Brexit

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When asked about prospects for the coming 12 months in the light of the result of the EU referendum, consumers' response was strongly negative in all seven areas. Non-essential spending is the area where consumers feel least confident over the next 12 months. This was closely followed by their overall personal financial situation, and savings and investments. UK house prices was the area where people feel least concerned.

Deloitte Consumer Tracker for the second quarter of 2016 - Business Insider

Business leaders urged U.K. Chancellor of the Exchequer Philip Hammond to deliver a “bumper” fiscal stimulus, saying the Bank of England can do little to revive confidence on its own. The Institute of Directors said its latest survey found increasing pessimism about the economy in the wake of the surprise decision in June to leave the European Union, with marginally more firms now expecting to cut investment than increase it over the next 12 months.

BOE Action Not Enough as U.K. Business Pleads for Fiscal Boost - Bloomberg

Catastrophist talk of an instant downward spiral following a No vote in the referendum – mostly emanating from George Osborne’s coterie - was always premised on the willfully-false assumption that the Bank of England would sit idly by and let it happen. Today’s actions have at least demolished that canard... The risk of doing too much is far lower than the risk of doing too little,” he said. Mr Blanchflower said the new global consensus in a world of zero rates is that monetary and fiscal policy must act in concert, each reinforcing the other for maximum effect. This is the exact opposite of post-war orthodoxies, but the cult of central bank independence was always a fair weather illusion. We are all Keynesians now.

We are all Keynesians now, so let's get fiscal

The Bank of England has fired the starting shot of a massive policy pivot as Britain disentangles itself from the EU system after 43 years. The quarter point rate cut today and a further £10bn of Gilt purchases each month for the next six months will help to shore up confidence, and may ‘bend down’ the yield curve a fraction more. Yet borrowing costs are not the problem. The UK has been stuck in an investment slump ever since the Lehman crisis, even though it has never been cheaper to borrow in the known history of the human race. British companies are sitting on £500bn of idle cash already because they cannot see how to make a profit amid secular stagnation.

We are all Keynesians now, so let's get fiscal

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Theresa May's promise to make a Brexit work for the United Kingdom looks to be approaching yet another major hurdle in the form of Norway.  That is because the Nordic state's European affairs minister, Elizabeth Vik Aspaker, said her government could block the UK from trying to rejoin the single market, as it's not in Norway's interests.... One of the major concerns for the Norwegian government, the Aftenposten report says, is that Norway would have to renegotiate a host of trade agreements if the UK were to join. This would be an incredibly long and complex process.

Norway could stop UK rejoining the single market - Business Insider

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The pound trading at $1.50 may seem like a distant memory, yet a few voices see it fully recovering from the Brexit sell-off. A weaker pound will support growth and restore balance in the U.K. economy, while the country will be able to strike a deal in exit talks with the European Union that maintains its competitiveness, said Stephen Jen, chief executive of investment company Eurizon SLJ Capital Ltd. The pound may take a couple of years to return to a pre-Brexit level, he said.

Rare Brexit Optimist Calls for Pound to Climb Back Toward $1.50 - Bloomberg

A lawsuit brought by a hairdresser, an investment-firm manager, and a handful of other plaintiffs that demands Parliament hold a vote on whether to trigger Article 50 will be heard by the UK Supreme Court, according to Bloomberg. The case is crucial because it sets out a legal path that could allow the House of Commons to ignore the result of the EU referendum. The plaintiffs argue that an Article 50 request to leave the EU can only be triggered by a vote in Parliament, not the mere request of the prime minister. If the Supreme Court agrees, then the Article 50 request would be put to the House of Commons. It is not certain that Article 50 would get enough votes.

UK Supreme Court case on Article 50 could stop Brexit - Business Insider

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London property rents fell for the first time in six years in July, a major U.K. estate agency said on Monday, with landlords opting to rent out rather than sell houses in the wake of the U.K.'s vote to leave the European Union (EU). Rents in the capital city fell by 0.5 percent over the last 12 months to average £7 ($9) less per month than in 2015, Countrywide said. This was the first time monthly rents in London had fallen year-on-year since November 2010, when the U.K. was recovering from recession. Across Britain, rents rose by 1.5 percent year-on-year in July, which was the slowest rate since 2012.

London house prices seen falling 10% as rents decline for first time in 6 years

Weaker demand, slower growth, faster inflation -- that’s the U.K. economy that the Bank of England sees in its crystal ball after the nation voted for Brexit. Now the first hard numbers are on the way. So far, surveys and estimates have mostly -- though not comprehensively -- shown that the June 23 decision to quit the European Union has prompted a downturn. The Office for National Statistics will this week publish figures giving more solid clues as to whether that’s the case.

Here Comes the Brexit-Era British Economy in Hard Numbers - Bloomberg

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Big investment banks with their European headquarters in London will start the process of moving jobs from the U.K. within weeks of the government triggering Brexit, a faster time line than their public messages of patience would imply, according to people briefed on the plans being drawn up by four of the biggest firms. Dismayed by the lack of a clear plan to protect the U.K.’s status as a global financial hub, executives are planning for the worst -- that they will lose the right to sell services freely around the European Union from the City, said the people, who asked not to be identified because the plans are private. Facing a long process with potential waits for regulatory approvals before workers can pack their bags, banks want to start quickly in order to have new or expanded offices set up in Europe before the end of the two-year Brexit negotiation period.

