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Business Mirror: May seeks new trade ties with EU as pound slides

Date: 10 01 2017

May seeks new trade ties with EU as pound slides

The United Kingdom will need a completely new trading relationship with the European Union (EU) after its withdrawal, Prime Minister Theresa May said, as the pound fell on concern she’s planning to pull the country out of the continent’s single market.

“It will be a new relationship because we won’t be members of the EU any longer,” May told reporters on Monday after a speech in London. “We will be outside the European Union and, therefore, we will be negotiating a new relationship across not just trading, but other areas with the European Union.”

As May’s self-imposed March 31 deadline for triggering Brexit approaches, markets are following her every word for signals of the shape the divorce will take.

Sterling slid on Monday to its lowest against the dollar since late-October 2016 after the premier told Sky News the previous day that Brexit isn’t “about keeping bits of membership” of the EU. The pound was 1 percent lower at $1.2168 at 4:52 p.m. in London.

May sought to blame the currency’s decline on the media’s efforts to interpret her thinking, saying her comments on Sunday were “what I’ve been saying for the past few months.”

‘Provide clarity’

“I’m tempted to say that the people who are getting it wrong are those who print things saying ‘I am talking about a hard Brexit; it’s absolutely inevitable that it’s a hard Brexit.’ I don’t accept the terms hard and soft Brexit,” the prime minister said on Monday.

“What we are doing is going to get an ambitious, good, best possible deal in terms of trading with and operating within the single European market.”

May was told by senior Conservative lawmaker Andrew Tyrie that the government should soon “provide clarity” about its intentions, “given the need to build a broad-based support for its position at home and abroad.”

Any blueprint should detail what the government hopes to achieve regarding the single market, customs union and any transitional deal, Tyrie, who heads Parliament’s Treasury Committee, was due to say in a speech in London, according to extracts released by his office.

Chancellor of the Exchequer Philip Hammond later insisted no decision has yet been taken on Britain’s trading relationship with the EU. The negotiations may need to include discussion of “what the interim period should look like between Britain leaving the European Union and delivering those long term arrangements,” if a deal can’t be reached by the end of the two-year exit period allowed by EU rules in 2019, he said.

“We haven’t made any decision about which structures would best support our aspirations, whether it’s being in or out of the customs union, in or out of the single market,” Hammond told Ireland’s RTE television on Monday after meeting Irish Finance Minister Michael Noonan. “We think it’s much better to start with the objectives, what we want to achieve at the end, recognize there are political red lines on both sides and look at how we can best structure a solution that delivers those objectives within the political red lines that both sides face.”

In a sign of the UK’s shifting priorities, Foreign Secretary Boris Johnson was in Washington on Monday for meetings with Republican House Speaker Paul Ryan and a trio of senators, a day after becoming the first cabinet minister to meet with members of President-elect Donald J. Trump’s incoming administration.

US meetings

Johnson met with Trump’s chief strategist, Steve Bannon, and the president-elect’s son-in-law, Jared Kushner, in New York on Sunday. The talks were “positive and frank” and covered relations with Syria, Russia and China, the BBC reported, citing unidentified aides.

As well as meeting Ryan on Monday, the foreign secretary was due to have discussions with Majority Leader Mitch McConnell of Kentucky and Bob Corker of Tennessee, both Republicans, and Democratic Sen. Ben Cardin of Maryland. He won’t meet with Rex Tillerson, Trump’s nominee for secretary of state, because the protocol is to wait until after the confirmation process.

May has said she wants to strengthen trade ties with other parts of the world after Brexit and has sought to build a relationship with Trump after a frosty start.

“The single market is a component part of the European Union, and it’s been a bad deal for the United Kingdom in the last 12 years,” Richard Tice, cochairman of Leave Means Leave, a group campaigning for a clean break with the EU, told the BBC on Monday. “The sooner we leave it, the better and the sooner we can do our own trade deals with countries around the world—and it’s really good to hear that Boris Johnson is in America—then the better.”

Liberal Democrat leader Tim Farron, whose party is seeking to avert Brexit and has called for a referendum on the deal that May negotiates, warned that the prime minister risks damaging the economy with its divorce strategy.

‘Hurt jobs’

“Every time Theresa May opens her mouth on Brexit the pound falls further,” Farron said in a statement. “It’s clear this government is taking us toward a destructive hard Brexit that would hurt jobs, increase prices and blow a hole in the budget.”

If she does favor closing borders, May’s priorities may also be those of voters. A poll released by ORB International found 46 percent of respondents viewed greater control of immigration as more important than free trade with the EU.

Continued access to the single market will only be possible if the UK continues to accept freedom of movement for labor, German Chancellor Angela Merkel said in a speech in Cologne on Monday. Picking and choosing aspects of EU membership “would have fatal consequences for the other 27 member states—and we can’t accept such consequences,” she said.

January 10th, 2017: Business Mirror