The UK has left the European Union. The transition period, during which the UK remains in both the single market and customs union, lasts until the end of the year, with trade negotiations set to start in March. In the background, the Bank of England kept Bank Rate unchanged, but lowered its forecast for the 2019 UK economy to 0.75%.Continue reading
The US Fed has made the third consecutive cut to its benchmark rate to 1.5 to 1.75%, but signalled that it does not expect a further cut in December. Chairman Jay Powell said that a preliminary US-China trade deal and lower risk of a no-deal Brexit had the potential to increase business confidence. So it’s a pause for now. How long will it last?
Overall, there was something for everyone in the latest deal. The backstop was binned, there will be no hard border on the Island of Ireland and the UK will be free to follow its own independent trade policy. There was some surprise that the UK Prime Minister was able to secure a deal so quickly. While the EU made some concessions, the movement in negotiations was primarily due to Boris Johnson removing some of the UK government’s red lines.
The UK Government and the European negotiating team have reached a new deal. Despite this the Prime Minister had to send a three-month extension request to the EU. However, there is still a chance that the deal will be passed into law before the 31st of October. With 11 days to go all options (deal, no deal, extension) are still on the table.
Encouraging discussions between UK PM Johnson and Irish president Varadkar fuelled optimism of a Brexit resolution. However, the thorny issue of the Irish border remains a major stumbling block. Time is running out for a deal at October’s EU summit. Meanwhile, a “partial” US/China trade deal has been agreed but hurdles remain.
The UK Supreme Court ruled unanimously that proroguing of the Parliament was unlawful. The Parliamentary session has resumed, but there is little clarity on Brexit’s form, date or on the timing of a general election. In the US the House of Representatives has started an impeachment inquiry. At the UN Climate Summit 66 countries, 93 companies and more than 100 cities announced commitments to reach net-zero emissions by 2050.
Over the last week the government’s working majority was reduced from plus 1 to minus 45. There is still no clarity on the Brexit outcome or the timing of a general election. All of this against the backdrop of a global manufacturing slow down – the UK, Germany, the USA and China all have recorded weakness in manufacturing activity. At least, America and China have agreed to resume trade talk in early October.
This week is likely to see the EU grant a longer, but more conditional, extension to Article 50 than the UK Government has requested. Back in Westminster talks continue to try to find a set of proposals that can be passed by the House of Commons. Away from the politics, most economic data has been disappointing.
There has been a steady stream of negative news of late about consumer spending and consumer confidence. The latest car sales figures for Northern Ireland reveal that last month was the quietest for car showrooms in eight years. Meanwhile retail sales fell at their fastest pace in almost four years in February, according to the Ulster Bank PMI. And talk of food shortages and potential tariff-induced price rises if a no-Deal Brexit comes to pass will have done little to boost consumer sentiment. However, despite all of this, when we look at figures in relation to housing – the biggest discretionary consumer spending item of all – they appear to be at odds with everything else that is going on.