Brexit

[admin]

And some more backtracking by the Brexiters..

Certainly, leading Brexit campaigners, including Boris Johnson and Matthew Elliott, who ran Vote Leave, have said very clearly they are in no hurry to push the button.

Will article 50 ever be triggered? | Politics | The Guardian

Leading Brexit campaigner Iain Duncan Smith has distanced himself from a pledge by the official leave campaign to spend £350m “sent to the EU every week” on the NHS, saying he had never made the claim. During the referendum campaign, Vote Leave issued posters reading: “Let’s give our NHS the £350m the EU takes every week.” The campaign’s battlebus, outside which the former work and pensions secretary was frequently photographed, featured the slogan: “We send the EU £350 million a week – let’s fund our NHS instead.”

Iain Duncan Smith backtracks on leave side's £350m NHS claim | Politics | The Guardian

[admin]

The prospect of a parliamentary fightback against the result of the EU referendum gathered pace on Sunday, with pro-remain figures saying they would not “roll over and give up”. Some are urging a second referendum after Brexit negotiations have taken place. Lord Heseltine has pointed to the practicalities of an overwhelming majority in the House of Commons against leaving the EU. “There is a majority of something like 350 in the House of Commons broadly in favour of the European relationship,” he said. “There is no way you are going to get those people to say black is white and change their minds unless a) they know what the deal is and b) it has been supported either by an election or by another referendum,” Heseltine told Sky News. “So there’s a dramatic urgency to get on with the negotiations.”

Writing in the Guardian, Lammy said: “The referendum was advisory and non-binding, in contrast to the referendum on electoral reform in 2011, which imposed a legal obligation on the government to legislate. Almost 500 members of parliament declared themselves in favour of remain, and it is within their powers to stop this madness through a vote in parliament.

Parliamentary fightback against Brexit on cards | Politics | The Guardian

[admin]

The odds are completely against Jeremy Corbyn still being the Labour leader by the time of the next election, according to Ladbrokes this morning. Britain's main opposition party has imploded since the country narrowly voted to leave the EU on Thursday, with 19 shadow cabinet members resigning so far.

bookmakers' odds on the contenders for Labour and Conservative leaderships - Business Insider

Unemployment to hit 5.9% in 2017. "The UK economy is likely to enter a period of stagflation … This decision to leave the EU, in our view, will exacerbate current elevated levels of uncertainty and thus amplify already slowing economic momentum."

ANALYSTS: Brexit will bring recession ... and contagion - Business Insider

European diplomats have dismissed claims from Boris Johnson that the UK could negotiate access to the EU single market without obeying any of the rules. “You cannot have your cake and eat it,” said an EU diplomat, echoing a phrase the former mayor of London used during the campaign and which looks set to come back to haunt him. In a further blow to the leave camp’s credibility, Germany’s leading business group distanced itself from Johnson’s suggestion that German business expected Britain’s free trade with Europe to continue seamlessly.

Brussels rejects Boris Johnson 'pipe dream' over single market access | Politics | The Guardian

At the heart of Brexit is an act of self-harm to the UK’s trading industry (including, and perhaps especially, trade in services). But this is something that will evolve over the medium term as we gradually lose the benefits of the single market. It essentially means it will become more difficult for UK firms to sell stuff to the EU. Calculating the size of this effect is an exercise in trade economics not macroeconomics (see here for example). So it is not ‘intellectual arrogance’ to do this kind of analysis even if you think macro models have been a failure over the last 40 years. This decline in trade leads to a loss in productivity which makes UK citizens poorer over the medium term. It also means that the real value of sterling has to fall to make up for the fall in net exports (any decline in imports that result from leaving the single market will be less than the fall in exports). Other things being equal, this fall in sterling will happen immediately, as indeed it already has.

mainly macro: Just how bad will Brexit be, and can it be undone?

But a second referendum would not be necessary if, as a result of Cameron’s resignation, the UK fought a general election where the winning side explicitly campaigned not to invoke Article 50. This general election would become the second referendum. For this to happen three rather difficult but not impossible things have to happen. The first is that the Labour leadership need to stop talking about ‘respecting the will of the people’ and focus on how the Leave side are already owning up to their lies and false promises. The second, and perhaps most difficult, is that Labour need to form a united front on the basis of a Remain ticket, involving the LibDems, Greens and SNP. This is the only way the Conservatives and most of the tabloid press will be defeated. Third, the new Conservative leader has to be forced to hold a general election before Article 50 is invoked. Difficult, but not impossible.

mainly macro: Just how bad will Brexit be, and can it be undone?

