Markets react to May’s Brexit ‘impasse’ statement

Market reaction to UK Prime Minister Theresa May’s statement that the Brexit negotiations are at an impasse was swift this afternoon.

The pound fell against the Euro during May’s statement and currently remains under pressure.

Brexit: GBPEUR 21-09-2018
Market reaction GBPEUR

May complains about EU offer

Theresa May complained that the EU put two unacceptable choices on the table at the Salzburg summit.
One that the UK stay in the European Economic Area and Customs Union
The other, a free trade agreement with the UK and Northern Ireland remaining in the Customs Union.

According to May the first option would prevent the UK from making it’s own trade deals and betray the referendum result.
The second option would put a border between Northern Ireland and the UK. That would threaten the integrity of the UK May said.

May said both these proposals would be a bad deal and repeated her mantra that no deal was better than a bad deal.

Brexit impasse

According to May the EU rejected her ‘Chequers’ proposals on the grounds that they would undermine the the single market. She said the EU didn’t give a satisfactory explanation why that would be so, meaning the negotiations were now at an impasse.

Differing interests

Theresa May also acknowledged there were differing interests between the UK and EU.

However, these differences are not merely technical which is what some UK ministers seem to imply.

The Commission’s Chief Negotiator, Michel Barnier, was clear on the EU’s objectives in a press briefing in December 2016:

“…Unity is the strength of the European Union and President Juncker and I are determined to preserve the unity and the interest of the EU27 in the Brexit negotiations. This determination is shared by all governments.”

Barnier went on to make clear that the UK would not get a deal that would make it attractive for other members to leave.

Two promises

The Prime Minister finished with making two promises. That EU citizens’ rights would be respected and that she would prevent a hard border in Ireland.

Heading toward a stark choice

“It’s not acceptable to simply reject the other side’s proposals without a detailed explanation and counter proposals,” May also said. This appears to be an attempt to apportion blame and to put the ball in the EU’s court. But for the EU the interests of trade is subservient to, and flows from the strategic imperative to preserve its cohesiveness.

The negotiations risk heading towards a stark choice. The UK agreeing to the EU’s terms or tumbling out with no agreement. Both are politically fraught, the markets reacted negatively today but they could be in for a real bare knuckle ride…


Gary Hollands – 21 September 2018