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In our article of October 2018, we described the country’s history, the fighting spirit and the nation’s pragmatism to support the argument that a Brexit deal, or no deal, would not be an issue over the medium/longer term for the British people. As one observes the population go about its daily business, this comment is still pertinent today.
We also considered some kind of agreement past the Brexit deadline. With the possibility of an extension, this scenario is not totally off the table.
However, what we could not have imagined, was the extent of the political mess Brexit is causing in the House of Commons. As the UK parliament refuses the current proposal put forward by Prime Minister May, it confirms not wishing to leave the European Union (EU) without a deal of some sort at the same time. The actions of British Politicians are making them ‘all just prisoners here … of their own device’ (Hotel California, Eagles). In effect, they have maneuvered themselves into a corner with nowhere to go. They can no longer close the divorce process with the EU weeks before the deadline, nor can they accept a new deal, as there is none on offer (yet).
On the economic front, the Finance industry has already organized itself to maintain access to the European financial market, with passporting ‘put throughs’ via Luxembourg and Ireland. The ‘City’ is well prepared for any outcome. For trade however, the organizational logistics are becoming a nightmare. This is likely to disrupt exchanges with the EU, a large exporter to the UK. In addition, the sorry sight of a disorderly British Parliament and local media bashing of an imminent end of the world for its people post Brexit, are likely to weigh on the consumer sentiment moving forward. Not good for business either side of the channel.
‘Muddling through’, ‘Fudging’ a deal or ‘Kicking the can down the road’ have been traditional ways politicians sort out problems. However, the times today are so grave and the decisions of such consequence that these approaches are no longer appropriate. To top it all, the population is now divided and feed up with the whole Brexit issue. A new referendum or general election might not even provide a clear answer as to what way to go. As deadlock looms pending a new deal (if ever there is one), the UK could end up just being ‘unable to leave’ after having triggered Article 50 to ‘check out’ of the EU.
Column by Steven Groslin, Executive Board Member and Portfolio Manager at ASG Capital