Brexit negotiations begin: David Davis targets ‘historic’ deal

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Brexit Secretary David Davis will call for “a deal like no other in history” as he heads into talks with the EU.

Subjects for the negotiations, which officially start in Brussels later, include the status of expats, the UK’s “divorce bill” and the Northern Ireland border.

Mr Davis said there was a “long road ahead” but predicted a “deep and special partnership”.

The UK is set to leave the EU by the end of March 2019.

Day one of the negotiations will start at about 11:00 BST at European Commission buildings in Brussels.

Mr Davis and the EU’s chief negotiator Michel Barnier, a former French foreign minister and EU commissioner, will give a joint press conference at the end of the day.

The UK minister, who will be accompanied by a team of British officials, is expected to say: “Today marks the start of negotiations that will shape the future of the European Union and the United Kingdom, and the lives of our citizens.

“We want both sides to emerge strong and prosperous, capable of projecting our shared European values, leading in the world, and demonstrating our resolve to protect the security of our citizens.

“I want to reiterate at the outset of these talks that the UK will remain a committed partner and ally of our friends across the continent.

“And while there is a long road ahead, our destination is clear – a deep and special partnership between the UK and the EU. A deal like no other in history.”

The BBC has been told by European Union sources that the talks will follow the EU’s preferred pattern of exit negotiations first, with the future relations between the two sides – including the free trade deal the UK is seeking – at a later date.

Five major UK business bodies have come together to call for continued access to the European single market until a final Brexit deal is made with the EU.

In a letter to Business Secretary Greg Clark, they urged the government to “put the economy first”.

The letter is from the British Chambers of Commerce, Confederation of British Industry, EEF, Federation of Small Businesses and Institute of Directors.

On the eve of talks, Chancellor Philip Hammond issued a strong warning about the implications of the UK leaving the EU without a deal in place.

Mr Hammond told the BBC’s Andrew Marr Show that having no deal would be “a very, very bad outcome for Britain” but added that one that aimed to “suck the lifeblood out of our economy over a period of time” would be even worse.

He called for a transition deal to be in place to avoid businesses being affected by a “cliff edge” scenario as the UK leaves.

Mr Hammond has said the UK should “prioritise protecting jobs, protecting economic growth and protecting prosperity”.

 


UK interest rates kept on hold at 0.25%

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UK interest rates have been kept unchanged at 0.25% by the Bank of England’s rate setting committee.

However, one of the nine who sit on the Monetary Policy Committee (MPC), Kristin Forbes, expressed concern about inflation and voted to raise rates. It was the first time since July last year that the vote to maintain rates had not been unanimous. Analysts said it indicated the Bank of England could be closer to raising interest rates than they had thought. “The minutes paint a picture of a committee moving a lot closer to hiking rates than markets had realised,” said Neil Wilson, markets analyst at ETX Capital.

The Bank caught “markets off guard” as it “was expected to be a dud of a meeting,” he added. The surprise was reflected in the currency markets, where the pound turned losses against the dollar into a 0.6% gain, to trade at $1.2357. The pound also gained ground against the euro, trading 0.7% higher at 1.1526 euros.

The Bank of England, led by governor Mark Carney, expects the UK economy to grow fairly briskly this year, at a rate of 2%. However, it then predicts a slowdown amid uncertainty surrounding the conditions of the country’s withdrawal from the European Union. Against that uncertain background, many economists have predicted that the Bank will leave rates unchanged until at least 2019. However, Ms Forbes, who is due to leave the MPC at the end of June, backed a rate rise on the grounds that inflation is “rising quickly and was likely to remain above target for at least three years”. Latest official figures showed the UK’s inflation rate rose to 1.8% in January, which is below the Bank’s 2% target but the highest rate for two and a half years.

Hawkish tone

The minutes from the MPC’s latest meeting indicated some other committee members might also be close to voting for a rate rise. The minutes said: “Some members noted that it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted.” The fall in the value of the pound since the vote to leave the EU has meant goods brought into the country are more expensive.

