Morning Brief – Thrown under the bus

Thrown under the bus

Do you remember when Boris Johnson told the world that he likes to build models of busses in his spare time? The ‘confession’ offered during the televised interview with talkRADIO was, the daily mail conjectured, a PR spin to draw attention away from the referendum red bus that brandished the infamous £350m per week EU funding claim. It worked! Google Boris Red Bus and you’ll scarcely find results relating to the campaign promise that left Vote Leave in such hot water with the electoral commission. In fact, google Boris Bus and you’ll discover that the slogan is even fewer and far between, though that does have somewhat more to do with the Prime Minister’s accomplishments as London’s Mayor than a PR-pro! 

Last week Boris reminded the nation at the Conservative Party Conference of his passion for building busses from old boxes. But due to an HMRC white paper published yesterday, Boris’ Brexit Bus could be dragged back to centre stage. The most detailed analysis offered to date on the process of UK-EU post-Brexit trade has suggested that the additional annual burden of administration alone would be £15bn. 

Boris has demanded acknowledgement of his proposals for the Irish backstop by the end of this week and it is widely expected that we will know by next week whether Boris’ back-to-front-stop will be adopted as the basis of negotiations heading into the October EU summit. As sentiment towards the new proposal appears to be faltering on the continent, one concern for short-run Sterling is that political frustrations build and yet another meander takes place in the Brexit path without anything actually moving forward. Moreover, given that leadership has changed hands twice in the Conservative Party since the referendum without prior election, it seems untenable to suppose that another conservative candidate could take the helm without resorting to the public. This necessity is even more transparent when we consider that the new candidate would most likely be inheriting a minority in the House of Commons. Whilst obscured by the risk of a no-deal exit, September’s push for a general election did not see the Pound fare terribly well over the medium term. 

As the fate of Sterling and Brexit hangs in the balance expect higher volatility this week accompanied by choppy trading conditions. Sterling has opened considerably lower in early European trading this morning, pricing in the downbeat mood surrounding Johnson’s exit proposal. Liz Truss, trade Secretary (CHEESE), will today set out the tariff regime that would apply on EU goods entering the United Kingdom after Brexit. Utilising the General Agreement on Tariffs and Trade under the World Trade Organisation that we heard so much about during Boris’ campaign, it is expected the Secretary of State will announce that 90% of goods are to escape import duties.

Discussion and Analysis by Charles Porter

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