Alright, hit me with the cold, hard, Brexit facts.
Why did the UK want to leave in the first place?
It's past the 29th of March, why is the UK still in the EU?
As we mentioned above, Brexit keeps getting delayed as UK Parliament can't seem to agree on what post-Brexit Britain looks like. Former PM Theresa May tried her darndest to get a Brexit amendment passed; however, she was forced to leave office after numerous failed attempts. The sinking ship that is Brexit is now captained by PM Boris Johnson, a lovely jubbly fellow that said he would get Brexit done by October 31. Further to this, he assured Britain that under no circumstances he would ask for an extension to his October 31 deadline.
This was not the case, and Brexit has now been delayed again until January 21, 2020. Before that though, the UK will head to the polls for an early general election. Currently Boris Johnson does not have a working majority in parliament, which makes it very hard for him to get his Brexit deal passed smoothly. Should he win a majority in the election, Brexit is expected to go ahead pretty seamlessly. However, should Labour gain the majority they have promised another Brexit referendum.
Update 1 November 2019:
Long story short, the EU agreed to grant the UK another Brexit extension until January 31, 2020, and there will be a UK general election on December 12.
On Wednesday the EU unanimously agreed to grant the UK with a ‘flextension’ until next year. It’s flexible, so if the UK sorts themselves out before that, then they are free to leave early. The EU hopes this time will allow for another election that will aid in getting the deal approved.
Why the election? Currently, Boris Johnson does not hold a working majority in parliament, which means he is seriously struggling to get his Brexit deal approved. He hopes that the general election will change this, granting him the majority he requires to push Brexit proceedings along smoothly.
Markets currently expect the conservatives to win and achieve their desired majority; however, there is a lot of volatility among electorates with considerable shifts in voting intentions since last year.
With such high stakes, many are expected to vote tactically in support of their Brexit beliefs as opposed to normal partisan alignment.
Should the conservatives fail to secure a win, the Labour party has promised another Brexit referendum.
The news of the election and Brexit delay has put upward pressure behind the GBP.
Update 24 October 2019:
Alright, a lot has happened since the weekend. It's a bit of a whirlwind, so we will try and highlight the key events.
- Boris Johnson wrote a letter to the EU asking for an extension. Not one to make things easy, he refused to sign the letter and also sent an accompanying letter that says he thinks granting an extension would be a huge mistake.
- The speaker of the house refused to hold a meaningful vote on Monday as it went against everything MP's had already discussed on Saturday.
- Johnson published his 110-page agreement and requested three days of intense debate. This request meant MP's had to read and scrutinise the extensive bill overnight. This was, understandably, met with a lot of criticism.
- MP's have now begun a series of votes on Johnson's Brexit bill. He won the first vote, 329 votes to 299, which was around the legislation designed to implement his deal. This now means MP's can vote on specific amendments to the bill, so topics like the customs union can be debated further. While this is positive for Johnson, the debates could drag on and have the potential to change the shape of his bill completely. From here, there still needs to be another meaningful vote, and every piece of his agreement needs the support of Parliament before the UK leaves the EU.
- Meanwhile, the EU is still considering the request for an extension. The EU President has recommended EU leaders accept the demand for a three-month extension; however, France is slightly apprehensive on yet another delay to Brexit.
If the EU grants the extension, it is likely to be flexible. So, if the UK approves the Brexit Bill, they are welcome to leave at any time before the three months is up.
There is also the potential of a general election; however, we will cross that path if and when it arrives.
Update 20 October 2019:
It's been a big day for Brexit.
What was meant to happen?
Boris Johnson had agreed on a deal with the EU and was getting UK Parliament to vote on it today. He needed 318 votes to pass the agreement which would take effect on the current Brexit deadline of October 31. If it didn't get passed, Johnson was required by law to ask for an extension until January 31 2020.
What actually happened?
Long story short, they voted on an amendment tabled by Oliver Letwin (a former conservative) and NOT the Brexit deal. The Letwin amendment essentially says that Parliament won't support Johnson's Brexit deal until other bits of legislation required for the agreement are passed.
What does this mean?
If Johnson's deal was approved, there is still a chance the UK could crash out of the EU with a bad deal/ no deal if lawmakers hadn't passed the complex legislation needed for the Brexit deal.
What happens next?
This is where it gets a bit messy.
Leader of the house has said there would be a 'meaningful vote' on Monday on Johnsons deal. This doesn't MEAN much, but it shows support for his agreement.
If they voted in favour of the deal, Johnson would still need to get it passed through the house of lords and the Queen. BUT, the speaker of the house has said this might not happen because it goes against everything they have done today.
The Benn act (that forces Johnson to ask for an extension until January 31 if he didn't get a deal passed today) requires Johnson to write to the EU by 11 pm tonight and ask for the extension. BUT, Johnson has flat out said he wouldn't do this. If he doesn't, he will be breaking the law and will be taken to court on Monday. BUT, someone else from the government might write the letter for him.
