Brexit: Theresa May ‘ambitious’ over deal with EU

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Theresa May has said she is “ambitious” over the deal the UK will strike when leaving the European Union.

Speaking at the start of a two-day visit to Bahrain, the prime minister declined to comment on whether she ruled out continuing to pay for access to the EU single market. She would look to negotiate “the best possible terms”, she added. The visit comes as the UK government is in a legal battle over whether MPs should get a vote on triggering Brexit. The UK public voted to leave the EU by a margin of 51.9% to 48.1% in June’s referendum. Brexit Secretary David Davis has suggested that payments to the EU for access to the single market could continue after the UK leaves the bloc.

‘About EU too’

On Sunday, Foreign Secretary Boris Johnson told the BBC that “large” sums of money should not be used for this purpose. Questioned on the subject of payments as she arrived in Bahrain, Mrs May said: “I’m ambitious for what we can achieve in our deal.”We will be looking to negotiate the best possible terms that we can with the European Union.” She added: “Crucially, this is not about how we retain bits of what we’ve already got, but what our new relationship with the EU is. “And I think that’s a relationship which is not just a single UK as supplicant into the EU. Actually, it’s about the EU as well. It’s about the UK.” On Monday, the government began its appeal in the UK Supreme Court against the High Court’s decision that it must consult MPs before invoking Article 50 of the Lisbon Treaty, which gets two years of Brexit negotiations under way. The prime minister has said she intends to invoke Article 50 by the end of March. The Prime Minister speaking to troops on HMS Ocean On Tuesday, Mrs May continued her trip to the Middle East by visiting HMS Ocean – the Royal Navy’s flagship in the Gulf. She gave a short speech to the troops, calling them “vital” in protecting the UK “in an increasingly uncertain and dangerous world”, especially when it comes to trade and defending against piracy. The prime minister also offered them thanks for their service, promised future investment and wished them a “peaceful” Christmas.

BBC News


Markets stabilise after Italian referendum

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Financial markets have rebounded after initial falls following Italian Prime Minister Matteo Renzi’s heavy defeat in Sunday’s referendum.

The euro was hit after Mr Renzi announced his intention to resign. At one stage the euro hit $1.0505, its lowest level against the US currency since March 2015.  But it rebounded from that low to stand at $1.0634, a fall of just 0.3%. Shares in Italian banks opened lower before recovering ground. The troubled Monte dei Paschi was down by more than 5% in the first few minutes of trade, but then rebounded and had edged into positive territory. Shares in Unicredit and Intesa also fell sharply at first before recovering.

Analysts say Mr Renzi’s defeat was already priced into the market. Kathleen Brooks, research director at City Index Direct, said there was caution among investors but not panic. “While the markets are likely to remain nervous as we start a new week, they haven’t fallen off a cliff, so far,” she said. “Either markets are becoming immune to political risk, or they are taking the view that the Italian issue will be a slow-burner, even if the president can’t form a government, he still has 70 days to try, and that seems quite far away at this stage.” However, the Italian economy is in a fragile state and a period of political uncertainty could do it further damage. Italian banks including Monte dei Paschi di Siena have been under pressure

‘Beleaguered’ banks

Analysts are particularly concerned about Italy’s banking industry, which is seen as vulnerable to a loss of confidence. Many banks are struggling with a burden of bad debt and are in need of refinancing. That finance would be harder to come by amid a political crisis. “Italy’s banks don’t have time to waste to try and boost their capital buffers. A win for the Yes camp in this referendum could have seen investors help to recapitalise the banks. However, it is unknown whether investors will do so now that the No camp has prevailed,” said Ms Brooks. “Without a sitting government, will there be official help for Italy’s beleaguered banking sector?” The size of Italy’s government debt is also a concern. Government borrowing, depending on which figures you look at, is one of the largest in the eurozone.

