No-Deal Brexit More Likely as Pound Trading Remains Calm
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- Competition law remains a principal point of disagreement
- The EU prepares for a no-deal scenario
The negotiation process between the UK and the European Union is headed to a dead end as the two sides might not be able to reach an agreement on the main divergences, according to officials.
UK Prime Minister Boris Johnson was unsuccessful in his attempt to strike a deal with European Commission President Ursula von der Leyen over Wednesday night dinner and even though their meeting was described as “frank”, the sides continue to signal that it may be impossible to bridge the gaps. The nine months of negotiations have now reached the final countdown of fewer than three weeks and after multiple deadlines, the main disagreements remain the fishing rights, the rules for fair competition, and governance.
Both Prime Minister Johnson and EC President von der Leyen have commented that the two sides remain far apart on these three sticking points. Mr. Johnson has made it clear that the UK will fight for its sovereignty and will not allow the EU to narrate the competition rules as they evolve over the years. The bloc, on the other hand, insists that the UK adheres to the EU’s trade regulations to protect the stability and integrity of the single market.
Boris Johnson Anticipates a No-Trade Deal
In light of the faltering negotiations with the European Union, UK Prime Minister Boris Johnson warned the public in a TV interview on Thursday to be prepared for a no-trade deal between the UK and the EU. Mr. Johnson commented that the UK has better chances for an Australian type of relationship with the EU rather than a Canadian one and urged the public to “get ready for that Australian option”. If the UK goes into the Australian-style Brexit, the World Trade Organization rules will apply, which would put tariffs as well as quotas after the transition period ends on Dec 31.
Recently, the former Australian Prime Minister Malcolm Turnbull told British media that Australia does not have a “satisfactory” trade relationship with the EU while also saying that there are “very big barriers to Australian exports and a lot of friction in terms of services”.
Additionally, the European Commission on Thursday published its contingency plans in case no deal is signed. According to an EU official, there is also the option of a “friendly no-deal” which puts in place reciprocal contingency rules and standards, effectively allowing trade talks to continue in 2021.
In these gloomy times, the Great British pound remains contained in the region of its recent lows reached earlier this week. The UK currency is now hovering slightly above the 1.3300 marks against the US dollar with a Thursday low of 1.3250. Sterling traders seem to be resilient and optimistic that a deal could be reached before the end of the transition period. On Tuesday, the GBPUSD reached a weekly high of 1.3478.
In other news, Wall Street firm Morgan Stanley has planned to move $120bn of assets to Frankfurt as the company shifts its business away from the UK. The US lender plans to move the assets in the first quarter of 2021. The business shift is the latest in recent months where big businesses are moving from London to the European Union. JPMorgan Chase and Goldman Sachs were also among the firms that chose to move assets and staff, which for JPMorgan include €200bn in assets and a staff of 200 people. Goldman Sachs is expected to move 100 workers from London to other European cities alongside up to $60bn in assets from the UK to Frankfurt.