Earlier on Thursday, the supermarket chain Sainsbury became the latest retailer to warn of the pressure to raise prices. Other MPC members noted consumers were turning more cautious amid slowing wage growth and rising prices. On Wednesday, the US central bank voted to increase interest rates, its second recent move upwards.

The FTSE 100 index, which has recently been moving in opposition to the pound, eased back from its earlier record highs. Before the Bank’s decision, the index had hit a mid-session high of 7,444.


Trump effect ‘has been good for UK’ says central banker

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A boost to financial markets since Donald Trump’s election has helped the UK economy, a central banker has said.

Ben Broadbent, the deputy governor for monetary policy at the Bank of England, told the BBC that some of Mr Trump’s economic plans could help the UK. Mr Trump has promised to cut taxes and boost US infrastructure spending, but also erect trade barriers. “Financial markets have taken a relatively optimistic view so far of what it means,” he told BBC Breakfast. “You’ve seen business confidence rise, particularly in the US, you’ve seen financial markets get more optimistic, and I think that has had some impact on us,” he said.

However, he added that it was too early to know what the full effect of Mr Trump’s policies would be. Global markets were boosted by the so-called “Trump effect” after investors bet on Mr Trump’s policies of infrastructure spending and lower corporate taxation coming to fruition and boosting the US economy. That economic plan would probably help global growth, Mr Broadbent said. The US Dow Jones share index broke through the 20,000 point barrier in late January for the first time ever as investor confidence built. However, US markets have eased back this week amid growing uncertainty.

Mr Broadbent sounded a note of caution about some of Mr Trump’s policies. “There are other things the US administration has said that people may worry more about, or have done in some markets,” he said. “And I should say overall that… there’s a lot we have yet to see about the detailed plans, including those for fiscal policy, for government spending and taxes and so forth, so we’ll have to wait and see. “But so far, at the margin, yes, it’s been positive for global sentiment, and for that reason, and to that extent, for us as well.”


Pound slides ahead of May’s Brexit speech

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The pound has fallen below $1.20 amid reports Theresa May will set Britain on course for a “hard Brexit” in a major speech.

Ahead of the address – in which the Prime Minister is expected to signal that Britain is prepared to quit the European Union’s single market – sterling slid to its lowest level against the dollar since October’s “flash crash” in Asian trade. It also fell to a two-month low versus the euro. But the currency edged up slightly, back above $1.20, after it emerged that Donald Trump had told The Times he hoped a new US-UK trade deal could be negotiated “quickly” after Brexit. The pound is 20% down on the dollar since last June’s referendum – a level not regularly seen since the mid-1980s.

While a weaker sterling makes UK goods more competitive abroad, it means imports are more expensive. Analysts said the latest sterling fall reflected market jitters over the Brexit negotiations and the prospect of Britain crashing out of the European trading bloc. Several Sunday newspapers reported that Mrs May will say the UK is prepared to leave the single market, customs union and European Court of Justice in her speech at Lancaster House on Tuesday. Her red lines for the negotiations will reportedly be an end to free movement from the EU and freedom to strike new trade deals around the world – neither of which are thought to be achievable within the single market.

Downing Street described the reports as “speculation” but the approach appeared to be backed up by Chancellor Philip Hammond – who warned the UK could slash business taxes if it is denied access to European markets after Brexit. In an interview with the German Welt am Sonntag newspaper, Mr Hammond said: “If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term. “In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do. “The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.”

Kathleen Brooks, an analyst at City Index, said reports of the UK leaving the single market had been “like kryptonite” to traders. She wrote: “The FX market has spoken, and, as of Sunday night, it is not confident that Theresa May can deliver the necessary clarity and confidence when she lays out her Brexit plans.” Sean Callow, a senior currency strategist at Westpac Bank in Sydney, told Bloomberg: “It is difficult to make the case for the pound to avoid testing – probably breaking – the ‘flash crash’ lows in coming weeks.” The flash crash on 7 October saw the pound fall below $1.19 – its lowest post-referendum level – before recovering. A report published last week said the crash, during Asian trading, was caused by a range of factors, including the time of day.

