Brexit Bulletin: Lording It on Budget Day

The upper house sets a challenge for the PM. Now the Chancellor will try to set the tone.

Capital Economics Bootle Says Hammond Striking Right Note

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Theresa May is no longer getting her own way on Brexit.

The House of Lords on Tuesday handed the prime minister her second parliamentary defeat within a week, this time voting to rewrite the draft of the law that would allow her to start talks with the European Union.

A bus passenger looks out towards the Houses of Parliament and 'Big Ben', March 2, 2017. Photographer: Luke MacGregor/Bloomberg

A bus passenger looks out towards the Houses of Parliament and Big Ben.

Photographer: Luke MacGregor/Bloomberg

With the help of Conservative rebels, Labour and Liberal Democrat peers demanded the power for Parliament to return May to the negotiating table if they don’t like the eventual exit agreement.

The vote received short shrift from the government. Thatcher-era Cabinet minister Michael Heseltine, who backed the amendment, was fired from a series of advisory roles. May’s team is now preparing to try and overturn the amendment – and the one passed last week guaranteeing the rights of EU citizens living in Britain.

 May’s team argues the tweak would weaken her in the negotiations. Brexit Secretary David Davis said the bill has a “straightforward purpose – to enact the referendum result and allow the government to get on with negotiating a new partnership with the EU.”

“It is clear that some in the Lords would seek to frustrate that process, and it is the government’s intention to ensure that does not happen. We will now aim to overturn these amendments in the House of Commons.”

The focus now switches to identifying how many Conservative rebels in the House of Commons will be prepared to defy the premier. Seven Tories voted against May on the bill last month and former minister Bob Neill told the BBC on Sunday he might back the binding vote.

May only has a majority of 17 in the Commons, so just a few of her own lawmakers need to change sides to make defeat possible. A poll released on Wednesday by FTI Consulting found 47 percent said the Lords are right to amend the bill, with 34 percent against.

All the parliamentary wrangling delays the moment May can trigger Brexit. There are now conflicting reports on when the moment may come, ranging from March 15 to March 31. 

Separately, the Times reported that two unnamed senior ministers are echoing former Foreign Secretary William Hague’s call for a snap general election so May can win a clear mandate for her Brexit plan. The prime minister’s office rejected the idea on Tuesday; to call a vote Parliament would have to repeal an act which fixes the ballot for 202o.

Budget Day

Chancellor of the Exchequer Philip Hammond will deliver an upbeat economic outlook today in his first Budget, while keeping money in the bank in case things go wrong with Brexit.

The chancellor of the Exchequer’s red box

The last budget was delivered by former Chancellor George Osborne.

Photographer: Simon Dawson/Bloomberg

The Office for Budget Responsibility is set to raise its growth outlook, having predicted expansion in November of 1.4 percent for this year.

The estimate is still likely to be lower than its pre-referendum forecast of 2.2 percent, and Capital Economics reckons any upgrade will be offset by weaker forecasts for 2018 and 2019. The OBR previously anticipated growth of 1.7 percent and 2.1 percent for those years, respectively. 

The OECD led the way on Tuesday in raising its forecast for U.K. growth to 1.6 percent this year (up from 1.2 percent), while leaving its 2018 projection unchanged at 1 percent. It expects inflation to weigh on consumers and business investment to slow.

Raiding London

EU officials are sharpening their focus on two of the region’s most influential regulatory bodies, currently located in London.

The European Medicines Agency and European Banking Authority may be forced to relocate post-Brexit with a number of countries jostling to host them, reports Bloomberg’s Ian Wishart.

The EMA was the subject of informal exchanges among representatives of EU governments meeting in Brussels on Monday, according to diplomats. One concern is that the topic spills into the Brexit talks if not sorted out. There are hopes for a quick resolution, with fears a drawn-out process would affect the agency’s ability to retain staff.

Meanwhile, Shipping Minister Panagiotis Kouroumblis said Greece is discussing the possible move of Lloyd’s of London’s shipping department to the port of Piraeus.

What Next for the Euro?

With Brexit on its way to becoming a reality, the future of the euro is back on the table. We’ve taken a look at three scenarios that could lead to the euro splintering—and three that could see the currency coming through the populist wave in even stronger shape. 

Brexit Bullets

  • Former Bank of England Governor Mervyn King says “Brexit has had rather little impact on the economy and may in the long run have rather little impact”
  • Rents for luxury homes in central London’s best districts fell 5.1 percent in February from a year earlier, as companies pause on moving employees to the city, Knight Frank says
  • A third of businesses haven’t started planning for Brexit, says consultancy Anaplan
  • Ford Credit Europe commissioned a project to examine applying for a German banking license, Sky News reports
  • Most of the five major U.S. investment banks may decide on Frankfurt as their EU hub post-Brexit with announcements due soon, says Hubertus Vaeth, a city lobbyist
  • Private investment firm Aquind signed an accord with Reseau de Transport d’Electricité to connect a power cable with the French grid, even as the U.K.’s exit from the EU poses risks to the project

On the Markets

Sterling slipped to a seven-week low versus the dollar on Tuesday, driven by declining retail sales and slowing house-price increases, as well as the latest dose of political uncertainty. 

Still, Morgan Stanley strategists predict sterling will soon start climbing, prompting U.K. stocks to weaken.

And Finally…

Bookmakers are laying odds that Hammond will say “Brexit” at least once during his Budget speech. Paddy Power says it’s so likely that a £100 wager would generate just £1 in winnings. Rival Ladbrokes offers the same amount for those who place a successful bet of just £3.




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