UK: Hard Brexit fears returns with May’s key speech on Brexit in focus today – Danske Bank

According to the Senior Analyst, Mikael Olai Milhøj at Danske Bank, Brexit has moved back into the spotlight after a recent TV interview with PM Theresa May where she repeated that control over immigration and national sovereignty are higher on the government’s priority list than access to the EU single market.

Key Quotes

“Over the weekend and ahead of PM Theresa May’s important Brexit speech today, Brexit headlines have dominated the UK media. According to a story in The Times, Theresa May should be prepared to leave both the EU single market and the custom union in order to regain control over immigration. The Britons seem to support this stance, as 46% agree that greater control over immigration is more important than access to the single market (39% against), see Reuters. In general, PM Theresa May and the Conservative Party still enjoy huge support in opinion polls.” 

“In a comment in the Sunday Times, Brexit Secretary David Davis has not rejected a transitional deal between the UK and EU to make the process as smooth as possible. To some extent this is also the spirit of the so-called ‘Great Repeal Act’, where existing EU laws will be transposed in UK domestic laws on exit date.”

“As expected, the UK has begun to use taxation and regulation as negotiation weapons. Chancellor Hammond has hinted that UK could become a corporate tax haven with looser regulations if the EU tries to punish the UK. The Dutch Prime Minister Lodewijk Asscher has said he will block any EU-UK deal unless it includes a deal on taxations.” 

“In an interview in The Times conducted by Michael Gove (one of the leading Conservative Brexiters), President-elect Donald Trump said he wants a trade agreement between the US and the UK secured ‘very quickly’. Trump also said that ‘Brexit is going to end up being a great thing’.”

“The EU Commission’s chief Brexit negotiator, Michel Barnier, tweeted Saturday that the ‘EU would need special vigilance on financial stability risk’, as he recognises the importance of the City of London to EU businesses. He noted, however, that the City should not expect a special deal.” 

“We are currently reviewing our GBP forecast but we see potential for further GBP weakness in the coming months as the triggering of Article 50 moves closer. As such, EUR/GBP once again touching 0.90 should not be ruled out.”