Meanwhile, the EU has said they will allow for an extension if Johnson asks nicely.
Update 18 October 2019:
Boris Johnson has done the impossible and got the European Union to agree to a brand, spanking new Brexit agreement unanimously. This caused a spike in the value of the pound against most major currencies.
Whether this optimism continues is another story altogether. Tomorrow the UK parliament is holding a special sitting to vote on the deal. Johnson requires 318 votes for the deal to pass, and is expected to offer a package of plans to win votes including ‘social protection’, ‘environmental standards’ and ‘workers rights’.
Johnson is already starting on the back foot though, as the Northern Irish Democratic Unionist party has said they won’t support his deal due to it including custom checks between Northern Ireland and the rest of the UK. UK betting agency ‘Sporting Index’ is predicting Johnson will lose by seven votes.
The EU has said there wouldn’t be an extension to the current October 31 deadline; however, if the deal isn’t passed this weekend, it’s likely an extension could be granted. This will especially be the case if the prospect of another referendum gains momentum.
As the decision is happening over the weekend, financial markets will not react until trade resumes on Monday. If the deal is approved, it is likely the pound will increase in value even more. So, if you plan on purchasing GBP soon, it’s worth monitoring this decision and potentially capitalising on the weekend’s lack of trade to ensure you’re not stuck purchasing when the AUD is even lower against the pound.
Update 4 October 2019:
On Wednesday British Prime Minister Boris Johnson submitted his latest Brexit proposal to the European Union. The most significant point of change and contention is the Irish border. Johnson plans to create both a customs and a regulatory border between Northern Ireland and Great Britain, going against Theresa May’s promise to avoid physical border checks.
There have already been several responses to Johnson’s latest proposal, most of which aren’t glowing reviews. European Commission President Jean-Claude Juncker said the plan “has numerous problematic points”. European Union Council President, Donald Tusk, said he is “still unconvinced” about the new Brexit proposal. Further, members of the European Parliament, a.k.a those who will ultimately approve the deal, noted: “The UK’s proposal falls short and represents a significant movement away from joint comments and objectives”. Sheesh.
Initial comments aside, the EU will continue to work with the UK over a deal. Should they not reach common ground and approve an agreement by October 19, Johson is required by UK law to request an extension. However, Johnson has made it very clear that Brexit will happen on October 31 with or without a deal.
Update 1 October 2019:
With only 31 days until the current Brexit deadline, the U.K. government has reportedly completed a draft withdrawal agreement that they plan to present to the E.U. later this week. This news has given the pound a slight boost after weeks of uncertainty-driven downward pressure.
The U.K. government is expected to release more information about these plans to the public later this week before meeting with the E.U. to negotiate both the deal and a potential extension to the current Brexit date. Bloomberg reports that the new agreement suggests creating ''customs clearance zones'' in Northern Ireland and Ireland as an alternative to the controversial Irish backstop.
In the meantime, opposition M.P.s are still not keen to support a general election or table a no-confidence vote against current Prime Minister Boris Johnson until the E.U. grants a Brexit date extension to eliminate the chance of the U.K. crashing out of the E.U. on October 31.
It's refreshing to hear that the government has made progress on drafting a new agreement after months of flogging the old one despite no-one being happy with it. Whether the E.U. and wider M.P. approve this new agreement is another story and one that we will no doubt hear about over the next few weeks.
Update 27 September 2019:
On Tuesday the British Supreme Court ruled that Boris Johnson’s government broke the law by suspending government for five weeks in the lead up to the current Brexit deadline. Johnson’s government has refused to apologise for this.
The aftermath of this revelation has been wild, especially by British standards. Parliament has since returned and have done nothing but shout at each other. There have also been calls for Johnson to resign.
Amidst all of this, the Brexit wheels continue to churn as the October 31 deadline approaches. Opposition MPs have decided they will not back an early election, or table a no-confidence vote against Johnson unless the current Brexit deadline is extended to avoid crashing out of the EU with a no-deal. Should Johnson not reach a deal by October 19, a recent bill passed by parliament requires him to request an extension until January 31. Johnson has denied wanting to do this, which means he could potentially break the law again.
You can bet that as soon as an extension to the Brexit deadline is granted, opposition MPs will be frothing at the bit to call a general election.
Update 24 September 2019:
The British Supreme court is expected to release their verdict on whether Prime Minister Boris Johnson's suspension of Parliament was legal this evening. If it is deemed okay, Parliament will stay shut until October 14 as planned. However, should it be deemed illegal, Parliament may resume earlier, and Johnson will face immense pressure to resign. If Johnson resigns, a new leader, will be put in place charged with delaying Brexit and calling a general election. If I were Boris, I would need a lot more than an English Breakfast tea to calm my nerves right now.
