2018 has been politically and economically eventful for the UK by anyone’s standards, and promises to remain so till the end of the year.
British Prime Minister, Theresa May, takes her Brexit deal to Parliament for ratification on 11 December. It’s the deal that the European Union has agreed to, and is likely the best May could get. However, May’s cabinet colleagues dislike it so intensely that their resignations keep rolling in. In mid-November, two more left, including Dominic Raab, the chief negotiator for Great Britain’s withdrawal from the EU.
Commentators predict that the deal May presents to her cabinet will be rejected. If that happens, the UK governmentwill have three weeks to revise the deal and vote on it again. It’s hard to seehow any new deal would succeed, given the long hard road it’s taken to get just to this point.
So what happens if no deal is reached?
One outcome might be a motion of no-confidence in the May government, which would trigger a general election with Brexit as the focus. This, however, would require the Tories to vote against themselves in a no-confidence motion. This is unlikely to happen regardless of howevermany members resign from cabinet.
The remaining options could include the UK government leaving the EU without a deal, thereby falling under the trade rules of the World Trade Organisation, or to withdraw from its notice of exit under Article 50 pending a later attempt, now that the European court has confirmedit’s possible; or to hold a second Brexit referendum – a notion without legalprecedent that would require new legislation and probably many, many months ofpreparation.
Each option has repercussions, of course. Going with the WTO’s rules will introduce new tariffs and customs checks, as well as more border checks. How it will affect London as a global financial centre is also unclear. A suspension of Article 50 may merely put it off for another day (and perhaps another government). A second referendum, which nobody in government wants, keeps the issue going for however long it takes to find a resolution. If it finds a resolution.
Brexit has repercussions for European monetary policy too.
The European Central Bank has announced an adjustment to its ‘capital key’ – how its capital is divided between its members. Bloomberg reported on 4 December that the shares of 16 countries, including Germany, France and Austria, will be increased while 12 others – including Spain, Italy and Greece – will have their shares reduced.
When (or should we say ‘if’?) Brexit occurs, another adjustment will be made to account for the departure of the Bank of England, to distribute its proportion of the ECB capital to remaining members.
It’s only 21 days to the end of the year, but it still feels like a long road.
If you would like to speak with a professional financial adviser about how your investments are positioned for the year ahead, contact United Global Capital today on 03 8657 7640 or email info@ugc.net.au for a no cost, no obligation consultation.
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Joel Hewish
Authorised Representative No. 416387
Joel is the founder and CEO of UGC.
He is a licensed financial advisor with 15 years experience assisting clients grow, manage and protect their wealth.
