UK ex­pects years of tur­bu­lence dur­ing Brexit talks

Jamaica Gleaner - - MARKET REPORTS - – AP

A series of pound ster­ling bank notes is dis­played. The pound has been los­ing value af­ter UK Prime Min­is­ter Theresa May put a more de­fin­i­tive time­line on the trig­ger for Brexit.

BRI­TAIN’S TREA­SURY chief has warned of tur­bu­lence in com­ing years as the coun­try ne­go­ti­ates its exit from the Euro­pean Union, while the pound fell on indi­ca­tions the gov­ern­ment may give up on con­tin­ued ac­cess to the EU’s com­mon mar­ket.

Philip Ham­mond told the BBC on Mon­day that Bri­tain will face a cou­ple of years – or longer – of un­cer­tainty as Bri­tain goes through the process of leav­ing the 28-na­tion trad­ing bloc.

“I think we must go into this ne­go­ti­at­ing pe­riod with a re­al­is­tic ex­pec­ta­tion of the tur­bu­lence that there could be dur­ing the ne­go­ti­a­tions. Peo­ple will be spec­u­lat­ing – one day it’s go­ing very well, one day it’s not go­ing so well,” Ham­mond said. “We have to ex­pect a pe­riod when con­fi­dence will go up and down – per­haps on a bit of a roller coaster – un­til we get to a fi­nal agree­ment.”

Ham­mond’s re­marks came a day af­ter Prime Min­is­ter Theresa May set a timetable for Bri­tain’s exit. She said the coun­try would in­voke Ar­ti­cle 50 of the EU treaty – the for­mal mech­a­nism to leave the EU – by the end of March. That would start of­fi­cial talks on Bri­tain’s exit but also the thornier is­sue of what the new re­la­tion­ship will be like.

In a speech, May em­pha­sised a need to limit im­mi­gra­tion of EU ci­ti­zens, sug­gest­ing she may pri­ori­tise that over re­tain­ing mar­ket ac­cess for Bri­tish com­pa­nies to the EU’s tar­if­f­less com­mon mar­ket. The EU has long in­sisted that Bri­tain can­not be part of the com­mon mar­ket if it blocks EU work­ers.

A move to break out of the com­mon mar­ket – what ex­perts have termed a ‘hard Brexit’ – has wor­ried many Bri­tish busi­nesses as they would face new tar­iffs, red tape and bar­ri­ers on ex­ports to the rest of the EU. It is a par­tic­u­lar prob­lem for Bri­tain’s mas­sive fi­nan­cial ser­vices sec­tor, which would lose the au­to­matic right to work across the EU, cur­rently the world’s big­gest eco­nomic bloc.

The pound fell on Mon­day af­ter the com­ments by May and Ham­mond, dropping 1.1 per cent to US$1.2835. The pound, which traded around $1.50 on the day of the June 23 vote to leave the EU, was at US$1.2745 on Tues­day, down 0.8 per cent on the day.

To help the econ­omy through the tur­moil, the Bri­tish gov­ern­ment agreed to ease off its bud­get aus­ter­ity drive. Ham­mond said he would aban­don the goal of the pre­vi­ous gov­ern­ment to put the coun­try’s books into sur­plus by the end of the decade. He also hinted at tax cuts to stim­u­late eco­nomic ac­tiv­ity.

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