Update 20 September 2019:
The GBP was boosted slightly this week by the news that European Commission President, Jean-Claude Juncker, said that a Brexit agreement could be reached by October 31. That is providing the Irish backstop was replaced by something that still achieves the same objectives of the backstop. Markets clung to this hope, and the pound experienced upward pressure as a result. It is important to note, though, that Juncker also said he didn't currently see the odds of the deal at more than 50-50.
In other UK news, overnight the Supreme Court ruling into the legality of PM Johnson's decision to suspend parliament concluded. The verdict is expected next week. Should Johnson's decision be deemed legal, the suspension will continue until October 14. However, if it is considered illegal, there will be enormous pressure for Johnson to resign. If he stands down, opposition parties will have the option to appoint a caretaker PM charger with delaying Brexit and calling a general election.
Update 10 September 2019:
On Monday night UK time, British Parliament voted against Prime Ministers second bid in seven days for a general election. With that vote done and dusted, Parliament now falls into five weeks of suspension.
Johnson requested this suspension, and it was approved by the Queen two weeks ago. Despite the Prime Minister claiming no-malicious intent, many argue that this suspension is an attempt to stop MPs from discussing Brexit and preventing the UK from leaving the European Union without a deal on October 31.
MPs are so convinced that this is the case (and a considerable roadblock to democracy) that they have successfully voted in favour of an order that requires Johnson to release private internal communications with his advisors regarding his plan to suspend parliament for five weeks.
Further to this, last week MPs passed a law urging Johnson to seek a three-month extension to the current Brexit deadline of October 31 should he not secure a new deal with the EU. It is unknown if Johnson will indeed comply with this, especially after he stated he would rather “die in a ditch” than seek an extension. Moreover, his office has come across very unwilling to share their private correspondence regarding the suspension.
It all seems a bit fishy to me (and not the good kind of fish that comes with chips either). Either way, don’t expect it to be quiet on the Brexit front just because of the Parliamentary suspension. Individual parties will still hold conferences on Brexit and their applicable policies.
Update 6 September 2019:
In the space of a week, MP’s have voted successfully on a bill that would require Johnson to delay Brexit until January 31 if he can’t secure a deal by October 19. We expect this bill will become law on Monday, September 7, just before the suspension of parliament.
Not only that, but MPs rubbed salt in the wound by failing to provide the necessary support for an early general election. Johnson put forward a vote that required two-thirds of the house of commons to vote in favour. Despite this initial decline, opposition leader Jeremy Corbyn has indicated that he may be more inclined to vote for an early election if the Brexit delay becomes law. MP’s are expected to vote again on the election next week, so we will sit tight and see how it all plays out.
The reduced likelihood of no-deal Brexit put upward pressure on the value of the GBP against the AUD. While this isn’t ideal if you need pounds, it’s certainly not all bad news as the developments helped lift global market sentiment.
Update 3 September 2019:
As Parliament resumes this week those against a no-deal Brexit are scrambling to bring a motion to Parliament. They hope to force another Brexit delay until January 31 if a deal cannot be reached with the European Union by October 19. This comes despite Johnson saying that “there are no circumstances in which he will ask Brussels to delay.” I don’t know what that means if the motion gets approved by Parliament, but I have no doubt we will find out in the next few days.
Adding further fuel to the fire, markets expect that Johnson will call a general election on October 14 if he loses his ‘deal or no deal’ strategy. On the weekend he said that he didn’t want an election; however, markets believe he would rather an election than allowing MPs to delay Brexit further.
For such an election to occur, ⅔ of lawmakers need to agree. If the numbers don’t work in Johnson’s favour, he could call a vote of no confidence against himself to force an election - an unprecedented move in UK parliament.
Update 30 August 2019:
British Parliament is set to resume after their summer break next week. The new UK Prime Minister, Boris Johnson, however, has given up on his summer tan early and instead busied himself by asking Queen Elizabeth for a small favour. His request? A mere parliament suspension from September 9 until October 14. No biggie, right? Such an application is a formality under the UK constitution to allow a new Prime Minister time to organise legislation and their policy agenda. Except when that suspension occurs just weeks before the UK is set to leave the European Union.
Queen Elizabeth approved Johnson's request, meaning MPs will have minimal time to oppose a no-deal Brexit, due to take place on October 31. Widespread protests erupted across the UK as a result, with over one million people signing a petition against Johnson's plan to close parliament.
Many have challenged Johnson's motives as a means of pushing through a no-deal Brexit and a clear move against democracy. House of Commons speaker, John Bercow, described the decision as a constitutional outrage aimed at stopping parliament from debating a solution to Brexit and a means of stifling the voices of those wishing to avoid a no-deal Brexit. Protestors have even gone so far as to promise 'civil disobedience' should Johnson's plan go ahead.
Opposition leaders unsuccessfully requested a meeting with the Queen in the hopes she would block Johnson request. On Tuesday 160 MPs opposed to a no-deal Brexit signed a pledge to prevent a no-deal exit "using whatever mechanism possible". One such course of action is to remove Johnson as PM via a no-confidence vote.
