It appears that since late 2015 the current developments in the United Kingdom are entirely in the shadow of Brexit. First, it was questionable whether or not referendum will be held; then Cameron’s government ended up holding the Brexit referendum last June which saw the British people elect to part from the European Union, and earlier this year, in March, PM Theresa May handed in the formal notice that triggered the two-year negotiation period during which the terms of the Brexit need to be established. So, how are things going on that front?
Not that well, it seems. Negotiations were expected to be difficult for a number of reasons: after the preliminary elections in the UK, the current government is quite unpopular and struggles with maintaining a steady position on what exactly the United Kingdom is prepared to do to exit the European Union, not to mention the EU is driving a hard bargain in order to discourage any other member-states from desiring to leave.
As talks between the two parties involved were underway this week, we caught a glimpse at the current situation. While there was some progress in terms of the UK agreeing to guarantee the rights of EU citizens currently there to continue their residence through the introduction of new ID documents, the big issues are in near-complete stagnation. Perhaps the most important point of divergence relates to money: the EU demands that the UK agrees to settle its financial obligations to the European Union before any other aspects of Brexit can be discussed. The United Kingdom, on the other hand, disagrees with some of the expenses and is trying to limit costs as much as possible.
The biggest issue (which likely stems from – or is exacerbated by – the lack of strong British leadership at the moment) is that nobody is certain what the United Kingdom aims for. The EU has set forward a set of conditions and things to discuss, but unless the UK – who initiated the whole Brexit matter – state outright their goals, no progress can be made. So far May’s government has made vague statements about reaching a good deal or exiting the free-trade area of Europe and limiting immigration, but none of the her speeches have provided any details or specific statistics they would like to achieve. May’s approach is noted for her now-infamous statement that “no deal is better than a bad deal” – which sounds a bit doubtful.
May’s government was harshly criticized yesterday by London’s mayor Khan, member of the opposing Labour party. Khan, who is concerned for London’s huge importance in the British economy and its role as an international business hub, seems to feel that May is too wrapped up in the internal issues of her Conservative party and is not attentive enough to the pressing needs of the UK as a whole. The Labour party recently expressed that it would like for the UK to remain in the EU’s single-market and would accept the EU’s immigration policy in order to ensure that – but it is unclear if they would be able to successfully influence May to take a similar approach.
All of this uncertainty is very hard for business. There are companies in the UK who rely on the opportunity to hire talent from all across the EU for their business activities. Similarly, other companies are eager to learn whether the Brexit deal would require them to move to another EU state instead of Britain, not to mention the British citizens who are working abroad and who may need to return to the UK. As every trader knows, uncertainty is not good for the financial markets – there is less and less confidence in the British pound each day. The GBP/USD has slumped to 1.29 and at this point any negative news regarding Brexit negotiations could drag it down.
