In World Economy News 03/10/2016
Business groups and foreign capitals pressed Prime Minister Theresa May for more detail after she said she’ll start pulling the U.K. out of the European Union in the first quarter of 2017, and hinted that she’s tending toward a so-called hard Brexit.
The premier told her Conservative Party’s annual conference in Birmingham, central England, that she’ll invoke Article 50 of the EU’s Lisbon Treaty — the formal trigger for two years of talks — by the end of March. May also said she’ll introduce a bill to convert all existing EU laws into U.K. legislation to provide certainty for business and investors.
Left unanswered were most questions about what form the divorce will take and what sort of subsequent trade deal May will try to strike. Such doubts, and speculation that Britain will favor controlling immigration over safeguarding access to the single market prompted a decline in the pound against all but one of its 31 major peers.
“The prime minister has removed one big question — on timing — but has accelerated an urgent need for answers on others,” Confederation of British Industry Director-General Carolyn Fairbairn said in a statement. “Businesses cannot continue to operate in the dark in other areas.”
May, attending her first Tory conference as leader after June’s referendum decision to quit the EU upended British politics, is having to balance the will of the electorate with the demands of a fractious party and the desire of business for as little disruption as possible.
Miles Celic, chief executive officer of TheCityUK lobby group, said the banking industry remains keen for a “transitional period to help ensure financial stability and minimize disruption to their ability to provide products and services to customers.”
‘Real and Pressing’
May on Sunday pledged to control immigration in Britain’s best interests while retaining access for business to the single market, seeking “the best deal possible” for U.K. companies.
“I know some people ask about the ‘trade-off’ between controlling immigration and trading with Europe. But that is the wrong way of looking at things,” she said. “We will do what independent, sovereign countries do. We will decide for ourselves how we control immigration. And we will be free to pass our own laws.”
The reaction from Europe was lukewarm. While May indicated she now hoped to start informal talks, Raimundas Karoblis, Lithuania’s vice-minister of foreign affairs, said there can still be no “negotiations without notification.”
“We are not much farther than we were before,” Czech Foreign Minister Lubomir Zaoralek told the state newswire CTK. “We still haven’t been clearly told by Britain what it wants to do.”
Jobs ‘Disaster’
The leader of the pro-EU Liberal Democrat party, Tim Farron, said May “has just confirmed that we are going for a hard Brexit.” Such a move “means disaster for British jobs, businesses and our economy,” he said in a statement.
As well as commerce and immigration, the U.K. and EU must find common ground on rights for their citizens in each other’s territory, the border between Northern Ireland and the Republic of Ireland, and what, if anything, the U.K. contributes to the EU budget. There are also a string of legal, regulatory, energy, agricultural and security issues to address.
“The terms under which the U.K. will eventually leave the EU have not become any clearer,” Carsten Nickel, deputy director of research at Teneo Intelligence in Brussels, said in a note to investors. “The uncertainty surrounding the Brexit process will remain heightened for the foreseeable future.”
Customs Union
May’s trade secretary, Liam Fox, suggested that leaving the EU’s customs union would not be a serious problem for the U.K.
“Most businesses in the world are outside the European Union. The United States is outside the European Union — it doesn’t seem to be seriously hampered in doing business with Europe because it’s not in the customs union,” he told an event at the conference on Sunday when asked how businesses would avoid more red tape outside the customs union. “You have to be rational about all of that.”
May’s announcement means the two years of Brexit negotiations should be completed in 2019, 46 years after the country joined what was then the European Economic Community, though Fox cast some doubt on that timetable. “What we want is the best exit for the United Kingdom, not the quickest,” he said. “I wouldn’t put a timescale on it.”
Source: Bloomberg
