Brexit Bulletin: This Will Take Time
It’s supposed to take two years to extract the U.K. from the European Union. That timeline may be emerging as a point of contention, with some on the continent reluctant to help out the British.
U.K. Chancellor of the Exchequer Philip Hammond told Parliament’s Treasury Committee on Monday that the negotiating period for departing members set out in the EU’s Lisbon Treaty will probably not be long enough to work out Britain’s future relationship with the bloc.
As a result, a longer transition period is likely to be needed to smooth the path of Brexit, he said, adding that some officials in other countries are already coming round to that view.
“The further we go into this discussion, the more likely it is that we will mutually conclude that we need a longer period to deliver,” Hammond said.
“There is, I think, an emerging view among businesses, among regulators and among thoughtful politicians, as well as quite a universal view among civil servants on both sides of the English Channel.”
While Hammond's view won support from the House of Lords, the U.K.’s unelected upper chamber, French executive Gerard Mestrallet rejected the idea of a transition in a Bloomberg TV interview on Tuesday. The chairman of energy producer Engie, who is also spearheading efforts to build up Paris as a financial center, said companies want to see the process tied up as soon as possible.
“Business has nothing to gain from a long transitional period, which will be a period of uncertainties,” he said.
Hammond has long been an advocate of a transitional period after Britain leaves the EU, though David Davis, the Brexit Secretary, is said to have dismissed such concerns in private.
Two committees said in a joint report that Prime Minister Theresa May must strike a temporary deal as it may be impossible to reach a post-Brexit free-trade agreement in the “extremely tight” timetable for talks.
Price Pressure, Income Pressure
U.K. inflation accelerated more than economists forecast in November and the latest data from the Office for National Statistics also added to evidence of a buildup in pressure since Britain voted to leave the European Union. Fueled by the pound’s fall and and rising oil costs, U.K. import prices surged almost 15 percent in November, the biggest annual increase in five years. Upward pressure may intensify after this month’s output cut by OPEC.
It’s not just the U.K. feeling the pinch, though. Slow progress on living standards is one of the factors also adding to the strain on the political establishment across Europe. As Bloomberg Intelligence’s Jamie Murray notes in the chart below, inflation-adjusted incomes in the U.K., Spain and Italy have lagged France and Germany in recent years.
Labour vs. Hard Brexit
The U.K.’s main opposition, the Labour Party, is stepping up its fight to protect Britain’s ties to the EU after Brexit.
Keir Starmer, Labour’s Brexit spokesman, will pledge to fight against a “hard” break from the EU in a speech at Bloomberg’s European headquarters on Tuesday, promising instead to work for co-operation with Britain’s biggest market.
A “hard Brexit” would “entail a range of harmful new barriers to trade and a desperate rush to sign new agreements with third party states to compensate,” Starmer will say, according to extracts of the speech released by his office.
Such a path would lead to “a global race to the bottom which would not only put our economy and jobs at risk, but which would also abandon our shared scientific, educational and cultural endeavors with the EU.”
Labour is seeking to make its mark on the Brexit debate after a lackluster showing in two recent by-elections that were seen as tests of May’s handling of Brexit. Labour came a distant third in pro-Remain Richmond, in west London, and fourth in Leave-supporting Sleaford, in eastern England.
- Guy Verhofstadt, Brexit chief for the EU Parliament, says Ireland’s U.K. border poses an especially difficult problem
- Former German Finance Minister Peer Steinbrueck says some members may ditch the euro over the next decade
- The EU will push for talks to start quickly after Article 50 is triggered, documents show
- London’s derivatives crown was already slipping before the Brexit referendum
- Online-only fashion retailer Asosplans to double its U.K. manufacturing after the pound’s plunge
We’ve seen Marmite prices soar and Pot Noodles yanked from the shelves of British supermarkets. Could chocolate be the next victim of Brexit?
German cocoa processor Euromar Commodities was forced to start insolvency proceedings last week after its supplies of cocoa beans were interrupted by the collapse in the value of the pound.
Euromar uses the London-based ICE Futures Europe market to hedge the price of its raw materials, and the cost of protection soared after the Brexit vote as a result of the drop in sterling. That left the company short of cash to pay its suppliers.
“I am therefore negotiating credit in order to resume business operations,” Rolf Rattunde, a partner at law firm Leonhardt Rattunde, said in an e-mailed statement Monday. “The intensive discussions with lenders and shareholders make one feel optimistic.”