News of the suspension did not bode well for the value of the pound, pushing it's value down against most major currencies including the Aussie dollar. The value of the pound will be severely undermined, should the suspension go ahead and result in the UK crashing out of the EU without a deal. The silver lining in all of this is that it might give UK-bound Aussie travellers more bang for their buck in the short term. The long-term outlook for such an instance is not ideal, though, as a no-deal Brexit is by no means good for the global economy.
Update 20 August 2019:
This week, new information has come out saying that, should the UK leave the EU without a deal on October 31, EU citizens will not lose the right to live and work in the UK immediately. Despite new Home Secretary Priti Patel wanting to end free movement immediately, there is not enough time to completely replace current immigration rules.
This is the first real information we have received about post-Brexit Britain. With this in mind, we still don’t know if the UK will leave the EU on October 31 with a no-deal, or if the deadline is to be extended again.
In hopes of honouring the October 31 deadline, Boris Johnson has delivered a letter to the European council president, Donald Tusk, asking to replace the current Irish backstop with a “legally binding commitment” for both the UK and EU to avoid building infrastructure and carrying out border checks. Tusk has yet to accept this offer; however, Johnson is set to travel to Germany and France to emphasise his determination for Brexit to take place on October 31, regardless of whether there is a deal or not.
This comes after a “leaked” government document reveals that crashing out of the EU with a no-deal would lead to food, medicine and fuel shortages as well as job losses and port disruptions. Eeep.
All things considered, it is expected that a group of cross-party benchers will use the House of Commons session on September 9 to legislate against a no-deal Brexit by requesting another extension to the deadline.
Update 16 August 2019:
Labour leader Jeremy Corbyn has put out a call to other opposition parties and rebel conservative MP's to join forces to create a caretaker government, call a general election and secure an extension to Article 50. He is doing this in the hopes of extending the Brexit deadline (AGAIN!!) and preventing the UK from crashing out of the EU with no deal on October 31.
From an economist point of view, we probably don't want the UK to leave the EU without a deal as it could have pretty profound ripple effects throughout the economy. Sure it might boost the value of the AUD against the GBP in the short term (yay cheap Yorkshire puddings!), the long term effects would be far less delicious.
Update 9 August 2019:
British Prime Minister Boris Johnson has urged his MPs to "get on and deliver" Brexit as he continued to insist a new agreement with the European Union could be brokered before Britain is due to leave on 31 October. Boris was adamant there will be no more dilly dallying and extensions after the Halloween deadline but also that the "unacceptable" Northern Ireland backstop had to go; a non-negotiable for the EU.
It appears the UK are really no closer to leaving the EU with a functional deal than they were 2 years ago, a fact that hasn’t been lost on consumers or businesses in Britain.
Even the powerhouse of Domino’s hasn’t been left unscathed with the company saying the probability of shortages of ingredients due to a messy Brexit have risen since earlier this year. To combat disruptions to ingredients such as Portuguese tomato sauce, Domino’s has set aside £7m to stockpile the essentials.
The GBP has been hammered from pillar to post since the Brexit drama began and that pressure doesn’t look like relenting any time soon.
Update 2 August 2019:
It looks like the UK are really stashing the cash for a rainy no-deal Brexit day possibility on October 31st; doubling the emergency fund for things like extra border security, easing traffic congestion in border towns and tackling queues created by delays at the borders. That takes the total fund up to £4.2bn!
This comes after Bojo’s fresh chief secretary to the Treasury, Rishi Sunak, said Britain would "hopefully" leave the EU by 31st October. The European Union has told Britain’s new Europe adviser the Brexit “withdrawal agreement is not up for re-opening.”Halloween could really be coming to the UK this year.
The Bank of England has made an ominous warning that the UK faces the prospect of a "one in three chance" of a recession even if there is a smooth exit from the EU. The Bank said the possibility of a weakened future trading relationship with the EU will slow the economy down over the coming years even if there is an orderly Brexit.
The Pound responded by falling to a new two and a half year low against the USD. The AUD dropped marginally against the GBP though, with markets still unsure about the RBA’s next move.
Update 26 July 2019:
Now that one more Brexit sideshow is over and Johnson is sworn in as new UK PM, the real work can start chugging away on getting the UK out of the Eurozone by October 31st, whatever that may look like.
Boris Johnson will have his work cut out for him, facing a to-do list stuffed full of difficult tasks when he takes office, from negotiating a palatable Brexit strategy to handling an escalating diplomatic crisis with Iran where the Revolutionary Guard has seized a British oil tanker. A free-trade deal with the US is also a top priority and Boris has already been dubbed Britain Trump by his US counterpart in what could be the start of a blossoming relationship. Mr Johnson has also proposed an array of spending to support health, social care, policing and business in order to get things moving quickly from Theresa May.
Boris also wasted no time making the government his own, with 17 cabinet ministers changing on his first day in power dubbed by the media as the “night of the blond knives”. He vowed to take Britain out of the EU on October 31 — in 99 days time — “no ifs or buts” with a “better deal” than the one currently on the table.