Analysis: Simon Jack, BBC business editor

Although the share price of Europe’s oldest bank Monte dei Paschi is little changed, that could soon change if the consortium of investors planning a €5bn cash injection abandon their rescue attempt amid the political vacuum opened up by Matteo Renzi’s departure. They will meet this afternoon to decide their response. The boss of the bank has described this plan as getting “several holes in one in a row”. Golfers will know how hard that is and the wind of political risk has just picked up. If they do decide the plan is now too risky then the government may have no choice but to nationalise the bank. That would trigger a so called “bail in” which means people who lent the bank money would have to write it off. Unfortunately, 65% of those creditors are ordinary retail investors so the damage would be widespread and politically toxic. Italy’s cost of borrowing rose sharply in early trading on Monday. The country’s 10-year government bond yield was up from 1.896% at the end of last week to 2.0516%. Yields rise when the price of bonds fall. However, the yield then fell back below the 2% mark to stand at 1.988%. Analysts said yields appeared to be bearing up despite the fact that the European Central Bank had not stepped in to buy bonds.

‘Critical importance’

Mr Renzi’s defeat adds to pressure on the European Union following June’s Brexit vote in the UK. “It’s not very hard to see a new election on the horizon, and it’s not very hard to see the 5-Star Movement taking power with stated aims to either leave the EU, drop the euro, or both,” said Mark Wills from State Street Global Advisors. “For Italy, establishing stable governance and a plan to guide the nation is of critical importance given the fragility of the economy, challenging policies and the liquidity problems in the banking system.”


Hard Brexit ‘could cost Tories next election’ – MPs

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Pursuing a “hard” Brexit could alienate core Conservative voters and cost the party the next general election, a group of Tory MPs has warned.

The group – which includes ex-attorney general Dominic Grieve – said “a moderate core” of Tory voters do not want the party to become “UKIP-lite”. PM Theresa May must ensure she is not “pushed” into a hard Brexit, they said It comes as the Lib Dems overturned a 23,015 Conservative majority to win Thursday’s Richmond Park by-election. Ex-Tory MP Zac Goldsmith stood as an independent after leaving the Conservative Party, but Lib Dem Sarah Olney – who fought the campaign on the issue of Brexit – won by more than 1,800 votes.

  • Was Richmond Park by-election a vote on Brexit?
  • In quotes: What result means
  • ‘Hard Brexit’ or ‘no Brexit’ for Britain


Brexit: What are the options?

Writing in the Observer newspaper, Mr Grieve, former Foreign Office minister Alistair Burt, ex-transport minister Claire Perry, education select committee chairman Neil Carmichael, and Bath MP Ben Howlett, said the Richmond Park result must serve as a wake-up call for the party. “The Conservative Party needs to be alert that there is a moderate core of Conservative voters, who voted Remain, and who want to hear the Conservative government speaking above the noise of the Brexiters,” the quintet wrote. “They do not want the Conservative party to be UKIP-lite, nor to hear that their desire for a negotiated Brexit, with all options open for the prime minister, is an attempt to delay the process or simply an expression of Remoaning.” The Richmond Park result should be a reminder “that their votes have another destination if we don’t get this right,” they added. They called for Downing Street to reveal its negotiating position on Brexit before triggering the formal exit process under Article 50 of the Lisbon Treaty. Such a move would ensure the government was not “pushed into a corner by those who only advocate a hard Brexit,” the MPs added.

Hard or soft Brexit?

Theresa May has not set out her negotiating position on Brexit There is no strict definition of a hard Brexit or a soft Brexit, but they are used to refer to the closeness of the UK’s relationship with the EU after leaving. So at one extreme, “hard” Brexit could involve the UK refusing to compromise on issues like the free movement of people, leaving the EU single market and trading with the EU as if it were any other country outside Europe, based on World Trade Organisation rules. This would mean – at least in the short term before a trade deal was done – the UK and EU would probably apply tariffs and other trade restrictions on each other.At the other end of the scale, a “soft” Brexit might involve some form of membership of the European Union single market, in return for a degree of free movement.

What does ‘hard’ or ‘soft’ Brexit mean?

