This Week in Brexit 29th July
There’s now a month between us and the EU Referendum vote and there have certainly been some tumultuous developments during that time. This week has felt somewhat less volatile with the new Government starting to get to grips with the task at hand, the Labour party settling in for a summer-long leadership contest, and the markets steadying slightly after the disappointing PMI statistics released last Friday.
Theresa May continued her tour of Europe this week as she looks to make formal introductions and scope out how the other European leaders are positioning themselves ahead of any Brexit negotiations.
Earlier in the week, May travelled to Stormont Castle to meet Northern Ireland’s first and deputy first ministers. She took the opportunity to say that “Nobody wants a return to the borders of the past”. The next day, May hosted at Downing Street Irish Taoiseach, Endy Kenny, where they both agreed that it was important to keep close links between the UK and Ireland.
Wednesday saw the PM fly to Rome to meet Italian Prime Minister, Matio Renzi, where she spoke of the need for the UK to be flexible during negotiations. Renzi expressed sadness at the EU vote but said that Italy would be supportive during the “delicate” negotiation process.
Yesterday during a press conference with the Slovakian Prime Minister, Robert Fico, May warned Eastern European countries that the British public had sent a very clear message of the need to reduce migration. Fico commented that there was a disconnect between how British voters perceived EU migration and how it was viewed on the continent.
May repeated her message during a press conference with Polish Prime Minister, Beata Szydlo, but assured that there would be no change to Polish and Slovakian workers’ right to remain in the UK whilst we are still members. Szydlo was clear that freedom of movement would be a key issue during negotiations.
With both Jeremy Corbyn and Owen Smith having launched their respective bids for the Labour leadership, this should have been the first week of campaigning from the pair. However, a legal challenge of the Labour National Executive Committee’s decision to allow Jeremy Corbyn to automatically stand for re-election drew most of the attention. Yesterday, the challenge was rejected which means that the leadership contest can continue as planned.
Outside of the courts, Corbyn spoke optimistically about the prospects for the party; even going as far as to say that Labour could win an early general election if the Prime Minister were to call one. Corbyn’s campaign also received a boost when Sarah Champion, MP for Rotherham, un-resigned from her position as shadow minister for preventing child abuse and domestic violence.
This week saw Owen Smith question his opponent’s patriotism, saying that “nationalism and patriotism aren’t really part of his [Corbyn’s] make-up” and announce a wealth tax to boost NHS spending. However he also came under fire for saying that it was a shame that Labour hadn’t been able to “smash her [Theresa May] back on her heels”, referring to Labour’s performance in opposition to the Conservatives.
Whilst Labour’s internal struggle rages on, an ICM Unlimited Vote Intention Poll revealed that there was now a 16 point gap between the shares of the vote for the Conservatives (43%) and Labour (27%). This is the biggest gap since October 2009.
The pound closed on Thursday slightly down against both the dollar (1.31420) and the euro (1.19973), compared to this point last week. Following a sharp drop in the value of the pound upon the release of the PMI data on 22nd July, the pound’s value against the dollar rose steadily throughout the week; however, its performance against the Euro has been less impressive. The pound remains significantly below its pre-referendum levels against both currencies.
FTSE 100 and 250
The FTSE 100 reached a one-year high on Wednesday in the wake of the UK’s 0.6% GDP estimate for Q2 2016. Although flattening out since then, it closed yesterday 0.3% up on last week. Rolls Royce topped the FTSE 100 leaderboard with shares jumping nearly 14% after better than expected results.
The FTSE 250 climbed by 1.2% this week and has nearly erased the sharp losses which occurred following the result of the EU Referendum. Wednesday’s GDP estimates helped the index gain momentum.
Ryanair’s Pivot, Lloyd’s Cuts, and Ford’s Costs.
Ryanair announced early this week that it planned to reduce capacity in London Stansted with its focus now growing its operations on the continent. The company’s shares fell more than 30% following the EU Referendum result.
Later in the week, Lloyd’s Banking Group revealed that it is aiming to save £400 million pounds by the end of 2017 and is cutting a further 3,000 jobs to achieve this. The bank said that “a deceleration of growth seems likely”.
Elsewhere, Bob Shanks, Chief Financial Officer at Ford, identified that a weaker British pound in the aftermath of the Referendum result had cost the company in the region of $60 million during the second quarter. Ford’s projections also estimate that the cost to the company for every year until Britain leaves the EU would be between $400 and $500 million.
This Week at the Chambers
This week our Chief Executive, Paul Faulkner, attended the Birmingham Brexit Advisory Group. This group is organised by the City Council and brings together key stakeholders from across Birmingham to discuss the implications of Brexit for the City and explore joint strategies for addressing the most pressing issues.
As ever, if the EU Referendum result has affected your business, we would really value hearing about your experience. Contact Henrietta Brealey, Director of Policy & Strategic Relationships, at H.Brealey@Birmingham-Chamber.com.
Elliot Mason is Policy and Patron Adviser at the Greater Birmingham Chambers of Commerce.