Markets celebrate on new hopes of open Brexit - The Share Centre

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Michael Baxter

Markets celebrate on new hopes of open Brexit

Written by: Michael Baxter on November 4th 2016

Category: Thought for the day

The pound surged yesterday as the High Court ruled that Theresa May cannot trigger Article 50 without the approval of parliament.  For all the hysterical reaction in the media, this could be good news.

european flag

Half Brexit

In the days after the Brexit vote, I wrote here that “I feel like a right chump.”  On that day, I thought I had experienced something of an epiphany about Brexit.  That the whole point of Brexit was not for the UK to actually, physically leave the EU, but to force the EU to come to its senses, and agree new terms with the UK that would keep it in, but alleviate the key fears of the Brexit campaign.  In short, Brexit was a negotiating strategy.  And for what it’s worth, I know many Brexit voters who thought precisely that.

Then in the weeks that followed, another narrative emerged, this time that different parts of the UK would experience different forms of Brexit – that London, for example, may be afforded an EU work visa, leaving it open to the EU freedom of movement.

It was on this hope that we may see a kind of half in half out, Brexit, a best of both worlds – a free UK, not subservient to EU laws, but a part of the single market – that the falls in sterling seen after the referendum stopped.

The markets felt sanguine, reassured over the ambiguity over what Brexit means.

Then the Tory party political conference was held, and it became clear that this was not going to happen. The UK was choosing hard Brexit. Although, as I argued here, it was not so much hard Brexit the UK was selecting, but closed Brexit – a drawbridge Britain.

Yesterday, the pound soared because the ambiguity returned. 

The EU does not want to say goodbye

Earlier this week, the Council of Economic Experts, made of five leading German economists, said that the EU needs to do what it can to avoid Brexit from happening. “An exit of the United Kingdom from the EU would not only mean an economic loss, but above all a bigger political loss," it said and added: "The best outcome of the upcoming negotiations would therefore be if a Brexit could be averted."

A few weeks ago, the former and quite possibly next French President, Nicholas Sarkozy, said that if he was elected he would persuade Germany to renegotiate the EU treaty so that the UK could revise its Brexit decision.

The EU does not want the UK to leave. This presents an opportunity for the UK to negotiate some kind of arrangement in which it can agree far more favourable terms with the EU, creating a kind of third tier of membership.

But the UK government has made it clear that it is not interested in this.  The rule by the High Court gives a new hope to the possibility of a compromise with the EU.

Did Theresa May see this coming?

For several weeks, various reports have been floating around the internet suggesting that it would be illegal for the UK government to kick off Article 50 without an Act of Parliament.   You can write about what I know on the Law on the back of a postage stamp, but the line-up of lawyers who supported this view seemed quite impressive to me. 

The High Court have not betrayed the British people, they have upheld their interpretation of the law.  That is how the UK legal system works, and it has worked pretty well for a pretty long time. What you cannot do is tear up the legal system simply because it has formed a view that some people don’t like.

Speaking as a non-lawyer, who had read a few reports on this matter, I was not remotely surprised by the High Court’s ruling. I am guessing, neither was Theresa May.

She can now go to the British people, and say “well, you know I tried to carry out your wishes, but the judges have thwarted me.” She can then call an election, and probably win by a landslide.

Meanwhile, a new opportunity to negotiate a new arrangement with the EU emerges – one that a relieved EU will be happy to accede to, and the election will be a de facto vote on this.

The Bank of England 

Let me finish with a comment on the Bank of England.  Yesterday, it released its Inflation Report. It stated: “Output growth is expected to be stronger in the near term but weaker than

previously anticipated in the latter part of the forecast period.”  Let me ask a question. Where is this ambiguity in this statement? It seems as clear as you can get to me. I am at a loss to explain this headline from the Daily Mail: ‘Mark Carney humbled by Bank’s U-turn: He makes the biggest EVER upgrade to official growth forecasts and admits they got it wrong.” Well, if you squint your eyes, and ignore all parts of the Inflation Report that does not fit your narrative, you can draw that conclusion, I suppose.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Tags: : Article 50, open Brexit, 2017 election, High Court, Inflation report

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