Tag Archives: Boris Johnson

Battle of Brexit continues as Government loses High Court Article 50 ruling

Article 50 & the Battle of Brexit Britain

So the Battle of Brexit is back on as Theresa May v Parliament, the alleged powers of the crown and office of PM v ministers, Leave vs Remain, UK v EU, England v Scotland, UKIP v itself, presses on. The High Court has ruled that the UK government must consult Parliament before triggering Article 50 to leave EU. In addition, the original drafter of Article 50 reminds us that the treaty clause says nothing about canceling the process if the political landscape changes, another referendum or general election changes things, or the likely ‘Hard Brexit’ deal is unappealing.

Newspaper Response

Brexit High Court ruling newspaper response 4 Nov 2016
Brexit High Court ruling newspaper response 4 Nov 2016

The Right Wing tabloids such as the Daily Mail went for character assassination of the High Court judges, including describing one with disdain as “openly gay”, or like The Sun attacking the petitioners as elite and/or foreign. The Daily Telegraph published a column by Nigel Farage on the front page.

Dominic Grieve, the Conservative former attorney general, said reading hostile coverage in the Mail and the Daily Telegraph “started to make one think that one was living in Robert Mugabe’s Zimbabwe … I think there’s a danger of a sort of mob psyche developing – and mature democracies should take sensible steps to avoid that”. – The Guardian

Social Media Response

North East English Defence League Brexit Riots
North East English Defence League Brexit Riots?

Hard Right Brexiters and the EDL have promised riots if Parliament votes against Article 50. The nature of things to come?

So, the battle to stay or go has been reignited.

The Government is going to appeal to the Supreme Court but this is embarrassing for Theresa May and will add delays to the process. The appeal, may, ironically, end up in the European Court of Justice! Something that would not appeal to Nigel Farage.

The so-called Democratic Party have launched ‘Operation Beacon‘ to “enforce Brexit”

Gina Miller who led the petitioners bringing the court case against the government has now received death and sexual assault threats from online trolls following the High Court victory.

Labour leadership contender, MP Owen Smith has now called for Labour to amend a parliamentary Article 50 Bill to include a second EU referendum on it.

Crown & Prime Minister v the People

The argument by the Government that it can use the Crown’s royal prerogative powers is itself a smack in the face for democracy and Parliament’s sovereignty – the very thing Brexiters claim was the main reason for leaving the European Union. Yes, the EU Referendum was democracy in action, albeit with huge lies, fearmongering and bribes, on both sides – but, then saying that the PM now has the final say, reverses that very democracy. The PM is unelected and is not sovereign over Parliament’s MPs – who were elected on a stronger more honest mandate than a yes/no poorly managed Referendum campaign only brought in to appease the Tory Right so that they did not join UKIP. So just who is the Crown and who are the People? UKIP seem to be laying claim to being the voice of the people – if that it the result of Brexit then everyone loses in the long run.

Article 50 may not be final

Article 50 The Lisbon Treaty of the EU
Article 50 The Lisbon Treaty of the EU

So, the leaving process can and could be halted, not just by court action, but also since Article 50 is not irreversible according to its drafter. John Kerr, a former UK chief diplomat, and Secretary General of the European Convention, has stated the obvious, that anyone reading Article 50 can discern for themselves, that:

“It is not irrevocable – you can change your mind while the process is going on.” Lord Kerr

Indeed, Kerr suggested that the purpose of Article 50 was to slow down dictators from taking existing members out of the EU too quickly, nobody envisaged a country democratically withdrawing – although that right, should and does exist.

Hard Brexit would sink UK like the Titanic

Former equivocating Leave campaign leader and now bumbling Foreign Secretary Boris Johnson said, this week at the Spectator Awards that Britain would make a “Titanic success of Brexit”. When the audience yelled out “it sank!”, one has to wonder whether he knew or was well aware of what he was saying.