So far the government has refused to reveal what it will seek to achieve in negotiations with the EU, once formal talks begin. However, the Sunday Times says Mrs May has given ministers the green light to draw up secret plans for a “grey Brexit” that would steer away from the demands of Leave and Remain hardliners. The paper quoted Whitehall sources as saying that Chancellor Philip Hammond and Brexit Secretary David Davis had formed a “small clique” with No 10 to drive Britain away from a hard exit. On Friday, international trade minister Greg Hands suggested the UK could seek a deal which would allow sections of the economy to remain within the EU’s customs union after Brexit. Mr Hands said officials would be able to choose the type of products to be covered by agreements. In the Commons on Thursday, Brexit Secretary David Davis said the “major criterion” was getting the best access for goods and services to the European market. Mrs May has said she plans to trigger Article 50, which begins a two-year negotiation process before the UK leaves the EU, before the end of March 2017.

BBC News


Theresa May’s corporate governance rules tackle the wrong problem

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There are many reasons to be glad that the Tory leadership contest was cut short during that tumultuous month after the Brexit vote. Theresa May’s rapid coronation as Prime Minister stabilised the country and calmed markets.

It also, thankfully, prevented her from making too many foolish commitments about what her government would do to “reform capitalism”. And now, with the publication of the Government’s Green Paper on corporate governance on Tuesday, the rash suggestions she did make have rightly been diluted.

In her foreword to the Green Paper, May declared that her proposals are aimed at “restoring faith in what [businesses] do and in the power of the market economy to deliver growth, opportunity and choice for all”. In reality, they will do no such thing, and nor would the undiluted version that May advocated in July.

Juliet Samuel


RBS worst hit in Bank of England stress test

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RBS has missed key hurdles in a Bank of England stress test, forcing it to devise new plans in case of a financial crisis. The toughest stress test yet measured the UK’s seven biggest lenders against a global economic crash. RBS performed the worst and was forced to draw up a new capital plan, which has been accepted.

The bank said it had “agreed a revised capital plan… to improve its stress resilience”. It said the change came “in light of the various challenges and uncertainties facing both the bank and the wider economy highlighted by the concurrent stress testing process”.

‘Action taken’

RBS, which is still 73% owned by the government after its bailout in 2008, submitted the new plan to the Bank of England (BoE) after running its own internal tests and finding its balance sheet would fall short. The bank said the test applied a hypothetical adverse scenario to the group’s balance sheet as at 31 December 2015, and that it had taken a number of actions since then, including the ongoing run down of “risk-weighted assets”. And it said it had continued its reduction in “higher-risk credit portfolios”, and reached settlements with regard to various litigation cases and regulatory investigations.

Eight years on from the financial crisis and taxpayer-owned RBS is still short of the money it needs to survive another one. It came bottom of the class in the Bank of England’s tests of financial strength and has been forced to beef up its finances. Barclays also scored poorly but the proceeds of the sale of its Africa business saw it squeak through. These were the two weakest links in a system that overall has strengthened. And just as well. The Bank’s Financial Stability Report has plenty of reasons for concern. The UK’s reliance on foreign money to finance its trade deficit – the so-called “kindness of strangers” – is highlighted, along with the vulnerability of the UK’s role in providing financial services to the European Union. Add to that the rapid increase in debt in China and the world looks like a dangerous place – not for the first time. RBS has been found vulnerable.

Barclays was also asked to take action when it fell short of one hurdle, but the BoE deemed its existing capital plan was enough. Standard Chartered missed a key metric as well, although it was not asked to take any action. The Bank’s Financial Policy Committee said in light of the findings and action taken by RBS, “the banking system is in aggregate capitalised to support the real economy in a severe, broad and synchronised stress scenario”. And Bank of England governor Mark Carney, referring to the above trio of banks, said: “There were three of the institutions who could see the direction of travel and took actions of their own accord. “In our opinion, they’d still be in a position to lend to the economy (even after this shock).”

Risk factors

The annual stress test gauges the financial strength and resilience of the UK’s seven major lenders – Lloyds Banking Group, HSBC, Barclays, Royal Bank of Scotland (RBS), Santander, Standard Chartered and Nationwide Building Society. They were tested against a doomsday scenario which would see economic growth plunge to levels seen during the financial crisis of 2008.

BBC Business


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