UK economic growth slowed down further in 2018 and the outlook for this year is overshadowed by Brexit uncertainty, which is also causing some distortions in short term indicators as companies step up production and stock piling in preparation for possible disruptions in supply and transport routes.
Meanwhile the political debate in London continues…..
Sterling finished last week on perky footing, bolstered by a report in the London Evening Standard citing Cabinet ministers saying that Brexit will have to be delayed due to legislative congestion in the event that Parliaments rejects the EU Withdrawal Agreement at Tuesday’s vote, which looks highly probable.
The BBC reported that the government is set to lose the vote by a huge margin of 228. The BBC has also indicated that British officials have “put out feelers” to Brussels on whether the EU would agree to a delay in the legislated March 29 exit date. The ministers cited by the Evening Standard said that there is simply insufficient time for Parliament to work through a backlog of at least six “essential” bills that must be passed before the UK leaves the EU.
If the government’s Brexit deal is rejected, Prime Minister May will be obliged, as legislated just last week, to return with proposals for a new way forward by January 21.
This will make May’s position even more difficult, but it has reportedly also drawn some consternation in Brussels as it will give EU leaders hardly any time to discuss the situation among themselves and come up with a response to the new situation.
This would likely lead to Parliament voting on various Plan B options: An extension of the withdrawal date is now reportedly being discussed on both sides of the channel, and ultimately another referendum still seems the most likely option to eventually emerge as the path of least resistance.
Although the option of an Article 50 extension still exists, the EU is clearly eager to prevent another drawn out negotiation process amid the lack of clarity on where the UK actually stands. Brussels is looking at a maximum of 3 months of extension, which would not give London much time.
If there were to be another referendum, then a delay in the exit date would be essential as it would take at least three months to set up. The Labour opposition party has been calling for there to be a general election in the event the Brexit deal is rejected, but this is very unlikely as the Tory and DUP parties would undoubtedly be against it. We think a no-deal Brexit scenario is unlikely — Parliament has both the power and desire to stop this from happening.
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Andria Pichidi
Market Analyst
HotForex
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