Adding further poignancy to the event, Nigel Farage won the Spectator Lifetime Achievement Award. This recalls the Brexit Battle on the River Thames earlier this summer.

Currency & Stock Market Response

The Pound has leapt 1.5% against the Dollar and nearly 2% against the Euro in just a morning on the currency markets in response.

The near 20% fall in Sterling since the EU Referendum has made exports cheaper, but the cost of using Microsoft software for business has just risen 22%. Lenovo and Apple have raised their prices 10-20%. For the poor and vulnerable, food, drink, energy, and transport costs are all rising. The Government is guaranteeing that car manufacturers will not suffer during trade and tariff deals, meaning that they will find a way to compensate (itself against WTO rules) them or negotiate a trade deal on a sector-by-sector basis, something the non-car producing nations may block.

The FTSE-250 jumped 1.5%, it is made up of more British revenue-based businesses. The FTSE-100 lost 0.6% as it is more made up of multinationals with balance sheets in Dollars.

Where are the lines of democracy drawn?

Whilst a slim majority voted for Brexit, it was not a majority of either voters or the population. It was also regionally divisive. Northern Ireland and Scotland votes to stay, as did London and Norwich! More interestingly, Wales voted to leave, yet is concerned that England is driving the terms of Brexit against the wishes of regionally devolved parliaments like the Welsh and Scots.

Carwyn Jones, First Minister of Wales, has now called for votes on Brexit terms and negotiating positions to take place in Cardiff, Scotland and Northern Ireland, as well as Westminster. Democracy may have begun a process to take the UK out of the EU, but it may also have triggered a process to take Scotland and others out of the UK. With the Government playing hard ball against the regions, nay countries, of the UK, we are storing up future problems and questions over whose sovereignty is paramount.

Theresa May seems to be arguing that the courts should not stand in the way of the Government. So the Government is above the law? Suzanne Evans, of UKIP, agrees, and has called for the judges in today’s decision to be sacked!

Whilst many fearmongering scenarios may be unlikely, and initial economic data post-EU Referendum is not as bad as feared – yet, it does show that continued discussion and opposition may be fruitful, whether to change our negotiating position with the EU, or to wriggle our way out of Brexit itself. If that is a possibility, there needs to be a wider political discussion before a clearer and cleaner campaign and a second referendum on any final EU deal. Paddy Power have, today, halved the odds from 10/1 to 5/1 of a second EU referendum taking place before 2019.

So, as the Battle of Brexit reignites, with the threat of appeals and riots, this is neither over nor barely begun in divided Britain. After the last 6 months of the EU Referendum campaigns, increased hate crimes, rising stock markets and falling Pound, the likelihood of fresh devolution votes – Britain will not be healed or united by either leaving or remaining. Crown and Parliament have been set against each other, and democracy and debate seem to be the losers. Leave campaigners think the former is ignored if the Referendum vote it upheld. Remainers believe the vote was tarnished by lies and a politically-motivated campaign run for reasons other than the over-simplified seemingly consequence-free question being asked. At the very least, the debate should remain open to challenge Hard Brexit and Brexit means Brexit positions, and to see how the mind of the EU and the UK changes over the duration of Article 50, should it be triggered, and should it lead to Brexit, given that it is possible to cancel the process if the terms of #Brexit are too hard to bear.

 

Political Dystopia as UK living in Groundhog Day & Back to the Future era

UK Political Groundhog Day

Can you believe it? Nigel Farage is back in charge of UKIP, again – for the fourth time. We also have Maggie ‘Theresa May‘ Thatcher redivivus in charge of the Conservative Party (MT/TM same initials!). Jeremy Corbyn is also the second leader Labour has had in a year. OK, so the previous one was also Jeremy Corbyn! I feel like I’m living in political Groundhog Day.