Some uncertainty for the UK has been resolved with Johnson now PM and with a bit of luck for the dude, a honeymoon period may loom, and Johnson may initiate tax and policy changes to bolster a market-friendly profile. A lift in sentiment could trigger business investment activity and stimulate consumer confidence.
There are also risks Johnson forms a hard-Brexit Cabinet unwilling to negotiate with the EU in discussions, Irish hard border concerns remain unabated, The EU offer little intent to alter the 31st deadline if needed and the whole Brexit scenario keeps racing along to a fiery end.
Update 24 July 2019:
Well, the first leg of the next part of the Brexit race is officially underway, with Boris Johnson being confirmed as Theresa May’s replacement as leader of the Conservative Party and Prime Minister of the UK. Not a moment too soon too; finally putting to bed weeks of speculation, leadership debates and seemingly endless uncertainty surrounding who will take the United Kingdom out of the European Union.
The former London mayor beat Foreign Secretary Jeremy Hunt yesterday in the final leadership ballot 92,153 votes to 46,656 — winning 66 percent of the Conservative Party faithful votes. Boris won’t take over office straight away; outgoing Prime Minister Theresa May still has a day left to tidy her things. When she does vacate Number 10 Downing Street, Boris will need to meet with the Queen so he can be invited to form a new government.
Now that Boris is officially the man, he will have the opportunity to build his own Brexit dream team in an effort to get the job done before the October 31st deadline.
The AUD/GBP was quite muted this morning with the AUD dipping just a touch on the news of Johnson’s appointment to the top job. Despite fears of a no-deal Brexit being forced by Boris’ approach, the pound wasn’t particularly perturbed, signalling a couple of things: that the market had foreseen a Johnson victory at the ballot and largely priced it into foreign exchange markets and that only solid policy is going to breathe any life into the GBP or bring on further losses.
Actual movement at the Brexit station could still be months away, and that uncertainty is expected to be a positive for AUD performance against the pound to finish 2019, with many economists forecasting more losses for the GBP against most major currencies. Whether or not Boris appears more likely to deliver a deal or no-deal Brexit is going to weigh the heaviest and any negotiations with the EU, Ireland and Scotland regarding Brexit are going to be closely watched by the market.
Update 12 July 2019:
Bloomberg has released a survey of UK conservative party members showing that 72% back Boris Johnson to be the next leader of the party and PM.
Both Johnson and his adversary, Jeremy Hunt have said a no-deal Brexit would not be shied away from, despite almost total consensus that it would be a calamity for the UK’s economy. Staunch opponent of a no-deal solution and Pensions Secretary hopeful, Amber Rudd said today that “both candidates have said that no deal is part of the armoury going forward, and I have accepted that”.
There is also some critical economic data due to be released in the UK shortly. The combination of employment, inflation and retail sales data over the next week will be critical for shaping consumer and market confidence in the short term.
Economists are expecting employment to remain steady, but are less hopeful on retail figures, lamenting that further drops in sales will negatively affect the GBP leading up to the election of the next PM on either the 22nd or 23rd of July.
Update 28 June 2019:
With the race still going to decide who will replace Conservative Party leader and Prime Minister, Theresa May, there is no solution to the Brexit conundrum in sight. There was a sight glimmer of what can only be described as positivity as Boris Johnson showed us his gambling side by giving a no-deal Brexit solution a million to one chance under his watch. Johnson said ‘common sense’ will prevail when a new Brexit Bill is debated in Parliament, but if he’s hoping common sense will be enough to get it through, a million to one chance starts looking juicy.
As expected, the only movements for the GBP against major currencies have been sideways and downwards. The GBP performed weakly against the AUD and NZD, went sideways against the USD and took a couple of backward steps against the Euro. Until Brexit is sorted once and for all (and not a no-deal solution) there isn’t much positivity on the horizon for the GBP, with the only positive being the Bank of England’s decision to leave interest rates on hold.
Update 14 June 2019:
The weakness of the AUD/GBP performance has been offset slightly by further instability in the UK surrounding Brexit and exactly how it is going to be managed over the coming months. Now that Theresa May has officially stepped down as the Conservative Party leader, the race to replace her is really starting to kick into gear, with a secret ballot taking place overnight in the first round of party voting.
Unfortunately for the GBP, hardline Brexiteer and ardent No-Deal supporter, Boris Johnson soared above other leadership contenders in the ballot, receiving 114 votes out of a possible 300, nearly triple the votes of the nearest MP Jeremy Hunt. Three MPs failed to meet the threshold of 17 votes needed to stay in the leadership race and were eliminated, leaving seven contenders to fight it out for the opportunity to succeed Theresa May as party leader and prime minister.
In another blow for the GBP, but on a positive note for AUD performance, the UK Labour Party’s dramatic attempt to block the possibility of a no-deal Brexit was defeated by a slim majority of 309 votes to 298. The failure of the Labour-led motion to remove the spectre of a no-deal Brexit weakened the Pound as MPs on both sides of politics warned a no-deal strategy would be catastrophic for the UK.
