REPORT
By Gökhan Kurtaran
London letter, week beginning Jan. 16

-Concerns over EU single market access on the rise

 

As the U.K. is moving closer to March, Brexit concerns over access to the single zone are on the rise. U.K. Prime Minister Theresa May promised that Article 50 which starts the country’s two year process for leaving, is due to begin in March. This month, the U.K.’s Supreme Court is expected to make the final verdict as to whether Article 50 can be triggered by May alone or alternatively with Parliament’s approval. However, even if the final decision for triggering is left to a Parliament vote, the general expectation is that Parliament is likely to go with the referendum result and start the Brexit process in March.

Speaking to Andrew Marr on Sunday at BBC, Labor party leader Jeremy Corbyn said that Labor would support triggering Article 50 by March in line with the referendum result.  However, he said that they would expect the maintenance of the U.K.’s access to the single trade zone due to the U.K.’s close trade ties with the European market.

The main question for the U.K. is no longer the timing of triggering Article 50 but whether or not the U.K. can secure access to European markets as a result of negotiations. However, one of the main demands from the Brexit camp was to stop the freedom of the movement due to the rising number of EU immigrants flowing to the U.K.  According to EU officials, the U.K. cannot remain in a single zone while limiting the freedom of movement of immigrants, as these two conditions are binding on all member countries.

The pound has hit its lowest level for more than three months since reports began that Britain was set to quit the EU single market as part of its Brexit plans. Sterling fell below the $1.20 level before recovering slightly on Monday. The pound also dropped to a two-month low against the euro, falling more than 1 percent to about €1.13. So far since the EU referendum, the pound has fallen about 20 percent against the dollar since June's EU referendum, a decrease which has not been seen in the past 30 years.

According to London-based analysts, May is due to set a “Hard Brexit” tone in her speech on Tuesday, Jan. 17 which will no doubt have implications in the markets.

Chancellor of the Exchequer Philip Hammond, in an interview with the German newspaper Welt am Sonntag, suggested that the U.K. transform its economic model into that of a corporate tax haven if the EU fails to provide it with an agreement on market access after Brexit.

On the other hand, there might be some light at the end of the tunnel for the U.K. in its intentions to sign free trade deals with other countries to increase its competitiveness.

According to The Times interview, Donald Trump is preparing to take over the U.S. presidency on Jan. 20 and has recently said that the U.S. is ready to make a free trade deal with the U.K. as soon as possible.  This is in contrast with U.S. President Barrack Obama who said the U.K. would be at the end of the queue for signing a free trade deal if it had left the EU before the referendum. Trump, however, appears as if he will bring the U.K. to the front of the line for a trade deal, but negotiations with the business tycoon could be tough and tense.

 

 

16 Jan,2017

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