Theresa May Margaret Thatcher Number 10 Composite
Theresa May Margaret Thatcher Number 10 Composite

UKIP’s fourth-time-around leader

UKIP saving the Pound
UKIP saving the Pound, one cent devaluation at a time!

Admittedly, or allegedly, only a temporary reversion, but after Diane James’ 18-day stint as leader, Nigel Farage has returned to the helm of UKIP.

“UKIP without a leader is more electable than Labour with one” – Nigel Farage

Neil Hamilton as an alternative UKIP leader, currently leader in the Welsh Assembly, would be a “horror story” say Farage and Hamilton in a comical show of unplanned unity.

Financial Markets and Economic Prospects

GBP v USD 2016 post-Referendum Exchange Rate
GBP v USD 2016 post-Referendum Exchange Rate

And whilst the FTSE-100 reaches new heights for the multinational wealthy with shares and global reach, the Pound is crashing towards Sterling parity with the Dollar ($1.27) and ignominy with the Euro (€1.13).

Back to the Future over the EU

John Major launched his fatal Back to Basics political message and policies in 1993, but Theresa May’s message feels more like back to the 80s or even the 70s – before 1973 when we joined the EU. Now we are leaving it. When we joined, Britain was keen to avoid creating a rift between pro and anti-Europeans:

“Above all we should avoid creating a new, semi-permanent rift in British society, between pro and anti Europeans.” – The Guardian, 1 Jan 1973

Post-Referendum and with Brexit’s Article 50 due to initiate by March 2017, we have created exactly that with a very divided and divisive 48% Remainers and 52% Leavers society.

Currency falling backwards and downwards

DeLorean Back to the Future DMC Car
DeLorean Back to the Future DMC-12 Car

The Pound has only been this low once before in 60 years, back in 1985, when Back to the Future was released and the already defunct DeLorean (1983) was ironically the posited future of flying cars and time machines. In fact, without any irony at all, DeLorean or rather the new DMC is making fresh models of the DMC-12 car this year!

Recreating the Past rather than a Future

We seem to be recreating the past, rather than an inclusive or “brighter future” for all of Theresa May’s talk about injustice and inequality – because it’s selective inequality she’ll help, and selective education she’ll promote. And if, we can’t trust Nigel Farage to actually resign, Boris Johnson to keep on message for longer than 4 days (Theresa May’s joke at the Tory Party Conference, 5 October 2016), how can we trust that “Brexit means Brexit” or hope that it doesn’t. We seem to be living in the past, having chosen to withdraw from European cooperation and community, back to tariffs and protectionism, back to a low Pound, xenophobic racism and divisions, and peddling failed political slogans that could have been ripped from 1970s/80s politics and posters – indeed during the Leave EU campaign some were. Theresa May, in her speech, ridiculed ‘citizens of the world’, as many Remainers describe themselves, as citizens of nowhere, even if it was in the context of criticising global corporations:

“If you believe you are a citizen of the world, you are a citizen of nowhere. You don’t understand what the very word ‘citizenship’ means.” – Theresa May, Conservative Party Conference 2016 (speech in full)

This reminds me of George Orwell’s dystopian idea of citizenship in 1984! As for me, I’m a #proudcitizenoftheworld:

As was discussed today on TalkRADIO, for which I was interviewed, we are in dangerous territory here, using jingoistic language to appease the right whilst seemingly stealing centreground policies, but only for the few who are hard-working British citizens, not the “low skilled immigrants”. Immigrant wealth-creators are welcome but not “wealth consumers“, said Liam Fox at a fringe event. So that’s no more asylum seekers or refugees then?

Theresa May also turned the tables, saying that now Labour is the “supporting voices of hate…the nasty party”. Yet her language is more reminiscent of UKIP’s xenophobia than any kind of utopian equality. Even The Times said of her speech that “The Tory conference was largely immigration policy by Ukip.” It’s a scary future not a bright future we are being presented with.

