Brexit 'deal or no deal'? Are we finally getting to the end of the tunnel?

Thursday, 17th October 2019 08:52 - by Shant

It really is a matter of waiting on the headlines at the present time, as the UK PM Boris Johnson is scrambling to get a deal together that will appeal to the EU, the DUP and the hardliners within his party, who up until Wednesday evening were still mulling over the details.  In a day frought with headlines sparking off like a firework show, it was nothing more than chaos as the media frenzy over who heard what, and from whom descended into utter chaos at times.  One such tweet drew the ire of the DUP, as the 'writer' suggested that the issues regarding any possible weakening of the union had been addressed and that MPs had warmed to the deal.  The DUP was swift to reject these claims, questioning the sources to these claims.  

In yesterday's Brexit committee, where Stephen Barclay was under the spotlight, arch pro-Brexiteer, Sammy Wilson questionned the Brexit minister on whether any negotiations would put Good Friday Agreement in jeopardy, and if the government was trying to keep Northern Ireland in the customs union for 'practical purposes.  A DUP spokesman strongly refuted claims that the party was looking greater 'compensation' as a pathway to agreeing to the latest plans being put forward by the government as t seeks to get a deal in place before the deadline next week.   As the Benn Act stipulates, if no deal is achieved by the 19th of October, then the PM is required to ask for an extension to the exit deadline which currently remains on 31 October.

Needless to say, talks will have been conducted through the night, and will likely continue through Thursday and Friday.  Consequently, members of the ERG are also in talks to gain assurances that the plan will not inhibit the UK in any way, not least of all by causing any possible interference in the UK's ability to strike deals with the rest of the world.  Naturally, the EU will be keen to maintain competitive parity with the UK, and this - whether it has been vocalised or not - will have been a key determinant in agreeing to any terms the UK will and will have offered through talks up until now.  Needless to say, Europe needs all the protection it can get in these challenging times, as global demand is hurting the region severely, as has been reflected in the economic data in the past year. 

Going forward, the optimism over the Brexit saga finally reaching conclusion has been significant.  The Sterling exchange rate has appreciated by over 5% in the last week alone, and while the percentages do not reflect the outright level of the Pound, they do highlight the significance of the latest developments in a market starved of volatility these days.  Some would suggest the mood is perhaps a little overdone in light of the may obstacles ahead.  The deal still needs to be finalised and time is fast running out, though as is not widely advertised, parliament is to sit over the weekend in order to accommodate a vote on any deal which may come out of the latest 'intense' negotiations and on this there has to be a high degree of uncertainty.  

It is no secret that many MPs inside parliament who wish to do away with Brexit altogether - see the SNP and LibDems - while there is strong ongoing support to argue the case for a second referendum, which Jeremy Corbyn has underlined only this morning.  Indeed, reports yesterday suggested Tory Dominic Grieve and LibDem Vince Cable had traveled to Brussels to argue the case for a second referendum, and setting aside any debate over democracy, the reality remains that getting any deal through parliament still carries plenty of risks which seem to be ignored in this latest bout of euphoria.  One thing is for sure - MPs resolve to get the Brexit process over the line will be tested, though this will have political consequences further down the line, and certainly at the next general election.  

For now, investors and the public alike will be hoping to see this drawn out uncertainly finally coming to an end.  Investment has been heavily constrained by the multitude of unknowns emanating from the lack of clarity.  In the US, we are also seeing business investment taking a hit as the US-China talks continue to hit obstacle after obstacle, so there will be a significant upshift in sentiment if the UK government can secure a deal this weekend.  Sterling has adjusted for this in no uncertain terms.  Let's just hope it cant stick! 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.