Labour leader Jeremy Corbyn said Labour would “never accept no-deal”, while former Conservative MP Nick Boles, who flew back to the UK to vote with Labour lamented that a “No-deal Brexit on 31 October is back to being a racing certainty.” Basically it means that the UK is no closer to coming to a viable solution and the markets have responded with investors avoiding the GBP in early morning trade.
If the UK leaves Europe without an agreement in October, there will be no transition period, with the European Commission warning on Wednesday that Britain would be obligated to pay its outstanding share of the existing EU budget. Under Theresa May’s previously negotiated Brexit withdrawal agreement with EU leaders, the UK would owe the EU approximately $70 billion. Talk about bill shock!
With a lack of upcoming economic data in the United Kingdom, all eyes are on the political movements and power plays, further weakening the performance of the GBP.
Update 11 June 2019:
Now that Theresa May has officially stepped down as leader of the Conservative Party, the race to find her replacement is really starting to heat up as 10 contenders, many of whom support a No-Deal Brexit solution, take their marks. The first round of internal party voting begins on Thursday as they look to whittle the field down to two candidates, who will then be put to a vote of party members. Unfortunately for the GBP, this uncertainty only serves to create more instability in the currency and is unlikely to be resolved any time soon.
There are also fears that the growing uncertainty surrounding Brexit and the possibility of a No-Deal solution could drive the UK economy backwards this quarter with official data published on Monday showing the economy shrunk by 0.4% in April. This result was worse than expected and follows a March contraction of 0.1% as businesses and economists beg for some clarity on exactly what Brexit will look like.
The economic pain and uncertainty doesn’t appear to be going anywhere any time soon for the UK and the GBP continues to slip against most major currencies, the AUD included. If the rhetoric of Theresa May’s replacements continues to allow for a No-Deal solution, the Aussie dollar could see more gains over the coming months despite rate cuts at home.
Update 31 May 2019:
An announcement yesterday that UK car production was slashed by nearly half over April appears to have spooked investors off the GBP, causing a slight drop against the AUD compared with earlier this week. Many car factories, including BMW's mini factory, were closed for the month in an effort to cope with the expected disruption caused by a 29th of March Brexit that never eventuated. The spectre of a No-Deal Brexit on October 31st has only increased uncertainty in many UK manufacturing businesses, causing investment to stall and jobs to be lost due to the threat of border delays, production stoppages and additional export/import costs.
The AUD/GBP has also been helped by increasing uncertainty surrounding who will replace Theresa May as leader of the Conservative Party and what their agenda will be. Despite many UK businesses, EU members and economists agreeing that a No-Deal Brexit would likely be economically damaging, several of the eleven candidates for the position, including Boris Johnson, Dominic Raab, Andrea Leadsom, and Esther McVey have stated they would leave the EU without a deal. Yikes.
Whoever takes over as May’s successor will have to commit to leaving the European Union no later than October 31st, seek another extension or put forward a second referendum all while facing intense pressure after the Conservative Party’s terrible result in the European elections.
Update 28 May 2019:
British Prime Minister, Theresa May announced on Friday that she would be stepping down from the role as Conservative leader on 7th June, opening the door for a protracted contest to find the new leader of the embattled party.
Mrs May had been under enormous pressure for failing to pass four separate iterations of a Brexit deal while losing 31 of her Senior Ministers for various reasons along the way. In an emotional statement, Mrs May reiterated that she had done her best to deliver a timely and effective Brexit and it was a matter of "deep regret" that she hadn’t been able to. Mrs May will continue to serve as Prime Minister while her Conservative party undertakes a leadership contest.
The GBP remained relatively flat post announcement, confirming that the markets had indeed priced May’s resignation into currency markets. It remains to be seen what effect the race to replace Mrs May will have, with more than a dozen MPs believed to be gearing up for a shot at the role. Foreign Secretary Jeremy Hunt has recently announced he will run for the position, joining Esther McVey, Rory Stewart and hardcore Brexiteer Boris Johnson and as the other confirmed candidates. If a candidate supportive of a no-deal Brexit wins the race to become new Conservative leader, it is expected the GBP will weaken quite a bit compared to other major currencies.
In other important developments for the UK and Europe, all eyes have been on the results from Sunday’s European parliamentary elections. In a sign that the UK is sick of hearing about a drawn-out Brexit, Nigel Farage’s Brexit Party was the biggest winner from European Parliament elections over the weekend, with 32% of the total votes. In contrast, the current party in power, The Conservatives, received just 9% of the votes.
Even though pro-Brexit parties received more votes than Remainer parties, more people voted for a second referendum than for a no-deal Brexit. Labour Leader Jeremy Corbyn has promised to allow a public vote on any Brexit deal before the UK leaves the European Union, opening the door for an increasing risk of a General Election and even a second referendum on whether to leave the EU at all.