[admin]

Then there is the kind of business that takes place. It is cliché that markets hate uncertainty, but that is what the UK has effectively signed up for for the next two years. Dealmaking will likely drop. Takeovers and initial public offerings will be put on pause.

Brexit is going to fundamentally change banking - Business Insider

Look at that cluster of mid-tier banks, and you'll notice something. They're pretty much all European banks. Barclays, Credit Suisse, Societe Generale, BNP Paribas, Deutsche Bank, and HSBC all find themselves in a tough spot. "For this group of banks we estimate cost bases are probably at least 20-40% too high unless there is a sizeable improvement in the revenue environment," the note said. What is clear post-Brexit is that the revenue environment isn't going to improve. That means that these banks will likely have to cut more staff, shed more costs, and give up on more businesses. It will accelerate the movement of market share away from European banks toward US banks.

Brexit is going to fundamentally change banking - Business Insider

The surprise decision by British voters to leave the European Union is about to spawn warnings about the risks from companies that generate revenue or have operations in the U.K or Europe.

Brexit uncertainty is starting to drive companies to disclose possible impact - MarketWatch

The real lunacy of the United Kingdom’s vote to leave the European Union was not that British leaders dared to ask their populace to weigh the benefits of membership against the immigration pressures it presents. Rather, it was the absurdly low bar for exit, requiring only a simple majority. Given voter turnout of 70%, this meant that the “Leave” campaign won with only 36% of eligible voters backing it. This isn’t democracy; it is Russian roulette for republics. A decision of enormous consequence — far greater even than amending a country’s constitution (of course, the United Kingdom lacks a written one) — has been made without any appropriate checks and balances.

The Brexit vote wasn’t democratic at all - MarketWatch

[admin]

Reverberations will be heard around the world. Morgan Stanley’s Chief European Economist, Elga Bartsch, says the leave will likely trigger a downturn, if not outright recession in Europe, and resurrect concerns about a euro break-up. “Depending on how Europe responds to a vote to leave, the financial stress expected in the UK could spill over into the euro area. In particular, if concerns about euro break-up would start to creep back into markets, financial conditions could tighten materially,” she says. The European team expects a significant hit to eurozone growth and heightened European political risks, while its global team expects any number of negative spillovers, particularly from further U.S. dollar strength, which could pull the global economy into the recession danger zone.

Brexit: Out of the EU, Into the Unknown | Morgan Stanley

David Cameron will address Parliament Monday after a weekend of political turmoil that left Britain looking rudderless following the shock vote to leave the European Union. The attempt by opposition Labour Party lawmakers to throw their leader Jeremy Corbyn overboard, coming on the heels of the prime minister’s announcement that he will be gone in months, left the sense on Sunday that Britain was facing its greatest crisis in half a century with neither a functioning government nor an opposition. Ministers who did break cover were unable to say what Britain’s future relationship with the EU might look like -- that was a matter for Cameron’s replacement, they said. Boris Johnson, one of Brexit’s most senior supporters and a favorite for the job, sought to reassure Britons in his Telegraph column, published Sunday night, saying fears of the vote’s consequences were “wildly overdone.” But while he stressed there was no hurry to start negotiations with the EU, he fell short of putting forward any kind of plan.

Cameron to Face Lawmakers as U.K. Drifts Aimlessly to Brexit - Bloomberg

Only the Liberal Democrats, who were nearly wiped out in the 2015 general election, see a clear path. Leader Tim Farron said the party would pledge to keep the U.K. inside the EU. Although this is an offer the country has just rejected, a party that plainly rejected Brexit could pick up the support of many of the 48 percent who voted against it. “The total lack of leadership in the wake of the referendum is probably even more worrying than the vote’s unexpected outcome,” wrote Carsten Nickel, deputy director of research at Teneo Intelligence, in a research note. “U.K. domestic politics should be considered as a source of political risk for the foreseeable future.”

Cameron to Face Lawmakers as U.K. Drifts Aimlessly to Brexit - Bloomberg

Britain isn’t a member of the euro, but the U.K.’s vote to exit the European Union lays bare fears that a spreading political backlash against Europe’s longstanding political order could pose a renewed threat to the survival of the shared currency. “This is actually a huge blow to the process of European integration and is incomparably more damaging than the threat of a Greek exit from the eurozone” ever was, said Nicholas Spiro, partner at London-based Lauressa Advisory, in a phone interview.

Will the euro survive Brexit aftermath? - MarketWatch

Internal documents from the pro-Remain group TheCityUK show that they could live with an EEA option - or hybrid variant - that would preserve the City's viability by safeguarding EU passporting rights for financial services.

