David Johnson, Director at Halo Financial, comments on Theresa May’s Brexit speech and warns to keep an eye on the volatile Pound
British Prime Minister, Theresa May, delivered some surprises as well as a raft of pre-briefed details in her speech.
“The outline for her Brexit plans included an agreement to put the final proposal to parliament for scrutiny; pre-empting the Supreme Court’s decision.”
“Mrs May also made it clear that Britain’s departure from the EU would not leave a foot in the door. It will be a divorce and not a trial separation but Britain will, in the PM’s view, continue as an outward looking trading nation with a desire to do more business and not less and to continue to be a good neighbour to Europe.”
“The markets clearly liked what they heard. Sterling rose by a cent against the Euro and two cents against the US Dollar while the Prime Minister spoke and the confirmation of parliamentary oversight of the final EU negotiations caused the greatest spike.”
“Whether the Pound will maintain these gains is open to question. There is little doubt that traders had sold Sterling ahead of the speech and no doubt that the Pound was oversold in early UK trade.
“It should be remembered, though, that this isn’t even the starting gun for the EU negotiations. This is akin to a runner limbering up before get set in the blocks. The starter pistol will fire when the Prime Minister triggers Article 50 of the Lisbon Treaty; and that too may be in question because the Supreme Court has yet to deliver its verdict on whether the Prime Minister can trigger that herself or whether she needs Parliamentary consent to do so.”
The Business Chambers of Commerce echoed this sentiment in their post-speech comments to the BBC: "In business, what you achieve in a negotiation - not what you bid for - is what really matters. While businesses now have a clearer sense of the Prime Minister's top-line priorities, they will come away from her speech knowing little more about the likely outcome of the Brexit negotiations than they did yesterday."
“Volatile trading will continue and a bumpy ride is what awaits the Pound over the coming years. Of that there is no doubt,” warns Johnson.
Key points from the UK Prime Minister’s Speech
Rules and legislation
The Prime Minister stated that the plan was to transpose EU rules into UK law – “…the same rules that applied before Brexit will apply after.”
“A United Brexit”
Mrs May emphasised the relationships and important ties with the devolved Parliaments across the UK, starting that rules will be voted on by Parliaments in the UK, Scotland, Wales, and Northern Ireland.
“Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast”, adding that “we are working across UK for a united Brexit.”
Mrs May pointed out that maintaining the existing common travel area with the Republic of Ireland will be important – this was formed before either country was a member of the EU. The Prime Minister spoke of the “Special Relationship” between the UK and Ireland and emphasised that “Nobody wants to return to the borders of the past”.
“Britain is an open and tolerant country – we will always encourage immigration, especially highly-skilled immigrants, but Brexit must mean control of the number of people who come to UK from Europe”
Rights of EU Citizens
It is key to protect rights of EU citizens already living here and UK nationals in EU. The Prime Minister is already in discussions about this and it remains an important priority for Britain to resolve this challenge as soon as possible.
Mrs May talked about “empowering UK as open trading nation”
“The opportunity ahead is to build a truly Global Britain – reaching out to old friends and new allies. It starts with close friends and neighbours in Europe – we are aiming for a bold and ambitious free trade agreement with Europe. It should give British companies maximum freedom to trade with European businesses and vice versa, but CANNOT mean membership of the Single Market. Being out of the EU but part of the Single Market would mean complying with all the Single Market rules and regulations without any say in them. Mrs May described this as “…to all intents and purposes meaning not leaving the EU at all.”
She confirmed that they do not seek membership of Single Market – but seek the greatest possible access to it through a comprehensive, reciprocal Free Trade Agreement (FTA).
The UK must be free to strike up FTAs with countries outside EU too – “…we want to get out into wider world.” The Prime Minister pointed out that there was already enthusiasm expressed and discussions in progress with China, Brazil, the Gulf States, and they were focusing on future ties with Australia, New Zealand, India, and the US.
The focus is on tariff-free trade with Europe, but not through the common agreement with the EU – she emphasised that the plan is still to have a customs agreement, but as yet the shape this will take is unknown – perhaps as an associate member of the Customs Union, or a whole new agreement? However, she deflected uncertainty here by saying that “it is not the means that matter but the ends – which are that they want to remove as many barriers to trade as possible and set the UK’s own trade tariffs.
Collaboration with Europe
The Prime Minister affirmed commitment to collaborating with the EU on science and innovation initiatives, as well as continuing to cooperate with European partners on other important issues: crime, terrorism, and foreign affairs. She emphasised the UK and EU’s shared interests and values in common – with threats to security becoming more serious, there is a clear need to work together more. She wants the UK’s future relationship with EU to include sharing of intelligence and law enforcement.
A phased approach
Mrs May stated that “We believe a phased process of implementation will be in the interests of Britain, the EU institutions and member states.”
The Pound will continue to fluctuate against its key currency partners, particularly the Euro and US Dollar, given current political and economic events. Keep a close eye on the markets, plan ahead for any currency purchases and seek guidance from a currency specialist if you have any large individual or business payments to make in the coming weeks.
About Halo Financial
Halo Financial is a leading UK foreign exchange brokerage, offering a comprehensive range of services to individuals and businesses since its inception in 2005. The business prides itself on offering a flexible and personalised approach for each of its clients, simplifying the seemingly complex foreign exchange market to maximise savings in currency transactions and make money go further.
Halo Financial specialises in managing currency risk by offering hedging and risk management strategies for both individual and corporate clients, with vertical expertise in numerous industry sectors such as international trade, financial, education, migration and overseas property. Staffed by qualified technical analysts, the company is authorised by the Financial Conduct Authority and HM Revenue and Customs.
Halo Financial received the OPP Gold award for Best Supporting Service, the Gold Award forFinancial Support and Innovation from Re:Locate Magazine and has 5 out 5 star customer gold merchant status via independent review website, Feefo.com.
Article by Rachael Kinsella