Update 24 May 2019:
As frustrated British citizens went to the polls to vote in elections for the European Parliament many of them don’t want anything to do with, Theresa May lost her 31st senior minister to resignation. Commons Leader, Andrea Leadsom quit cabinet saying she no longer believes the government's approach will be able to deliver Brexit effectively.
Already under increasing pressure to resign, Theresa May’s fourth iteration of the Brexit Bill, the legislation required to bring her agreement into UK law, was knocked back overwhelmingly by her own Conservative party. Speculation is now rife that May could announce her resignation as early as this weekend, setting the stage for a complex and unwanted sideshow to choose a new Prime Minister to take Brexit to its conclusion.Due to the growing uncertainty around May’s position and the possibility firming once again of a no-deal Brexit, it was surprising to see the GBP remain relatively stable during trading yesterday. This suggests that global traders have already priced in the possibility of May’s resignation into the value of the pound. However, it remains to be seen what effect a protracted leadership battle or imminent possibility of a no-deal Brexit will have on the GBP moving forward.
Update 21 May 2019:
While the UK continues to squabble over exactly what Brexit should look like, the EU is preparing for a key test of their own strength and democracy as they head to elections for the European parliament later this week. Due to the UK being unable to finalise their withdrawal from the EU last month, they are bound by EU obligations to take part in the elections as well. According to polls (take that with a grain of salt) The Brexit Party, led by Nigel Farage is likely to receive the largest vote share in the election on Thursday, despite fierce opposition. Australia may have egg boy and egg girl, but the UK has Milkshake Man, who expressed his dissatisfaction with Farage yesterday by throwing a banana and salted caramel milkshake over him at a campaign rally. The support for the Brexit Party is not boding well for the GBP either, which slipped to a fresh four-month low against the Euro. Weaker results for the GDP could help to offset weaker than expected movements from the AUD, depending on how the market digests the RBA Monetary Policy meeting today.
Update 17 May 2019:
All in all, though, there have been no massive changes to the fact that no one has any idea about what Brexit means.
Update 23 April 2019:
With an extension until the 31st of October, we expect to be reporting of a few more ‘talks’ with no resolution. Buckle in, let’s pray we can celebrate a conclusion to Brexit with Halloween candy in October.
Update 5 April 2019:
Update 2 April 2019:
After Theresa May’s withdrawal agreement was voted down for the third time last week, a result which waved the UK’s right to a May 22 extension, yesterday members of parliament held more indicative votes in the hope of finding a majority.
There were four indicative votes, none of which commanded a majority. The ballots and results included:
- The prospect of remaining in a Customs Union with the EU was so close, yet so far, as the idea was defeated 273 to 276.
- They said ‘yeah, nah’ to staying in both the Single Market and Customs Union, with a defeat of 261 to 282.
- Don’t even try revoking Article 50 either, because it was voted down 191 to 292.
- The thought of holding another EU referendum clearly left a bad taste in their mouths as well, losing 280 to 292.
Where does this leave the UK? Well, as my dad would say, they are well and truly up the proverbial creek without a paddle. They have less than two weeks until the April 12 Brexit deadline and are stuck in a pretty gnarly political deadlock. If they fail to find an agreement or secure another extension by April 10, the UK will crash out of the EU with a no deal. If they do achieve an extension, they will be required to take part in the upcoming European Parliament Elections.
Opposition leader Jeremy Corbyn is calling for a third round of indicative votes, and Theresa May is considering putting her withdrawal agreement forward for a fourth vote.
Despite this saga slowly killing the souls of those keeping up with the drama, the last few days of Brexit happenings have proven quite useful for the value of the Aussie dollar against the Great British pound. If you had exchanged $2000AUD for pounds last Wednesday the 27th of March, you would have taken £18.60 less then if you had traded the same amount today. To find out more, visit our pound currency page.
Update 29 March 2019:
Update 26 March 2019:
Update 22 March 2019:
Update 19 March 2019:
- A leadership challenge
- A general election
- A second referendum on Brexit
- Revoking article 50 and stopping Brexit all together.
Update 15 March 2019:
Update 12 March 2019:
Update 8 March 2019:
Update 5 March 2019:
Update 26 February 2019:
Sure, 17 days sounds like a lot. However the UK has had two years, or 730 days, to get their act together. Time is running out, and all politicians have done for the last month or two is talk and talk without actually deciding on anything.
Update 22 February 2019:
If you are travelling to the UK soon, it’s definitely worth keeping an eye on Brexit happenings (as painful as that might be) to take advantage of any dips in the value of the pound against the AUD.
Update 19 February 2019:
Update 15 February 2019:
Update 12 February 2019:
- MPs are unaccepting of Prime Minister May’s proposed withdrawal agreement
- PM May is seeking concessions from the EU that they are unlikely to actually give
- Everyone (or almost everyone) is pretty concerned at the prospect of leaving the EU with a no deal.