Parliament must decide what Brexit means in the interests of the whole Kingdom

[admin]

The stakeholders of the global economy are struggling to plot a course through the aftershocks of Brexit. From what’s legal to what’s possible to what’s desirable, little has been clarified in the four days since U.K. voters took the unprecedented step of choosing to take their country out of the European Union. Making matters even more complicated are the meltdown in Britain’s two main political parties and the enduring legacy of the 2008 financial crisis. “Uncertainty is bad,” said Kit Juckes, global strategist at Societe Generale SA. “That wouldn’t matter if the global economy were ticking along nicely, but it isn’t.”

Picking Through Brexit Rubble, Leaders Try to Plot the Future - Bloomberg

Failure to mend fences with London risks an economic crisis that would expose the long-festering pathologies of monetary union.  "There is a cocktail of factors that could lead to disintegration," said Pier Carlo Padoan, Italy's finance minister. "We face a double reaction from Brexit: financial and political."    The 12.5pc collapse of Milan's FTSE MIB index on Friday was a warning shot. Unicredit was down 24pc, below depths reached in the Lehman crisis. Italy's banking system has been so destabilized by the EU's new "bail-in" rules that it cannot withstand any serious errors made over Brexit.

Parliament must decide what Brexit means in the interests of the whole Kingdom

Boris Johnson, Dan Hannan, and others in the sovereignty camp are signalling that they could live with a Brexit compromise that accepts EU migrant flows,  but going back to pre-Maastricht rules that guaranteed only the right to work, before the concept of EU citizenship. This would be a modified variant of the Norwegian Model, or European Economic Area (EEA).

Parliament must decide what Brexit means in the interests of the whole Kingdom

EU legislation is incorporated into the devolution settlements of Scotland and Northern Ireland. In effect, they have a "reserve" that can greatly complicate Brexit, giving them legal leverage as well as a moral claim for special care. By the same token, Scottish and Northern Irish demands give Leavers the political "cover" they need to accept a compromise.

Parliament must decide what Brexit means in the interests of the whole Kingdom

[admin]

First, international banks are likely to move staff out of London and do less business in the UK. Long before the vote, rival financial centers like Paris began campaigns to woo those bankers. JPMorgan chief Jamie Dimon told an audience of bank employees in Bournemouth, one of many regional financial centers in the UK, that as many as 4,000 jobs may be affected by a Brexit before the vote. He then sent a memo to staff after the vote, saying that the bank may need to make changes to its European legal-entity structure and the location of some roles. And Jes Staley, CEO of Barclays, sought to reassure foreign nationals working for the bank in the UK after the vote, but had to admit that he doesn't know what will happen.

Brexit is going to fundamentally change banking - Business Insider

It isn't just a question of whether staff move from London to another financial center, either. New jobs are less likely to be created in London.  M&G Investments, the fund arm of insurer Prudential, is looking at expanding its operations in Dublin, according to Reuters. The proposed merger between the London Stock Exchange and Deutsche Borse, which would have seen the combined group based in London, now looks to be on shaky ground. Germany's financial regulator has also said that London will no longer be the center of euro-denominated trading. All of this adds up to a significant blow to London's standing as a financial center and to the UK economy.

Banks get ready to move staff from London - Business Insider

“You lied,” Juncker told Farage as he listed the reasons why he thought British voters were misled during the referendum campaign, including the claim that the U.K. could strengthen control of its borders, when it has never been in Europe’s frontier-free Schengen zone anyway. “Why are you here?” Juncker asked Farage, who like his fellow British members of the EU Parliament, will lose his job when the U.K. leaves. “You’re never coming back.”

Triumphant Farage Crows to EU as Juncker Tells Him He’s a Liar - Bloomberg

A decline in a currency’s value typically benefits an economy by making goods and services produced within it more competitive on the global market. But for the U.K., it could be too much of a good thing. These benefits take time to materialize—companies can’t ramp up exports overnight. And the U.K.’s overreliance on foreign money means that the drop in the pound could drag its economy into a recession in the coming quarters, long before the benefits can be seen, said Carl Weinberg, chief economist at High Frequency Economics.