Banks Won’t Wait to See What Brexit Deal the U.K. Can Get - Bloomberg

Charles Grant, the director of the Centre for European Reform, believes that the UK needs to conduct five interconnecting sets of trade negotiations (actually he identifies more but I’m going to leave out those on foreign, defence and security policies for the sake of simplicity).

A deal on Brexit was never going to be easy. There's plenty that could go wrong

These are – deep breath – the UK’s legal separation with the European Union; a free trade agreement with the EU (which will, hopefully but not necessarily, be concurrent to the separation talks); the negotiation of an interim deal to cover the period between the UK separating from the EU (two years after Article 50 has been triggered unless all 27 remaining members of the EU unanimously agree to extend the timeframe) and when the FTA talks are concluded (those between the EU and Canada took seven years and only included limited access to the single market for services); accession to full membership of the World Trade Organisation (which requires the unanimous approval of all 163 members – including countries like Russia and Argentina with whom the UK has somewhat testy relations); and 53 new FTAs to replace those that the EU has with different countries around the world. Phew.

A deal on Brexit was never going to be easy. There's plenty that could go wrong

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U.K. retail sales posted a strong beat on Thursday, adding to a positive picture for the country's economy following the decision to leave the European Union. July retail sales - an indicator of post-Brexit vote sentiment - posted a monthly rise of 1.4 percent versus consensus expectations of a 0.2 percent increase. The yearly figure saw a rise of 5.9 percent, according to official data by the Office for National Statistics.

UK July retail sales show strong beat with monthly rise of 1.4%

There were warnings of recession before the EU referendum and more such gloomy forecasts have followed the vote to leave. But after a week of official economic data – including inflation and unemployment – gave a clearer impact of the immediate consequences of the poll, what do the numbers so far tell us? Employment is up, shoppers kept spending and a weaker pound has boosted UK tourism. At the same time, inflation has picked up, house prices have wobbled and businesses say they are nervous about hiring and investing.

Boom or gloom? The economic verdict on Brexit … so far | Business | The Guardian

The options come down to something the well-dressed City slicker knows all about. Does it go for an off-the-peg arrangement, or have something made bespoke? Off-the-peg would be best for many in financial services: they would prefer that if the UK is to leave the EU, it should at least stay in the single market, which would include that all-important passporting. However, it is looking increasingly likely that the off-the-peg solution is just not an option. That is because membership of the single market has always come at a high price, allowing the free movement of people from across the EU and paying money into the coffers of the EU. The City, which has been testing the waters, seems to have decided that is just not going to happen. As prime minister Theresa May said, "Brexit means Brexit". And with many voters deciding to vote Leave to keep "our money" and to reduce immigration, the price of membership of the single market would be unacceptably high. That leaves a "bespoke" solution, one based on the Swiss Model (pun intended), one where the UK negotiates a series of deals with the EU covering different industries. This is what Switzerland has done and it is a very prosperous country, but it does raise several areas of concern for the financial services industry in the UK. For a start, the City will want a better deal than the Swiss enjoy. The perfect illustration of that is the fact that one of the reasons the City is so successful is that it has attracted all those banks to London to do business in the EU, including all the major Swiss ones.

Will Brexit deal suit the City of London? - BBC News

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U.K. job seekers are starting to see the impact of Brexit, with salaries under pressure and companies advertising more contract positions as they resist committing to permanent hiring. The average advertised salary was 32,688 pounds ($43,174) in July, down 2.4 percent from a year earlier, according to an index by job search engine Adzuna published Tuesday. When inflation is taken into account, real earnings have fallen 3 percent, it said.

U.K. Salaries Weaken as Employers Start to Hesitate Post-Brexit - Bloomberg

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Meanwhile, it is evident from its behaviour so far that the government is all over the place. But one thing is crystal clear: by making immigration the priority over membership of the single market, Theresa May is almost guaranteeing that, in order to offer sops to the Cerberus of burgeoning racism in this country, the economy will suffer.

In the past 43 years of membership of the European Union for which successive prime ministers fought so hard, we have become an integral part of the European economy. In addition, until this summer, we enjoyed, in George Soros’s words, “the best of both worlds” – being beneficiaries of our trading relations with the rest of the EU, while outside the eurozone and the Schengen arrangement.

While I have always been strongly European, I agreed with the many economists who argued that the eurozone was badly constructed, placing noble political aims over economic reality. The American economist and Nobel laureate Joseph Stiglitz, who is by no means anti-European, has delivered a powerful critique of the way the eurozone has produced lower growth than potential, and unnecessary and potentially dangerous levels of unemployment in nations that, frankly, were not qualified to join a fixed exchange rate system in which the principal beneficiary was Germany.

