The pound’s high unfortunately ended over the last 24 hours, following reports that Prime Minister Boris Johnson will go on to create another “no deal” cliff edge Brexit. The resurfacing threat of a no deal has caused a correction for sterling, as the Prime Minister storms ahead with his plans to conclude the next phase of Brexit. Johnson is set to have a final date for the UK’s departure from the EU at the end of 2020.
The Prime Minister, with his 80-strong majority, apparently has plans to enshrine into law that the Brexit negotiations will end in December 2020. This means that there will be a one-year transition period entered into by the UK after the Brexit Withdrawal Agreement is ratified by Parliament, and the UK officially departs from the EU on 31st January 2020.
According to news reports, Boris Johnson will amend the Withdrawal Agreement Bill as early as Friday, to place legal blocks to further delay Brexit. MPs are expected to vote on this once the bill returns to Parliament, after the Queen formally opens the new parliamentary term.
Markets Quiver over Canada-Style FTA
Both the UK and EU negotiators have said that they will do whatever is possible in order to meet this deadline. This deadline also fits in with the EU’s financial cycle- where countries’ contributions to EU funding are set, which lasts five years and is due to be renewed this summer.
By having an end of 2020 date in place, the Conservatives’ strategy is to focus the minds of the trade negotiators, as well as appeal to those in the electorate who voted for the Prime Minister to “get Brexit done”. Many voters in the North of England have said they “lent” the Conservatives their vote, as they were traditionally Labour voters who had voted leave and did not believe Jeremy Corbyn would deliver Brexit.
None of this news should overly surprise the markets, as the Conservatives’ pledge to end the Brexit transition period at the end of 2020 and desire for a Canada-style Free Trade Agreement was in their manifesto. A no deal Brexit still remains unlikely, but markets could be gearing up for an increase in trade friction in the future, with the very real possibility of regulatory diversion between the UK and the EU.
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