Brexit is going down to the wire. We are hurtling towards 29 March with scant evidence the EU-UK are closer to resolution. Political brinkmanship has damaged GBP (although Euro has not performed well either), with traders selling upticks and buying low volatility.
Today UK Prime Minister Theresa May will brief the House of Commons on the progress of Brexit negotiations. We are doubtful of any breakthrough. May is expected to announce a meaningful vote for 27 February, but that is unlikely to appease anyone. Remainers need a new trick, since the last vote – a huge loss for May – failed to upset the political order. European Union Brexit negotiator Michel Barnier suggested that May endorse a permanent customs union, also supported the UK opposition Labour Party.
The UK economy is clearly weakening. Sharp declines in investment are victims of Brexit uncertainty. This is just common sense. UK Q4 GDP declined 0.2%, down from +0.6% in the Q3. For 2018, GDP growth slipped to its lowest since 2012, at 1.4%, slowing from 1.8% in 2017. Given a similar slowdown in Europe, it is hard to say how the UK would have performed without the spectre of Brexit. Italian growth forecasts have been reduced from 1.2% to a paltry 0.2%.