 


Theresa May: UK cannot keep ‘bits’ of EU membership

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The UK cannot expect to hold on to “bits” of its membership after leaving the EU, Theresa May has said.

The prime minister’s comments come as the government prepares to begin talks on Brexit, including whether the UK stays in the European single market. She told Sky News her approach was not “muddled”, following criticism by the UK’s former EU ambassador. Mrs May, whose critics have demanded more detail of her aims, promised to provide this in “the coming weeks”. But Labour accused the prime minister of failing to reveal whether she was prioritising “immigration over access to the single market”. Brexit talks with the EU are expected to begin as early as April. There has been much debate in recent weeks about the nature of the deal the government is aiming for, in particular whether controls on the movement of EU citizens will mean the UK leaves the European single market and customs union.

‘Ambitious’

Sir Ivan Rogers, who resigned as the UK’s ambassador to the EU last week, criticised “muddled thinking” among ministers. But Mrs May told Sky News’s Sophy Ridge on Sunday: “Anybody who looks at this question of free movement and trade as a sort of zero-sum game is approaching it in the wrong way. “I’m ambitious for what we can get for the UK in terms of our relationship with the European Union because I also think that’s going to be good for the European Union. “Our thinking on this isn’t muddled at all.” But it was “important to take some time” to look at the “complexity of the issues”, she added. Mrs May said: “Often people talk in terms as if somehow we are leaving the EU, but we still want to kind of keep bits of membership of the EU.

“We are leaving. We are coming out. We are not going to be a member of the EU any longer. “So the question is what is the right relationship for the UK to have with the European Union when we are outside. We will be able to have control of our borders, control of our laws.” In the referendum last summer, voters opted by 51.9% to 48.1% in favour of Brexit. Mrs May said: “This is what people were voting for on 23 June. “But of course we still want the best possible deal for us, companies to be able to trade, UK companies to be able to trade in and operate within the European Union and also European companies to be able to trade with the UK and operate within the UK.”

The prime minister has promised to invoke Article 50 of the Lisbon Treaty – getting formal Brexit negotiations with the EU under way – by the end of March. Mrs May told Sky: “Over the coming weeks, I’ll be setting out more details of my plan for Britain. Yes, that’s about getting the right deal for Brexit, but it is also about economic reform… “It’s about getting the right deal internationally, but it’s also about a fair deal at home.”

‘Taking back control’

For Labour, following Mrs May’s interview, shadow Brexit secretary Sir Keir Starmer told the BBC: “She had one question put to her three times and still didn’t answer it, which is, ‘Are you prioritising immigration over access to the single market?’ “That was the question she didn’t want to answer. And I think now, 10 to 11 weeks from the triggering of Article 50, and the most important negotiations for a generation, we need more clarity than that, and we haven’t got it.” Liberal Democrat leader Tim Farron said Mrs May’s comments “confirmed she is taking us towards a disastrous hard Brexit that will leave our country poorer and more divided”.

‘Disastrous’

But Richard Tice, co-chairman of the Leave Means Leave campaign, said: “We welcome the prime minister’s commitment to taking back control of Britain’s borders, therefore ending preferential treatment for EU citizens. “She is right that issues of trade and immigration are not binary because when Britain leaves the single market and the customs union, though freedom of movement will cease, Britain’s ability to trade with the EU and access the single market will continue.” Labour MP and leading supporter of pro-EU Open Britain group, Chuka Umunna, said:”Any trading arrangement outside the single market would erect barriers with our largest trading partner and would be disastrous for the UK economy, jobs and businesses.” Europhile former Conservative chancellor Ken Clarke told BBC One’s Andrew Marr Show: “Theresa needs to address the more serious question of the muddle [Sir Ivan is] complaining about, see whether she agrees with him and decide whether she can improve the way in which she organises the government to get to a proper conclusion.”

 


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