Nevertheless, the decision not to sign up to the euro – a masterstroke on the part of Gordon Brown and Ed Balls – did not diminish the advantages of being in the single market. Big business, and many small businesses, operate at a European level, with supply chains all over the continent. They are accustomed to the existing laws and regulations. Moreover, our membership of the EU is the principal attraction for all that inward investment that governments of both major parties have successfully attracted over the decades. All this is being put at risk, as a result of craven acceptance of an “advisory” referendum whose result was almost certainly determined by the false prospectus offered by the Brexiters.

Brexit is truly daunting: this is the biggest crisis I have known | Business | The Guardian

The world’s largest pension fund has blamed a $52 billion quarterly investment loss on the UK’s surprise Brexit vote in June to leave the European Union. The massive paper losses suffered by Japan’s Government Pension Investment Fund (GPIF) in the April to June quarter of 2016 almost matched the $50 billion losses it recorded in the 2015-16 financial year — its worst year since the global financial crisis.

World’s biggest pension fund blames $52 billion quarterly loss on Brexit

UK cosmetics maker and retailer Lush is relocating European staff from Britain to Germany and has expanded production at its German factory in the wake of Britain's vote to leave the European Union, it said on Wednesday. Lush, which makes cosmetics by hand, said uncertainty caused by the June Brexit vote had led it to accelerate plans to increase production at its factory in Duesseldorf, western Germany, for the European market.

UK cosmetics group Lush relocates staff to Germany post-Brexit | Reuters

Germany's DAX shows two key charting features.The first is the long-term downtrend line. This starts with the peak near 12,390 in April 2015. The downtrend line is anchored with the highs in December 2015. The positioning of the line is confirmed with the peak and retreats in June 2016. It's a validly placed and effective trend line that defines the DAX downtrend. It was broken in July 2016 with a clear move and close above the value of the downtrend line. The rally from this point has continued over the past four weeks. That in itself is a buy signal and bullish opportunity. It is the second chart pattern that provides added interest and confirmation support for the breakout. This is the inverted head and shoulder pattern. The shoulders are shown as points A and C. The head is shown as point B. The neckline of the pattern is a segment of the downtrend line.

This is why Brexit could be good news for German stocks

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Japan's government has warned that Brexit could result in the country's firms moving their European head offices out of Britain. The strongly worded report from Japan's foreign ministry says the firms might want to move "if EU laws cease to be applicable in the UK". It calls on Theresa May's government to behave in a "responsible manner". Downing Street received the report earlier this week, the BBC's Laura Kuenssberg understands. Japanese firms employ an estimated 140,000 workers in the UK, with Nomura bank, manufacturing giant Hitachi and carmakers Honda, Nissan and Toyota all having major bases in the country.

Brexit: Japan warns firms may move European HQ out of Britain - BBC News

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The government should say that Britain is leaving the EU because it wants no part of the EU's supranational ambitions. The relationship Britain ought to propose is one between law-making governments -- the U.K. on one side and the EU and its member states on the other -- not one between law-taking subsidiary units of a single constitutional entity. Subject to that, Britain will seek the maximum amount of economic integration and diplomatic cooperation.

Broadly stated as those goals may be, they're clarifying. For instance, they rule out the so-called Norway option, which grants access to the EU's single market but also requires free movement of workers and automatic application of EU legislation. They also rule out arrangements that would forbid Britain to negotiate free-trade agreements with other countries -- so no customs union (with a common external tariff), like the one the EU has with Turkey.

For many Brexit voters, control of immigration was the sticking-point, prompting the question: Could access to the single market be separated from free movement? It depends what you mean by "access to the single market," a term that's used too loosely.  In EU-speak, the "single market" is much more than an economic arrangement: It's an explicitly supranational undertaking, bound up with free movement of people as well as with free trade in goods, services and capital -- all understood as indivisible constitutional principles.

By definition, an intergovernmental relationship therefore rules out membership of the single market. But it doesn't rule out access. Free trade in goods, services and capital, and a high degree of labor mobility, are all possible, so long as those things are understood not as the constitutional underpinnings of a supranational order but as the terms of an ambitious free-trade agreement. And that, in a nutshell, is what Britain should aim for in its future relations with the EU -- an enhanced FTA. A new paper by Jean Pisani-Ferry and colleagues for Bruegel, a European think tank, says more about how this might look.

Britain's current full compliance with EU rules means that, in economic terms, the straight-line distance from here to there is not that great. In legislative terms, though, the journey is a long haul: EU laws have to be recast as British laws, and the reciprocal obligations of the EU and its members need to be recast accordingly. New agreements with the World Trade Organization and non-EU countries will also be needed. Then allow for the detours demanded by Article 50, and the punitive instincts that an exasperated EU might indulge, and the actual distance between here and there is likely to be exhausting. That will be the price of Brexit. In the end, though, and inconceivable as it may seem to respectable opinion in Britain, the destination -- restoring the U.K. as a sovereign law-making nation, with a government accountable to its citizens -- might be worth it.

Mapping Britain's Exit From Europe - Bloomberg View