Find out what Brexit could mean for the markets and how a hard or a soft exit from the EU could affect traders.
If Theresa May’s post-Brexit customs plan suggests the single market for goods it will just go in the Brussels waste paper bin, according to Ruth Lea, economic advisor to Arbuthnots.
On Friday, UK Prime Minister Theresa May is gathering the cabinet at her country house, Chequers, to present the final post-Brexit customs plan. In the hope a truce can be agreed between her feuding ministers, the strategy will be set out in a white paper the following week. But is May’s third Brexit way another dead end?
Two customs options have been up for discussion for near to a year now. Firstly, the new customs partnership (NCP), where the UK stays within the EU customs system and collects tariffs on Brussels’ behalf. Secondly, the alternative was the maximum facilitation scheme (max fac), which involved new technology and trusted traders. Downing Street was among the latter’s critics fearing its expense and that it did not address the problem of the Irish border. Her Majesty's Revenue and Customs (HMRC) said in May that the customs cost of Brexit would be £20 billion, more than 1% of gross domestic product (GDP), and warned time was running out to deliver the system by Brexit at the end of March 2019.
In an interview with IGTV’s Victoria Scholar, Ruth Lea, economic advisor to Arbuthnot Banking Group, says the National Audit Office believes HMRC should revamp customs procedures for March 2019 even if there is no deal. She also said the hard Irish border issue has been ‘weaponised’ by the EU and that the technology is more than capable of dealing with the trade that goes across it, which is very small compared to the Canada-US border.
This third customs union plan is expected to be a mix of NCP and the mac fax plan, with the UK reportedly seeking to stay within the single market for goods but not for services, which accounts for 80% of UK trade. The EU’s chief negotiator, Michel Barnier, has repeatedly stated that the four core freedoms of the single market, goods, services, capital and labour, are inseparable. Lea says, if the UK white paper suggests the UK are cherry picking the single market for goods it will just go in the Brussels waste paper bin. She adds, it’s time for the UK government to cut down its ambitions to a vanilla-free trade agreement with the EU on goods, and something for services, that would be the most practical way forward.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.