The European Union’s top Brexit negotiator has said he is not optimistic about avoiding a no-deal scenario – while Parliament has vowed to block it.
Does this mean that Brexit has become impossible to deliver – what does the confusion mean for your money – and how can your Continuum adviser help?
The Withdrawal Act of 2018 states that the UK will leave the EU on October 31st. Whether there is a trade deal or not, Brexit will happen, and if there is no trade agreement to soften the blow, it will be a hard one.
So – with some of the world’s most powerful politicians and skilled negotiators around the table – why is a deal not being done? The problem is the backstop. Michel Barnier, chief EU negotiator has declared that it has to stay to protect the integrity of the EU’s single market while ensuring an open border in Ireland.
What is the backstop?
The backstop is an arrangement to avoid a hard border between Northern Ireland and the Republic of Ireland, even if no formal deal can be reached. Northern Ireland would stay in the customs union and the single market, guaranteeing a friction-free border with the Republic.
The DUP objects, as it treats Northern Ireland differently from the rest of the UK, while Eurosceptics believe it would lock the UK into the EU’s customs union and prevent the UK from doing its own trade deals with nations outside the bloc.
Cynics have suggested that the backstop is a ruse by the EU to prevent Brexit from happening.
No agreement possible?
Michel Barnier has stated that he is not optimistic about avoiding a no-deal scenario and that the backstop is the maximum amount of flexibility that the EU can offer to a non-member state.
But no-deal is not acceptable to MPs on both sides of the Commons – and a large proportion of the business community. Many are desperate to stop the no-deal, but it is becoming hard to see an alternative.
Parliament does not have the power to demand that the Prime Minister reach an agreement with the other 27 member states. Nor can they demand an extension. In the UK constitution only the government has prerogative power to negotiate treaties – which effectively means the future of Brexit is entirely in the hands of the Prime Minister. He has vowed to take Britain out of the EU with or without a deal on 31st October.
Those against a no-deal could try and put parliamentary pressure on the Prime Minister to seek an extension, with the support of the Speaker. But time is running out.
It looks as though Brexit in some form or other on October 31stis inevitable.
What if we face a no deal?
A no-deal might be the outcome for Brexit. But it might not be the disaster that some are forecasting. We live in a world with a highly developed international trading system, and perhaps as much as 45% of UK trade is already on World Trade association terms – probably a similar volume to our trade with the EU. With trade deals with the US already on the table, and the ability to make deals with the rest of the world without the restrictions of the EU, the no deal scenario might not be as damaging as predicted.
But will there be a last minute breakthrough?
If the current Government is determined to take us out with no deal by October 31st, it can do so. It appears that Boris Johnson is taking this stance – and that it might be enough to bring the leaders of the EU back to the negotiating table. The cost of losing trade with the world’s fifth largest economy at a time when Germany and France are already looking close to recession might be enough to overcome reluctance to compromise. There are still paths that lead to a resolution even if the EU remains against reopening the deal – such as lengthening the transition period to sidestep a customs union backstop between Northern Ireland and the UK.
So, what should you do?
Until we know whether the Brexit will be hard or the subject of last-minute negotiation, the impact on the UK economy – and your own finances – will be impossible to assess.
However, careful investment and diversification could help provide solidity – and this is where Continuum can help. We are monitoring the situation on a day by day and even hour by hour basis. We can put what we discover to work for you.
So, whatever form Brexit takes, stay in close touch with your Continuum adviser, and be sure to keep reading our weekly newsletter. It could be the best way to find out how what is going on in Westminster and Brussels will affect your wealth.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.