courts.

"And that means we are going, once more, to have the freedom to make our own decisions on a whole host of different matters, from how we label our food to the way in which we choose to control immigration."

Given the two year expiry time of the Lisbon Treaty-based trigger that means the UK will have left by the summer of 2019 and that is at least one uncertainty out of the equation.

What May also confirmed though was that immigration and UK sovereignty will be top of the negotiation agenda at the expense of the single market. That in itself only intensifies the overall uncertainty of how Brexit will pan out. She has denied that it's "hard Brexit" per se as but the jury's very much out on that.

 May told The Andrew Marr Show that the process of leaving the EU would be "quite complex" but she hoped there would now be "preparatory work" with the remaining EU members so that "once the trigger comes we will have a smoother process of negotiation".

 "It's not just important for the UK, but important for Europe as a whole that we're able to do this in the best possible way so we have the least disruption for businesses, and when we leave the EU we have a smooth transition from the EU."

The end-March deadline means that official negotiations will begin ahead of the French and German elections next year

So the passive Remain campaigner becomes a pro-active Brexiteer. Politics eh ? May's gloves  are off now and she seems keen to get Brexit pushed through before going to the country again in the next scheduled General Election in 2020.

Expect the pound to open up lower in Asia and remain ( no reverse pun intended!) on the back-foot as I have been recommending for more than a while now.

Some of this confirmation will have been factored in though as rumours have been circulating for a while and with a market essentially short we can expect to see some profit coming off the table. Keep selling those rallies though as this play has a long way to run yet.

May also promised a bill to remove the European Communities Act 1972 from the statute book but the repeal of the 1972 Act will not take effect until the UK leaves the EU under Article 50.

She said this was an "important step", adding:

 "That means the UK will be an independent sovereign nation, it will be making its own laws."

The BBC has more on today's developments here
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UK's Hammond: No ifs, no buts, no second referendum, we are leaving the EU

Fin min Hammond starts his speech at the Tory party conference

  • Brexit process will be complex
  • We have the skills and ingenuity to make an exit a success
  • Brexit will need meticulous planning and steely determination
  • We are entering EU negotiations with the economy fundamentally robust

He's speaking at the Conservative conference so most of the comments are massaging their own egos and slagging off the opposition.

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Germany's Fuchs: Theresa May is underestimating EU's position in Brexit talks

CDU's Michael Fuchs with some tough words

  • May is going for hard Brexit
  • Hard Brexit will harm the London market
  • Brexit timetable is now clearer
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UK's May says it's too early to say what kind of Brexit agreement deal will be struck with EU

UK PM May addressing the party faithful at conference 5 Oct

  • wants agreement with EU to reflect strong ties with bloc, co-operation on counter-terrorism and support free trade
  • after Brexit the Brtain we build will be a global Britain
  • will intervene where markets are dysfunctional
  • have to acknowledge that there have been some side effects of low interest rates, change has to come
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ECB's Stournaras says UK will suffer the most from Brexit

Bloomberg picking up comments from AP

  • The Eurozone should commit realistically to Greek debt relief

Another great example of central bank independence from the Greek ECB man ;-)

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FT: Germany considers changing labour laws to help woo banks away from London

Looking for a post- Brexit banking job in the UK? It might be time to brush up on your German.

The Financial Times reports on German efforts to tempt banks out of London to Frankfurt:
  • Germany is considering changing its labour laws to make Frankfurt a more attractive hub for banks
  • However ... leading Wall Street banks indicated this weekend that they were more likely to relocate certain operations to New York than the eurozone if they shifted them from London
Here's the FT piece (may be gated): Frankfurt vies for UK banking jobs post-Brexit
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Brexit takes its first trip to court this week

The first of the Brexit legal challenges heads to court on Thursday

Apart from arguing with her European counterparts, PM Theresa May also faces challenges over Brexit from inside the UK. The first of those goes up in front of judges on Thursday. The next is due Monday 17th Oct.

It's not certain how much publicity will be allowed and there's rumours that the press May be banned from the first hearing but there's nothing confirmed and I can't see how they will be anyway.

One of the cases could be from SCM Private, a London based investment fund. Details of the cases back in late Sep.

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First Brexit hearing begins in the UK High Court

Three day judicial review of Brexit case begins today

The wheels of UK law go into motion today (not that they ever stop of course, except for elevenses).

The first case to be heard is from Ms Gina Miller of London investment fund group SCM.

The case is challenging what's known as the Royal Prerogative power that Theresa May's government is looking to use to enact article 50. The simple definition is that it's an age old law that the government wants to use so it bypasses parliament. The claimant argues that the government cannot lawfully use this to enact article 50;

The review is to be held over three days, today then & 18th and we've been reliably informed that it's doubtful that we'll get any comments from the review today as they will be just going over the arguments. It's highly likely that we may not hear anything until the hearing is concluded next week.

The review does have the potential to be market moving if it is decided that there's a case to proceed with. At this point, this is just to see whether there's merits in the claims. From there it's possible that it will go on to become something that will require a full legal challenge.

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Keep hitting GBPUSD rallies say Nomura

The market's acceptance of a hard Brexit should see the pound remain under pressure

According to Nomura, the market has gone through 5 stages of Brexit grief and has now settled on a hard exit. Although the market may be accepting that now, it doesn't mean the end of the drop in the pound.

