Brexit: Deal or no deal
Avid readers of this column may already notice that I try to keep my main focus on the emerging markets universe, particularly in EMEA and Turkey. However, recent developments in the political and business climate have forced me to write about different areas and countries as well. I have been living in the UK for more than two years. Over that time, I have grown accustomed to many features of this from trains and weather to porridge and baked beans. But, I haven’t been able to figure out how a country so proud of making deals pragmatically is now trying to trade off a threecourse meal with a burger. I mean Brexit, as my headline notes.
Last Tuesday, the UK Government and the European Union (EU) reached an agreement, largely on EU terms. Political support for the deal in the UK is weak, and the vote in Parliament is likely to prove difficult, whilst the publication of the draft withdrawal agreement has led to the resignations of two senior ministers and several junior ministers and aides.
Dominic Raab, who stepped down as Brexit secretary on November 15, saying that he could not accept the terms of the deal done by the prime minister, told the Sunday Times the UK should demand an agreement that allows it to unilaterally leave any customs union. He also said that he had held talks with Cabinet ministers, including Andrea Leadsom, who want to make late changes to Theresa May’s deal, and BBC’s Andrew Marr. “We have been talking over the last week intensely. Everyone wants to do the right thing and support the Prime Minister,” he said.
So, where do we go from here? Observers see little prospect that a draft agreement between the UK government and the EU will win passage in parliament due to divisions within May’s Conservative party. Without a deal, the UK would crash out of the EU in March 2019 without an agreement dictating its relationship with Brussels.
“For markets, the assumption that a Brexit deal will be reached and ratified by all sides has now been called into question,” said Lena Komileva, chief economist at G+ Economics, in a note. “The political reality now suggests that, for a deal to happen, the threat of a no deal has to become realistic, causing serious financial disruption, and possible business and consumer confidence shock,” she said.
Let me be clear: Issues related to Brexit may add the UK to the emerging markets universe with rollercoaster trading.