Financial Implications of Brexit, Currency Crash, Stock Markets Tumble

Osborne & Carney try to stabilise markets … and fail, at first

Pound v Dollar lowest in 31 years
Pound v Dollar lowest in 31 years

As George Osborne, David Cameron, Boris Johnson, and the Bank of England’s Mark Carney rush to reassure the financial markets – the Pound, the FTSE, and the UK’s sovereign credit rating all dive. Sterling has been battered and remains at a 31-year low, the FTSE 250 has witnessed in as many days two of its top-five one-day losses, and S&P have trashed our credit outlook by two-notches, increasing borrowing for the Government and businesses. A second BoE reassurance on Tuesday 5 July caused the FTSE 250 and Pound to dive further.

Former Governor of the Bank of England, Mervyn King essentially said “Keep Calm, Don’t Panic”:

“Markets move up, markets move down. We don’t yet know where they will find their level…What we need is a bit of calm now, there’s no reason for any of us to panic.”

Was this just a two-day shock? We haven’t seen all out financial Armageddon, but just what are we getting, and for how long?

As of Tuesday 28 June morning, adventurous investors were buying into the flatlined market and the FTSE 100 was up 2% and FTSE 250 up 3.3%, although within the hour the gains had fallen back to 2.6-2.8% – still 11% down since the Referendum. At the close it was 3.5% up, restoring a quarter of its Brexit losses. To quote the Financial Times, Markets Live blog:

“It’s still a bloody mess, even if markets have steadied.” FT, 11am Tuesday 28 June

In the first hour of Tuesday’s trading the Pound was up just 1%, barely 1.5c higher after its 18c fall, but by 10.30am had lost half that gain already, only to regain it after lunch and lost most of it by 5pm. There has been no recovery against the € Euro.

Perhaps, this was on hopes of a second referendum, called for by millions including Tory Health Secretary Jeremy Hunt, and Sir Richard Branson, despite being ruled out by the outgoing PM, David Cameron.

By Wednesday 29 June midday, the FTSE 100 had recovered all of its losses, whilst the FTSE 250 remained 10% down.

It could be, too, that the market is recovering on the news that nothing will happen in the short term, that Brexit reality is delayed, and won’t kick-in properly till after Article 50 is actioned and up to 2 years later Exit terms agreed and then years worth, but some counts 5-10 years, of negotiating new trading terms with the EU and some 50 agreements with the rest of the world that were based on our membership of and access to the European Single Market.

Thursday 30 June saw previous day gains restore the FTSE 100 to parity and by the close it was 2% above 23 June’s high. Whilst the more British based companies index, the FTSE 250, remains 7% down despite two more days of gains. It has gained 8.5% or 1300pts up on 14,967 since its low point on Monday. The Pound:Dollar exchange rate added 2%, lost 1% overnight, then made it back by lunch but after Mark Carney said financial easing might be required and Boris Johnson ruled himself out of the Conservative leadership, the Pound lost all the week’s gains, falling another 1.5% and remains 12% down.

In a Radio 4 interview early this week, George Osborne repeated his claim that Brexit “would make Britain poorer” and lead to “an economic downturn”.

Mark Carney had been accused of breaching the Bank of England‘s (BoE) independence by commenting quite forcefully pre-Referendum that Brexit might trigger recession. So, for him to say we are “resilient” now, is a little “flip-flop” but he did say that in the long term growth would be slower and the Bank could only “mitigate” against negative effects rather than resolve them. Mitigation includes the possible injection of £250bn.

Currency Markets

Currency Markets GBP Pound Crash against USDollar
Currency Markets GBP Pound Crash against USDollar

The £ Pound on Monday did not rally against the $ Dollar, instead, it continued its slide to around $1.31, nearly 13% off its 2016 peak to which it had risen on the short term belief that the UK would Remain. Instead, it has settled at its lowest level for 31 years, despite a 1% recovery on Tuesday morning. A week later, and by Wed 6 July Sterling dropped as low as $1.28 and is now hovering at $1.29, a 15% devaluation.

