‘Turbo-charging’ exit plans
Johnson’s government preparing for worst case scenario if EU doesn’t revise divorce deal
STERLING slid to a 28-month low yesterday as British Prime Minister Boris Johnson’s government said it now assumed there would be a no-deal Brexit because a “stubborn” EU was refusing to renegotiate their divorce.
Many investors say a no-deal Brexit would send shock waves through the world economy, tip Britain’s economy into a recession, roil financial markets and weaken London’s position as the pre-eminent international financial centre.
The pound, which was trading at $1.50 (R14.19) on the day of the 2016 referendum, dropped a cent to $1.2282, the lowest level since March 2017. Sterling has fallen two cents since Johnson was named the British leader on Tuesday last week.
Johnson’s bet is that the threat of a no-deal Brexit will persuade the EU’s biggest powers – Germany and France – to agree to revise the divorce deal that Theresa May agreed to last November but failed three times to push through the British parliament.
He has said that the EU must drop a “backstop” intended to keep the Irish border open. The backstop would require the UK to remain aligned to EU customs rules if a future trading relationship fell short of ensuring an open border.
The 27 other EU members, though, say publicly and privately that the divorce settlement – including the backstop – is not up for barter.
Many EU diplomats say they believe an election in Britain is highly likely.
“There must be some change from the EU, and if the EU are not willing to move at all we must be ready to give the country some finality,” Foreign Secretary Dominic Raab said, adding that London was “turbo-charging” no-deal preparations.
Raab said the UK wanted a deal but repeatedly cast the bloc as “stubborn”. Asked if he was threatening the EU – whose $15.9 trillion economy is nearly six times that of the UK’s – Raab said: “I am not doing any threatening.”
Johnson had told EU leaders he would sit down for Brexit talks when they indicated they were ready to shift on the divorce deal, otherwise Britain would prepare for leaving without a deal, his spokesperson said yesterday.
Differences over Brexit have strained the bonds that tie the UK. While the country voted 52-48 to leave in 2016, Scotland and Northern Ireland voted to stay in the EU while Wales and England voted to leave.
The question of the unification of Ireland and British-ruled Northern Ireland would inevitably arise if Britain leaves the EU without a divorce deal on October31, Irish Prime Minister Leo Varadkar said.
Varadkar also suggested that a so-called hard Brexit could undermine Scotland’s place in the UK. Johnson was set to make his first visit to Scotland as prime minister yesterday, as his Conservative Party’s leader there said she would refuse to support a no-deal Brexit.
“Our union is the most successful political and economic union in history. We are a global brand and together we are safer, stronger and more prosperous,” Johnson said in a statement before the visit. “So as we prepare for our bright future after Brexit, it’s vital we renew the ties that bind our UK.”
Johnson’s promise to deliver Brexit, with or without a deal, has put him at odds with some in his party who oppose a “no deal” exit – including its Scottish leader, Ruth Davidson.
Last week, Scotland’s nationalist leader Nicola Sturgeon wrote to Johnson telling him his Brexit plans would hurt the Scottish economy and that she would continue preparations for a second independence referendum.