Brexit Britain from Abroad: Sluggish Growth as Uncertainty Hits Slouching UK
The Brexit Squeeze
The Bank of England has warned economic growth will remain "sluggish" as it kept interest rates on hold amid a tightening squeeze on family incomes.
Policymakers on the Bank's Monetary Policy Committee (MPC) voted 6-2 to keep rates at 0.25pc, with fewer members this month calling for a rise as lacklustre economic growth has weakened support for a hike.
In its quarterly inflation report, the Bank cut its forecasts for growth to 1.7pc in 2017 and 1.6pc in 2018 and cautioned the squeeze on household incomes would continue, with inflation still expected to surge close to 3pc in the autumn.
But it signalled rate hikes will be needed over the next few years to rein in Brexit-fuelled inflation and said borrowing costs may need to rise by more than expected in financial markets.
Members also voted to withdraw part of the mammoth economy-boosting package unleashed a year ago in the aftermath of Brexit.
It will call time on the Term Funding Scheme to offer cheap-finance to banks from next February, although it said it was now expected to offer £15bn more under the scheme - at £115bn.
In minutes of the rates decision, the Bank said: "In the MPC's central forecast, gross domestic product (GDP) remains sluggish in the near-term as the squeeze on households' real incomes continues to weigh on consumption."
On rates, it reiterated that "some tightening of monetary policy" would be needed to cool inflation and by a "somewhat greater" extent than markets expect.
Holly Williams, The Irish Independent
Slouching Towards Brexit
The rosy-eyed version of Brexit — in which Britain negotiates an amicable deal with its European counterparts and through the magic of bilateral free-trade deals weathers the exit with little economic damage, all while reclaiming control over immigration and parliamentary sovereignty — is no longer on the table, and perhaps it never truly was in the first place. There are thus two realistic scenarios for Britain’s eventual exit from the EU.
The first is cataclysmic. This is the “no deal” option, in which Britain and the EU fail to arrive at an agreement by March 2019 and Britain simply crashes out of the union with no parachute in place. Britain’s trade with the EU would revert to World Trade Organization rules; a hard border would return to Ireland; goods would pile up at Dover and Calais and chaos would reign as confused agents apply customs checks and tariffs to which they are thoroughly unaccustomed; perhaps even flights between the U.K. and EU operated by British airlines would be unable to run. That scenario is bad enough that — surely — avoiding it would inspire sufficient action to negotiate some sort of deal, even a relatively punitive one.
More likely, then, is something along the lines of the deal Greece negotiated with its creditors in the summer of 2015: a harsh, political thing, full of animus and mutual distaste, inevitably concluded in a bleary-eyed session in the middle of the night just before the deadline. (The EU, in that respect, has an unfortunate tendency to resemble a lazy college student.) Britain’s interminable debate over its own negotiating stance points in that direction — the deadline may loom, but it always seems curiously off in the distance somewhere, never really meaning anything until the moment it hits. In the meantime the political class can re-run the debates it has already litigated time and time again while the level of toxicity and vitriol in the political climate makes a rational consensual policy only more difficult to attain. Eventually the sheer imminence of circumstance will force Britain’s leaders — whoever they are by that point — to adopt some position, and to recognize that the EU really did hold all the leverage after all.
But it will not be an amicable divorce. If Britain wishes to avoid either outcome, it should make every effort to cease its soul-searching and establish a firm negotiating position as quickly as possible. Otherwise it will continue its drift towards an outcome nobody desires.
Noah Duponte-Smith, National Review
Is Remain Still an Option?
Formal negotiations between Britain and the EU already began, despite the U.K.'s position on key issues like a financial settlement and the rights of European citizens in Britain still being murky to European negotiators.
British business is similarly hazy on details and is currently pressing the government to clarify its objectives for each sector of the economy, according to Allie Renison, head of EU and trade policy at the business group, the Institute of Directors.
Despite what seems like eternal optimism by those who would like to stay a member of the EU, political analysts say that it’s unlikely.
“It is significantly unlikely that the vote will be overturned,” said Matthew Goodwin, a professor of politics at the University of Kent. “Both of Britain’s two main parties are committed to respecting the referendum result so while the terms of Brexit are contested, the actual vote itself is being respected by both parties. The basic view of the public is that even if they don’t like the referendum result, they should respect it and move on.”
Even if there is a surprise U-turn and Britain decides that it wants to stay in the EU, Europe may not be excited about welcoming the U.K. back into the fold.
“A re-remain decision would not necessarily be met with enthusiasm on the other side of the [English Channel],” wrote Fabian Zuleeg, the chief executive of the European Policy Centre, an independent think tank, in a recent article. “The way the U.K. has conducted these negotiations has burned many bridges and there are precious few allies and friends left. And the longer this approach prevails, the harder will it be to turn the situation around.”
With so much yet to be decided, the only thing that seems certain is that there is a lot of uncertainty still to come.
Rachel Elbaum, NBC News
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