Sterling is predicted to fall further to around $1.15-$1.25, a 20-25% devaluation. This could add 15-20p to a gallon/3-5p a litre to the price of petrol within the month, as oil is priced in Dollars. There could be an 8% rise in food and drink prices imported from Europe since at €1.17 the Pound is 23% off its Euro peak and nearly 9% down since Thursday.

Global Stocks and UK Shares

FTSE 250 drops 11.4%, worst drop ever
FTSE 250 drops 11.4%, worst drop ever

Some $2.5 trillion was wiped off global markets in hours after the Referendum result – between 100-400 years worth of the nobody-can-agree-on-the-actual-figure of UK contributions to the European Union. Seeing £100bn wiped off leading FTSE companies in 2 days is way more than the £350m a week (less than £10bn/year after rebates) supposed EU savings, i.e., equivalent to more than a decade’s worth of EU contributions. So no new money for the NHS then!

Stock markets in the poor-performing economies of Europe, e.g., Greece, Italy and Spain, tumbled 12-15% on Friday, other world markets fell 3-8%.

Italy announced a €40bn rescue of its banks after they lost a third of their value post-Brexit vote, despite a 5% bounceback they remain over 25% down since Thursday, June 23.

FTSE 250 as UK Financial Indicator

FTSE 250 Share Index Crash
FTSE 250 Share Index sees record one-day fall

A far better indicator than the FTSE 100, which has ‘only’ seen 2-3% daily falls since Brexit and a 2% recovery on Tuesday, is the FTSE 250. It is made up of more mid-size predominantly British companies with 50-70% UK-based trade – the powerhouse of employment in the UK. Some 75% of Small and Medium Enterprises (SMEs) voted Remain.

The FTSE 250 has lost over 14% since Thursday’s vote, reaching 7% late-afternoon, continuing its near-8% slide last Friday when, at its worst, it dropped 14% in hours – its “worst drop ever”. It’s nearly 20% off its peak due to Brexit uncertainty over the last few months, its worst crash since 1987. During the 2008 crash, over a number of months, it lost nearly half its value leading to lay-offs. recession and austerity.

As to the financial market reaction not being as bad as 2008, that is not yet evident. The FTSE 100 is insulated by its international makeup but the FTSE 250 is more British. Back in October 2008’s crash it suffered a one-day fall of around 6.5% amounting to nearly 40% over 3-4 months. After the Referendum, it’s lost 8% and 7% across 2 days. It’s fourth and fifth biggest one-day falls ever from Sep/Oct 2008 have been eclipsed by Brexit day 1 and day 2, so far. This is the worst FTSE 250 crash since 1987, although Brexit days 3 and 4 are looking brighter, having recovered over a third of the losses, yet it remains 10% down, despite 1.9% gains Wednesday morning. A week later and by Wed 6 July, the FTSE 250 was down again drifting towards an 11% loss, eradicating any intervening recovery,

The FTSE 350 lost £140bn in a day, recovered, lost it all again by 4.30pm Monday but has now recovered 5% from its 7% loss.

Banking Sector

Banks (domestic and foreign) in Britain have been told by EU members France and Netherlands that they will not be able to use the European financial ‘single passport’ access to unhindered trading resulting in additional banking costs and a reduced incentive for US and Asian banks to be based in the UK – Dublin, Frankfurt and Paris, are suddenly more attractive and expected to gain financial jobs from the City of London. Barclays and Royal Bank of Scotland (RBS) have lost 35% in value since Thursday and had their shares temporarily suspended on Monday. On Tuesday there was around a 5% recovery.

Whilst many 99%-ers on the Left might celebrate another banking collapse, those businesses that employ millions depend upon a stable lending banking system to finance their growth and pay wages.