"The rhetoric from ministers with "red lines" on immigration has considerably lowered the possibility of a "Soft Brexit" in the market's pricing and we have moved more towards the "Clean Break" or "Hard Brexit" outcome. With the market's acceptance of this it has naturally seen GBP suffer. But it is more than just that. It has changed the dynamic we see between UK rates markets and FX that leads us to conclude that we have not yet seen the bottom in GBP, with portfolio inflows less likely to provide the necessary inflows to the UK to plug the current account deficit"

"From these levels it is less attractive for some to enter fresh shorts, but given the new market dynamic we continue to recommend selling GBP initially to 1.20 and further and for EUR/GBP to break above 0.92."

They were wary of a 3-4% squeeze before the flash crash but now say that the decks might have been cleared so that any bounce might not be as big as previously expected.

"So if there is any rally it should be shortlived and will be used by the market as an opportunity to sell at better levels unless of course it is due to a complete reversal of position from politicians on the current "Hard Brexit" stance."

There's no doubt that the selling pressure remains and the shorts have the pound firmly by the short and curlies. The short term charts are still developing and last week's lows around 1.2080/1.2100 will be the first target for another attempt at pushing the pound a whole lot lower.


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Expect London banks to move some operation to Frankfurt in the second half of 2017 says Germany

This time it's the Frankfurt Financial Centre chief

He's also been told by banks that they will move some operations to Frankfurt and he expects them to start doing so in the second half of 2017.

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Brexit: the hard and soft facts and the myths.

As part of Project Fear David Cameron threatened that he would trigger Article 50 immediately if there was a Brexit majority in the referendum. At the time this was interpreted as a "Hard Brexit". Theresa May has gone for the "Soft Brexit" which means that after 10 months of careful negotiation the UK will trigger Article 50 by March 2017. There should be no further reference to "Hard Brexit" as this is as soft as it gets.

Although we are well into the discussion stage of leaving we still hear siren voices telling us to reverse our decision and stay in the EU. Clutching at straws there is a strong lobby saying that we cannot exit until it has been debated in Parliament and voted for by our elected representatives. This is in spite of the fact that the referendum was undertaken to tell our elected representatives the will of the people. In one sense it should be a nod through for Parliament, but a lot of people are concerned that if this decision is left to our elected representatives then it will be overturned as every piece of weak news about the UK economy is attributed to the decision made to Brexit and all but a few politicians are likely to be led by their own self-interest.

 Already politicians are blowing-off steam about how more evidence has now come to light that Brexit will be bad for the UK economy and in the best interests of their electorate they feel they must now vote against Brexit. A politician`s life is short and full of risk and most of them will fall off the gravy train long before their working life is over and it is nice for them to think there is another lucrative gravy train to jump aboard and this incentivises many of them to justify a volte face.

As well as the politicians, the backroom bureaucrats are missing the point about leaving the EU. I spoke to several top members of HM Customs and Excise who are off to Luxembourg this week to unravel hundreds of pages of trade agreements before they can restart the process of renegotiation. I asked them why we are not just scrapping all trade agreements which interfere with price or quantity and why we are not offering free trade across the world. Starting with a clean slate will allow us to deal, case by case, with any problems that manifest themselves. There was a stunned silence. This approach could apply equally to all EU countries with whom we will continue to trade freely and if the EU does not want to play the free trade game then they need to look at the cautionary tale below.

The chocolate, cheese and wine myth.

Today Nick Clegg has pointed out that the price of EU cheese, chocolate and wine will soar if we go for a "Hard Brexit". I think we need to ask the consumer about this. As there are many substitutes for EU cheese I can see a win/win for the UK cheesemakers. Wines from around the world including England are as good if not superior to EU wines and Swiss chocolate is my favourite. So what will actually happen is that EU producers will be forced out of the UK market or they will have to absorb the tariff. EU producers will in turn put pressure on the EU policymakers to remove all tariffs as the only people who lose in this situation are producers in EU countries.

The falling value of sterling myth.

Remove all the noise about Brexit and it has been clear for some time that sterling is destined to fall and continue falling in value. I explained this before Brexit in my blog "Current account deficit on the balance of payments is the most damming statistic". At present this deficit is 7.6% of our GDP and the market will bring down the value of the currency, as did the lowering of Bank Rate by the Bank of England, until our export prices are sufficiently low and import prices sufficiently high to rebalance our external account. Daily fluctuations are determined by rumour, manipulation and misinterpretation of current statistics. However in the long run it is the current balance deficit that points the currency in a downward direction and the sooner it happens the quicker the problem is resolved. If fear pushed the currency lower quicker after Brexit then we need to look upon this as good news.

A Brexit induced rise in inflation myth.

As Friedman said inflation is always and everywhere a monetary phenomenon. Inflation is more units of a currency used in the same number of transactions. A falling pound, rising import prices, higher food or oil prices only change relative prices. For the average level of prices to rise there must have been a preceding growth in monetary demand. The prices described above are only symptoms of the inflation caused by the Bank of England`s monetary policy more than a year ago.

Brexit and the Stock Market boom myth.

Brexiteers have claimed the Stock Market boom as a success but, as much as I would like to, the real advantages to economic growth of Brexit are sometime ahead. Asset prices hitting a peak is just the inverse relationship between interest rates and asset values. The Bank of England lowering interest rates has caused asset prices to rise and it will be reversed when interest rates start to rise.

Brexit has had nothing to do with asset bubbles. They are the result of a misguided Central Bank policy as I explained on my blog in "A reappraisal of interest rates and market interest rates"


Join date: 2012.10.01
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Richard Branson on Brexit: "We're already seeing disastrous consequences"

CNBC (with Reuters) report on an interview with Richard Branson, Virgin big wig:

  • "We're already seeing disastrous consequences with the way the pound has dropped. This is a number of years before Brexit actually takes place
  • There's been very, very little to be gained from it and there's been an awful lot to lose from it."