49. Weekly Newsletter
The 15th of October deadline for Brexit talks to be completed, set by PM Johnson, has been completely missed due to numerous negotiation sticking points remaining. If a trade deal is not reached then trade between the UK and EU will not cease once we enter 2021. However, the Johnson Government would come under heavy political criticism from many supporters of a hard-Brexit as the UK would have lost time (and paid the EU around £40bn net since 2016) for striking alternative global trade deals. Furthermore, public support for a no-deal Brexit is well below a majority and could be politically disastrous.
If a no-deal occurred then it would likely lead to higher prices in UK shops and may additionally weaken the FTSEs disappointing year. On the other hand, Brexit supporters have argued that leaving the EU will provide the UK with more freedom to agree tailored trade deals across the world. The certainties the UK has for 2021 are: the UK will stop big annual payments towards the EU budget, the UK will have a points-based immigration system, freedom of movement will end for Great Britain, and businesses trading with the EU will require more paperwork.
On the 2nd of December England is set to enter a new phase of lockdowns in a county-by-county process in one of three tiers. The tightest restrictions (Tier 3) have been imposed in mainly the Midlands and the North of England. The plans also will allow for rules to be eased between the 23rd-27th of December to allow three households to join together. The UK has the highest per capita Christmas spending in Europe and the month of December typically represents 12% of annual GDP. Since the UK GDP is forecast to shrink 11.3% this year (not fully recovering until the end of 2022) it has been seen as essential to rescue part of the economy over the Christmas period.
The loosening of lockdown is in a bid to ‘save Christmas’ and also the economy which is heavily dependent upon the Christmas season. Statistics for 2020 are forecasting that Brits will spend £24.2bn (£476 per person) during the holiday season. The data even shows vast differences in regional spending with the Welsh spending more, per person, than the people in London and almost double of those in the East Midlands.
The UK has been ranked as the 8th best country in the world for ease of doing business (Sweden was also a top 10). However, the UK’s historical business success may be under threat again with Scottish independence threatening to shift around 8% of national GDP from Westminster. The First Minister of Scotland, Sturgeon, this week used St Andrews Dayto rally around a new referendum for national independence. Sturgeon has also declared that PM Johnson would be unable to veto a vote either during her party’s virtual conference.
The Scottish had their ‘once in a generation’ referendum on Independence in 2014 which saw 55.3% of the country (on a 84.6% turnout) vote to remain part of the union. However, polling data suggests that “Johnson’s leadership” has been the biggest driving factor for swing voters in Scotland backing independence and now represent a majority of the country. An independent Scotland would likely try and re-join the EU, leave NATO, raise taxes and cut defence spending.