The Brexit endgame

The Brexit endgame

 As the deadline for crashing out of the EU approaches, British business is getting antsy, said Lisa O’Carroll in The Guardian. “I find it almost impossible to believe that politicians on both sides would allow our countries to slip into no deal,” observed CBI acting director general Josh Hardie last week. 

But he warned that even if a deal is struck, industry still faces a “tidal wave” of red tape on 1 January. Ominously, when French customs authorities recently “rehearsed Brexit checks”, a five-mile lorry queue developed on the approach road to the Eurotunnel in Folkestone. Food and drink suppliers are particularly nervous about goods perishing, while Make UK, which represents manufacturers, predicts that uncertainty could result in a “period of hibernation for some businesses in early 2021” while they gauge “how the land lies”. The Government has urged companies to “step up preparations”, said The Economist. 

Many have retorted that “uncertainty over the negotiations” has made “proper preparation all but impossible”. There’s also an information black hole on the likely macroeconomic impact – the Government hasn’t published an assessment of what any Brexit trade deal (or no deal) might mean. “Fortunately, the independent Office for Budget Responsibility has now done the job.” It predicts a “4% long-term loss of output with a deal, and an extra cut in GDP of 2% next year with no deal”. That echoes the Bank of England’s conclusion that “Brexit will cost more than the pandemic”. The OECD has just downgraded its 2020 forecasts, putting Britain second-to-last among leading economies with an expected 11.2% fall in GDP this year. “That is an unhappy position in which to inflict further disruption.” Markets, meanwhile, are treading water, said The Daily Telegraph. 

Even on the day that the first vaccinations took place, the FTSE 100 barely made it into the black. And, after a bruising session at the start of the week, the pound “popped into positive territory” on news that a deal had been clinched over management of the Ireland-Northern Ireland border. Every sliver of good news counts. “Investors have got this far without believing the Brexit bluster,” said Katie Martin in the Financial Times. But with just three weeks now remaining until 31 December, Monday’s fall in sterling – “its biggest since September” – was a sign of nervousness. Dropping out “without a safety net” has not been, in market parlance, “priced in”. Investors are not at panic stations quite yet: “the latest shake-up in sterling is nowhere close to the scale of referendum night” in 2016. “But the time for proving the optimists right is running out.”