Investors fear stormy political and economic UK weather

May’s Brexit desperation as she begs EU leaders for help

ACROSS Europe, Parliaments are in recess. But UK Prime Minister Theresa May cut short her annual Alpine walking holiday last week to meet with French President Emmanuel Macron. She also despatched her new Foreign Secretary Jeremy Hunt and other Cabinet ministers across the continent.

In what were seen as signs of desperation over the Brexit crisis at home, the strategy is aimed at persuading the European Union leaders to instruct Brussels negotiators to compromise. For the sake of both the EU and UK economies, Mrs May hopes that all 27 EU leaders will mostly accept her latest Brexit proposals.

The basis of Mrs May’s proposed “Chequers” deal – which has first to be accepted in the UK Parliament – includes a UK-EU free trade area with a common rulebook for industrial goods and agricultural products; a customs model with freedom to strike new trade deals around the world; no “hard border” between Ireland and Northern Ireland; an end to the jurisdiction of the European Court of Justice in the UK; and ending free movement and taking back control of UK’s borders. The City of London and other financial services would have common regulations with the EU.

EU rejects May’s flawed proposals

The EU’s chief negotiator, Michel Barnier, has rejected Mrs May’s planned customs arrangement. It is aimed at effectively keeping the UK in EU’s common market and allow Britain to negotiate separate deals with the US, China and other nations. He also said the EU would not agree to the UK’s immigration controls because of its internal free goods, services, capital and people ruling.  Mrs May’s hope is that Germany’s Angela Merkel and President Macron and other leaders will persuade Mr Barnier to bend and thus forge a deal that is close to her proposals. So far, however, the leaders have said they would not interfere with Mr Barnier’s negotiations.

They have ignored appeals from Mrs May, Mr Hunt and Bank of England governor Mark Carney on the growing risk that Britain might crash out of the EU without a deal. In that event, they fear that trade and investment would become so chaotic and uncertain that markets would tumble, economies would slide into recession and unemployment would soar. Last week, a mere hint of the possibility from Mr Carney caused sterling to fall.

Sterling’s Brexit weakness

May likely to offer concessions likely to aggravate Conservative Party

The more probable scenario, however, is that Mrs May will offer concessions.  A fudged deal would then be agreed by the time Brexit is triggered at the end of March 2019. Such a deal may or may not be accepted in Parliament. The current UK Brexit proposals, prior to any possible further concessions, have already been rejected by Brexit supporters in both the Conservative and Labour parties. The politicians who wish to remain in the EU are calling for a second referendum.

Mrs May is thus in the unenviable position of failing in her negotiations whether she agrees to a fudged deal that allows the UK to remain in the EU without a vote on future policies, or crashes out.

May likely to be sacked after Brexit

The general view is that Mrs May will soldier on until Brexit happens in March 2019.  But soon afterwards a Tory leadership election will take place. The UK could then be plunged into further political uncertainty. The ultimate fear is a Labour takeover led by Jeremy Corbyn, the ultra-left Labour leader. His proposed economic policy is nationalisation, high taxation and high spending. Hardly surprising, the sterling is weak and foreign investors are jittery.

© copyright Neil Behrmann

This editorial was first published in The Business Times, Singapore

Neil Behrmann is London correspondent of The Business Times. Jack of Diamonds his thriller on global diamond mining and smuggling, has recently been published. It is the sequel to the thriller, Trader Jack, The Story of Jack Miner.

See reviews of both books on:



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