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Has the last 3 months been a phony war?

The phony war is over so they say.  The Prime Minister has taken some of the uncertainty out of Brexit by confirming that Article 50 will be exercised by the end of March 2017.  Stormy waters ahead?

The Prime Minister’s declaration and the increasing rhetoric coming from Liam Fox and others suggesting a “hard Brexit” has had the immediate effect of another fall in the value of sterling against the dollar and the euro, with a prediction of parity soon to the euro not seen since 2008 but with an all-time high on the FTSE 100 Index.  The point is that the financial markets will see significant turbulence as they seek to interpret each and every comment coming out of Downing Street and the three wise monkeys, sorry men; Messrs Johnson, Davis and Fox.

A fall in the value of the pound makes everything from Europe more expensive without tariffs, which makes the suggestion of calling the EU’s bluff on tariffs all the more interesting and, I hope likely.

The suggestion that the UK unilaterally declares it to be tariff-free would put the onus right on the EU, either to reciprocate or to declare a tariff on our goods and services.  Any tariff which the EU imposes could be mirrored, of course, by the UK but whilst such tariff monies received by the UK could be used to subsidise those industries affected, the same will not be possible for those affected companies in the EU.  QED; Tariffs could be more expensive to endure for the EU.  This must surely be a tool which the PM can use to placate our manufacturing industries, the vanguard or most vocal of which appears to be the car manufacturers.

We hear today that 35,000 jobs and £5 billion of revenue is likely to be lost from the City with the possibility of double that and so the scare stories continue.

The doom-sayers and soundbites not only from vested interest in the UK but that coming out of Europe are inevitable with 27 countries having their own view for the future. But having negotiated more deals in 35 years as a commercial property agent than I care to remember, I have yet to agree anything where I started from and have certainly never negotiated in public.

The heavy lifting is yet to come and will be behind closed doors. How they will carry on with with the added complication of multiple elections in the EU countries who can say.  Bad news should come quickly and be faced.  A long fuzzy fudge (which I still fear is likely) will be far more damaging.  We will no longer be part of the EU with that club’s rules but as many of the EU regulations were adopted from UK Standards it should not be difficult to repeal the 1972 Act, as the Prime Minister has said will happen, and then adopt those which suit our needs, most of which will be consistent with the EU anyway.

In the meantime, whilst the last 3 or 4 months has seen little to be concerned with following the Brexit vote, perhaps the next 6 months may give an alternative flavour but my guess is that the hiatus will continue well into the next decade especially if we follow a timeline in Article 50, which ties up the financial details the way the EU want us to do.

Interestingly we have yet to see any change in sentiment around commercial and industrial property in the provinces although deals do seem to be taking longer to get across the line and whilst end users are not fighting over current stocks there remains a steady and what would seem to be resilient demand.  Others are clearly optimistic and are taking the long view that we will emerge stronger.

We will just have to live with a degree of uncertainty…..no change there then.

Written by Mark S. Hanson

October 2016

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