GBP and latest Brexit Agreements or is it ?

Reply to Chris Leslie MP on the costs of Brexit by Liz Truss, Chief Secretary to the Treasury

Liz Truss and the government are basically dancing on the head of a pin.

Main points of the reply

1) Divorce figure is media speculation

2) Nothing is agreed until everything is agreed

3) Deal contingent on trade, the “long term economic relationship”

As I’ve written elsewhere, flowing from the negotiating philosophy (horse trading) of the UK side, they’ll expect concessions in return.

And given that they’ve conceded ground it’ll be imperative in their view that they do get thrown a bone.

Avoid failure of December 4 talks

I don’t think the EU will want the December 4 talks between May and Juncker and Barnier to be perceived a failure.

I’d expect talk to be of ‘progress made but more to go’, ‘optimistic’ etc – As Bloomberg wrote:

“Both sides are targeting a Dec. 14-15 European leaders’ summit as the time to declare that enough headway has been made to move on to discussing their future trading relationship.”

I think in this respect, while reaction to the divorce bill has been positive, it should be borne in mind that it is the easiest of the three issues to solve as there is a relatively ‘straight forward’ formula to work to.

Two immediate problems

I can see two immediate problems that can adversely impact the talks.
1) External strategic: Progress has to be made on Ireland before trade can be discussed. Unless the UK gives ground here as well there will be little movement. This does appear to be an EU strategic red line and the Republic is pushing hard on this

2) Internal political: Following from point 1, the WTOers will demand a halt to a deal on the divorce bill on the grounds of the EU’s lack of ‘reciprocity’

While anything can come out the blue and have an impact, I think a close eye on what happens on the Irish issue in the run up to December 14 will give us the best steer on the outcome.

The longer term

At this stage, it’s in neither side’s interest for the talks to collapse. If there’s no real progress on the Irish issue I’d expect a postponement on trade talks under the guise that although the talks haven’t quite yielded the results both sides hoped for, there has been enough progress to continue…


Gary Hollands

Geopolitical analyst Tyga FX