All I can say is Godspeed, Britain. With a strong emphasis on the speed bit.
Update 8 February 2019:
Update 1 February 2019:
British MP’s voted on Tuesday on a number of amendments to the current Brexit withdrawal agreement. There was a resounding push for changes to the Northern Ireland backstop. As a result, Prime Minister Theresa May will spend the next few weeks negotiating with MP’s and the European Union on a new deal.
Update 29 January 2019:
Update 8 January 2019:
UK Prime Minister, Theresa May, has finally announced a date for British MPs to vote on her Brexit deal after postponing the original vote, scheduled for the 11th of December 2018. The new vote will take place next Tuesday 15 January 2019 (Wednesday 16th Australian time).
Should there be a majority vote against the proposed deal, the prospects of leaving with a ‘no-deal’ will become much higher. In preparation for this instance, over 200 MPs have already signed a letter urging May to rule out a no-deal all together.
On the flip side, many conservative MPs are actively calling for Britain to leave without a deal. They argue that May’s current deal is not reflective of the Brexit that citizens originally voted for in the referendum. Leaving without a deal means the UK would automatically fall back on the World Trade Organisation rules.
We will just have to see what will happen with next week's vote, as the decision will have a major impact on how Brexit continues to unfold.
Update 13 December:
Yesterday’s vote of confidence against PM Theresa May saw her win 200 votes to 117. Whilst this is positive for her, it still means she doesn’t have support from a third of her party when it comes to negotiating and passing the proposed Brexit agreement.
Update: 11 December
Today, British MPs were supposed to vote on the current Brexit deal. However, after expectations that the deal would have 187 votes against 419, UK Prime Minister Theresa May has delayed the vote to avoid the almost certain defeat. To put the number into perspective, the deal needs 320 votes to pass.
So, where does this leave the UK? Not in a great position if we are being honest.
There is no majority within the UK’s political factions that are in favour of any course of action. To recap, the potential options are:
A no deal. This would see the United Kingdom leaving the EU with nothing but their dreams, some debt and a good cup of tea. Definitely no trade deals, border negotiations or things that are quite important for the wellbeing of the UK’s economy and best interests of the citizens.
Joining the European Free Tree association. Once again, there is no real majority in favour of this.
A people’s vote on a Brexit agreement.
A second referendum to see if UK citizens are still in favour of leaving the EU. While some of the population could vote differently in a second referendum, obviously a second referendum undermines the original referendum at a considerable cost to the UK’s economy. According to a written statement to Parliament from March 2016, the estimated cost of conducting the original referendum was a whopping £142.4m. Imagine paying that bill again.
Most citizens and politicians alike are against a no deal, but also have no alternative as to what a deal should look like. It has been confirmed that the UK can decide not to leave the EU if they wish, however the EU has made it clear that they will not renegotiate the withdrawal agreement. Crikey.
The lack of support for any of the options has resulted in the odds of a no deal rising exponentially. It is also highly likely that the March 29 Brexit deadline will be extended.
If you haven’t already guessed, the UK government is in disarray at the moment. Or, as my dad would say, they are running around like a bunch of headless chooks. The prospect of a general election is becoming more likely, especially amidst calls for May to resign. If that’s the case, who would take her place, and would she ever get the chance to work in ye old London town again?
This growing mass of uncertainty has reflected on the pound’s performance, pushing it down lower against most major currencies.
If you’re travelling to the UK soon, it's definitely worth keeping a close eye on Brexit news to see how they are affecting the GBP. Maybe also take them some tea, everyone sounds really stressed over there.
Update: 29 November
Overnight saw the UK Treasury and Bank of England (BoE) provide risk assessments of potential Brexit scenarios.
The Treasury forecast that a ‘no-deal’ scenario would lead to a 9.3% hit to UK Gross Domestic Product (GDP) over 15 years. The BoE forecast the same scenario would lead to a 25% fall in GDP, thus resulting in a need for the Bank to increase interest rates to 5.5% to control inflation.The Treasury didn’t forecast the recently agreed deal with the EU, however, a close variant was modelled. The model showed a 3.9% decrease in GDP over 15 years. Whilst this is definitely better than the consequences of a ‘no deal’, both institutions agree that the UK will be poorer economically under any form of Brexit situation, compared to just staying in the EU.
In addition to this, talk of a second referendum is continuing to grow. It will be interesting to see what happens in the coming weeks as Prime Minister Theresa May continues to rally MPs for support of the current agreement. Should May not gain enough support during the vote on 11 December, the UK will need to return to the drawing board and face the reality of a ‘no-deal’ scenario.
Therisk assessment scenarios did not have a major impact on the pound against the AUD; even so, the market will remain extremely cautious as we move through the next few weeks.
- Businesses to prepare for post-Brexit rules
- Confirmation of final details of the new relationship
- Continuation of free movement
- The UK can negotiate its own trade deals in this time, however they will not come into effect until the transition period ends.