What the Brexit negotiations mean for the British pound | message

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It is a surprising glimmer of hope: Michel Barnier, the European Union (EU) commissioner for Brexit, expressed himself optimistically about a possible exit agreement with Great Britain at the beginning of the week. Representatives of the Netherlands and Ireland are also more confident that a contract will now be concluded, insiders reported to the Reuters news agency.

A week earlier, British newspapers had written that the government under Prime Minister Boris Johnson no longer expected an agreement. The two main points of contention regarding future UK-EU relations are access to UK fishing grounds and the need for the country to adhere to EU labor and environmental guidelines.

Hope again

Suddenly there is now the possibility of a soft, regulated Brexit at the end of the year. The treaty would have to be in place by October so that the EU member states can ratify it by December 31st. An agreement that avoids bureaucracy and tariffs between the previous trading partners would definitely benefit the UK economy. The pound, which has been depreciating against the euro since mid-February, should also benefit from this.

Gloomy outlook

However, the currency markets seem to have little confidence in the conclusion of an agreement: the exchange rate initially only reacted to the news with small discounts. Too often the negotiating partners have missed deadlines and missed deadlines. Meanwhile, it is not only the financial sector that is groaning at the ongoing uncertainty. A recent study by the London School of Economics paints a bleak scenario for the UK economy.

Brexit will hit those sectors hard that have remained relatively unaffected by the effects of the corona pandemic, it says, such as pharmaceuticals, auditors and the publishing industry. The pandemic has also reduced the capacity of the economy to digest further shocks. The government must plan in much more detail in order to prepare for “the greatest economic slowdown in our lifetime”.

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