Here’s how the weak pound could wreck the U.K.’s economy - MarketWatch

[admin]

Just eight months ago, Chinese President Xi Jinping was snapping selfies with soccer stars in Manchester, dining at Buckingham Palace and drinking beer in an English pub. Queen Elizabeth hailed Xi’s U.K. visit as a “defining moment.” Xi and Prime Minister David Cameron heralded in a "golden era" of relations, establishing the U.K. as China’s “best partner in the West.” Xi quoted Shakespeare and stressing Britain’s “positive role” in deepening China’s ties with the European Union. Now, Cameron is on the way out, Britain has voted to exit the EU and Xi’s being forced to reassess his strategy for the 28-member bloc, China’s second-biggest trading partner, according to data compiled by Bloomberg. The U.K. has been a key advocate for China in Europe, from building trade-and-financial links to supporting initiatives such as the Asian Infrastructure Investment Bank. Beijing’s leaders were counting on the U.K’s backing later this year when the bloc decides whether to grant China market-economy status. “One major reason why China attaches great importance to its relations with the U.K. is to leverage EU policy via the U.K.," said Xie Tao, a professor of political science at Beijing Foreign Studies University. London’s value as a "bridgehead" to Europe has been lost with Brexit, Xie said, leaving China to turn its focus to Germany.

Brexit Throws Off Xi and Cameron's Political Bromance - Bloomberg

[admin]

That might sound like a long time away, but it’s not. “The two-year negotiation timetable is clearly too short for Britain,” Moody’s Analytics says in a new report. Here’s a short list of what the UK must do in that time window:

– Negotiate a new trade deal with the European Union. – Negotiate trade deals with more than 50 other nations

– including the United States and China – that have trade agreements with the EU, since the UK will no longer be governed by those deals.

– Establish “passporting rights” that allow the UK’s thriving financial services industry to operate seamlessly with the rest of Europe, as it does now.

– Make a deal determining the fate of two million Brits living in other EU nations, along with three million EU migrants living in Britain.

Anybody who thinks all of this will be easy never negotiated a trade deal, which typically takes 4 to 5 years to put in place. Multiply that by 50 and you get some idea of the daunting work the UK must accomplish in a short amount of time.

This is why Brexit will be a nightmare for the UK - Yahoo Finance

There are models the UK can follow that might allow economic integration with Europe, without adherence to its immigration rules and other requirements Brexit voters strongly objected to. Iceland, Liechtenstein and Norway, for instance, essentially pay a fee to the EU to enjoy trading privileges in the common market. But the fees in Norway, the nearest analog to the UK, are almost as high as what the UK pays to the EU now, and Norway has no say at all in EU decisions. This arrangement “would not generate substantial fiscal savings for the UK government,” according to a recent analysis by the London School of Economics and Political Science. Since UK payments to the EU were one of the primary objections of Brexit voters, this option seems to violate the spirit of Brexit.

Switzerland has a different deal with the EU and pays about 60% less than the UK does, but “the Swiss model would result in less economic integration… leading to higher economic costs of Brexit,” according to the LSE paper. Then there’s the Canadian model, which allows the free flow of goods but is not as open regarding services, including finance, which would deal a blow to the UK banking sector, a key competitive advantage of the UK economy.

This is why Brexit will be a nightmare for the UK - Yahoo Finance

[admin]

More worrying is what S&P also said: that debt coming due over the next 12 months is 755pc of Britain’s external receipts and large sums have to be rolled over continuously. This is the highest for all 131 rated states, thanks to London’s role as a global financial hub. We will not know whether there is any mismatch, either in currencies or maturities, until the repayment deadlines hit and the skeletons come out of the closet. The test lies ahead.

Was Brexit fear a giant hoax or is this the calm before the next storm?

What we have learnt from the market moves since Brexit is that Europe is just as vulnerable as Britain. The vote has already triggered a banking crisis in Italy, where the government is struggling to put together a €40bn (£33bn) rescue but is paralysed by the constraints of euro membership.

Was Brexit fear a giant hoax or is this the calm before the next storm?

The FTSE 100 index of equities in London is back to where it was on the eve of the vote, compared to falls of roughly 6pc in Germany and France, 10pc in Spain, 11pc in Italy, 13pc in Ireland, and 14pc in Greece.  My point is not that they we are in OK and that they are in trouble. That would be facile. The FTSE 100 is cushioned - or flattered - by the devaluation effect on foreign earnings of big multinationals. The broader FTSE 250 is a purer gauge, and that has dropped 8pc. Homebuilders Persimmon and Taylor Wimpey are still down by a third. It is not painless.

Was Brexit fear a giant hoax or is this the calm before the next storm?

Morgan Stanley says they need to wake up. It warns that the eurozone will suffer almost as much damage as Britain in a 'high stress scenario', and so do others. Danske Bank says the UK and the eurozone will both crash into recession later this year.

Was Brexit fear a giant hoax or is this the calm before the next storm?

The more sterling falls, the greater the net stimulus for the British economy. The reverse holds for the eurozone. It is a further deflationary shock at a time when Europe is already in deflation, when inflation expectations are in free-fall and bond yields are collapsing below zero, and when the ECB is running out of options.

Was Brexit fear a giant hoax or is this the calm before the next storm?