Brexit Bulletin: Hammond Time

  • Chancellor to make the case for a “pragmatic” Brexit in speech
  • Analysis reveals sectors and areas where Brexit matters most

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Saved from the chop by the botched election, U.K. Chancellor of the Exchequer Philip Hammond will tonight make the case for a so-called “pragmatic” Brexit that focuses on protecting jobs and economic growth.

Hammond, whom Prime Minister Theresa May reportedly would have sacked if she had secured a large parliamentary majority in last week’s election, is now positioning himself as the architect of a softer Brexit.

Philip Hammond, U.K. chancellor of the exchequer.
Photographer: Simon Dawson/Bloomberg

He gets a chance to outline his thinking at his annual speech in the City of London tonight, Bloomberg’s Svenja O’Donnell and Robert Hutton report. He will spend part of his address outlining how funding for major infrastructure projects and start-up companies will be safeguarded during the withdrawal from the European Union. He will reveal discussions with the European Investment Bank to ensure access to funding as long as Britain is in the bloc. 

He plans to say:

“Investors need certainty in order to continue to support the U.K. economy and create jobs as we leave the EU. That is why we will fortify the vital financial support that helps businesses to grow —from cutting edge start-ups right through to large scale infrastructure projects.”

Hammond has long been on the softer end of the Brexit spectrum, advocating maximum ties with the EU after the divorce. May’s preference for immigration controls eventually led him to abandon his call for continued single-market membership, yet over the last year he still publicly highlighted the risks to exporters of leaving the customs union, spoke up for the importance of financial services and said high-skilled foreigners would still be welcome in Britain.

He once said people did not vote for Brexit “to become poorer or less secure.”

Bank of England Governor Mark Carney will also speak at Mansion House this evening, hours after the Bank of England’s latest interest rate decision, and at a time when economic growth forecasts are being cut and inflation in accelerating.

Still in Limbo

Britain remains in political limbo as May’s talks drag on with Northern Ireland’s Democratic Unionists. 

The BBC reported that a deal for the DUP to support May’s Tories in Parliament may not be possible before next week, without saying where it got the information. That might delay the formal opening of the new session of Parliament, scheduled for Monday.

Opposition politicians seized the delay to attack May. Labour Party leader Jeremy Corbyn called it a “nonsense situation,” while Scottish First Minister Nicola Sturgeon wrote to May to demand more inclusion in the Brexit process and to protect “participation” in the bloc’s single market and customs union.

The Financial Times reported that May will shortly make a “very generous” offer to EU citizens in the U.K., guaranteeing them the rights they currently hold. The U.K. wants a cut-off point to be March 29, 2017, but is expected to agree to EU demands that the date should be the day of Brexit in 2019, the newspaper said.

German Chancellor Angela Merkel said on Wednesday night that she expects the U.K. to stick to its timetable for negotiations although her top envoy said “the door to Europe is always open.”

Promise or Pain?

As May fights for her political life and is forced to rethink her approach to leaving the EU, the pressure has never been greater for her to deliver what she calls “the promise” of Brexit.

The testing ground for whether she will achieve that is in places such as the English Midlands, the Northeast and the Northwest.

Many of these areas, traditionally loyal to the opposition Labour Party, voted to leave the single market and yet their local economies are dependent on foreign companies which risk being hurt by the divorce.

Andre Tartar, Sam Dodge and Jeremy Scott Diamond have unearthed the industries and firms that the government must keep on side during the negotiations and beyond.

Among the businesses that need to be kept happy are Airbus, which makes 1,200 wings per year in the U.K., General Electric, which employs 1,700 workers and Coca-Cola, whose factory can churn out 2 million cases of bottled water.

Perhaps most critical are car companies such as Nissan and Toyota. They produced 1.7 million vehicles in the U.K. last year, the most in 17 years, half of which were exported elsewhere in Europe.

Brexit in Brief

  • Ryanair, EasyJet say soft Brexit won’t address airline concerns
  • Talk of Brexit euro clearing raid is wide of the mark, says Bloomberg Gadfly
  • EU nations interested in hosting European Banking Authority or European Medicines Agency must submit offers by July 31
  • Anaplan, which develops business-planning software, expects Brexit to boost demand
  • Lord Mayor of London Andrew Parmley says “access to the single market is a priority”
  • 56 percent of skilled EU workers living in the U.K. are at least “quite likely” to leave the U.K. before Brexit deal is struck, says Baker McKenzie
  • Uncertainty over Brexit is prompting U.K. agriculture firms to delay or cancel investments, says David Caffall, chief executive of the Agricultural Industries Confederation

And Finally…

Perhaps the only the central bank in the world to have been delighted by last year’s vote for Brexit was Kazakhstan’s.

That’s because it had bet against the pound before the surprise decision. Now Governor Daniyar Akishev say his personal view is that sterling has “significant potential for growth in the future.”

“In the current conditions, it’s clear there’s a lot of political uncertainty now in the U.K.,” Akishev said in an interview. But the outlook is strong for the pound, “considering the potential of the British economy.”

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