Inflation Risk

The costs of imported raw materials, food, wine, petrol etc could rise 10% because of the Pound’s fall alone. If British businesses selling at home want to keep prices the same, they will have to cut back office costs and jobs instead. Yes, we will recover, but book a “one-way ticket”, to quote George Osborne, for more austerity, unemployment and inflation pain first.

Housing Market

House prices may fall in the short term according to Savills but so will affordability, mortgages, and lending criteria stress tests may rise. International buyers may take advantage of a cheaper Pound to buy here, whilst locals are priced out of the mid-market. House builders have seen significant share price falls and the FTSE triggered its ‘circuit-breaker’ to suspend trading in all house builders temporarily. For instance, Taylor Wimpey fell 16% (40% since Thursday), Persimmon 17.4% (38% in 2 days) and Barratt Developments fell almost 20.7% (38.4% in 2 days), Bovis Homes 33% in 2 day etc. In addition, with the credit rating trashing they will find it harder to fund new building developments, further intensifying our domestic housing crisis.

Radio 4’s You and Yours is reporting people seeing immediate 5% drops in house sale prices due to Brexit – ‘Brexundering’.

We could eventually see a quadruple-whammy of wage restraint, credit crunch, inflation and interest rate rises, affecting house buyers and stifling the pressured renting sector too.

Pensions

It has been reported that particularly those living abroad may lose UK annual increases with inflation to their pensions, but also those at home might lose the “triple lock” guarantee. Pension funds held privately on the stock market will obviously go up and down with the fortunes of the FTSE, currently down. Of course, Leave leader, Boris Johnson said pensions would be unaffected, he also said the NHS would get £350m a week and that among many pseudo-promises has already been pulled.

Credit Rating and Economic Outlook

After the Brexit vote, Moody’s changed the UK credit outlook to “negative” from stable. Fitch see it likewise and downgraded it to AA negative. Today, Standard & Poor (S&P) have followed suit and downgraded our last remaining Triple-A national credit rating two-notches from AAA to AA:

“In the nationwide referendum on the U.K.’s membership of the European Union (EU), the majority of the electorate voted to leave the EU. In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the U.K. … The vote for “remain” in Scotland and Northern Ireland also creates wider constitutional issues for the country as a whole. Consequently, we are lowering our long-term sovereign credit ratings on the U.K. by two notches to ‘AA’ from ‘AAA’.” – S&P

“Fitch has revised down its forecast for real GDP growth to 1.6% in 2016 (from 1.9%), 0.9% in 2017 and 0.9% in 2018 (both from 2.0% respectively), leaving the level of real GDP a cumulative 2.3% lower in 2018 than in its prior ‘Remain’ base case.” – Fitch

“S&P maintained its negative outlook on the UK, which means there is a one-in-three chance of another downgrade in the next two years. The UK is now deemed less credit worthy than the US and EU by S&P, and the decsion marks its exit from an elite club of countries such as Switzerland and Australia that stil have a AAA rating.” – Daily Telegraph

A survey of 1,000 directors at the weekend reveals that roughly 20% are expecting to issue redundancies, over 20% are freezing recruitment, and 20% considering moving some operations to Europe.

Worst Economic Crisis since WWII

A former Organisation for Economic Cooperation and Development (OECD) economist has warned that the UK faces its worst economic crisis since the Second World War. It is certainly on track to challenge 2008’s banking crisis and 1987’s Black Monday crashes which saw £63bn wiped out. Other crises include  the 1974 General Election which saw one-day losses of 7.1%. Back in 1929 the Dow Jones witnessed a 22.5% drop in a single day.

Always Look on the Bright Side …

Yes, we will weather it, and in the long term it may make little difference, but the short-medium term is going to be harder. We still have to pay into the EU budget, but will begin to be shut out of meetings and decisions, we will still have freedom of movement and migration for EU citizens for at least 2 years, if not beyond if we follow the likely Norway or Swiss models. It is highly unlikely the EU will allow us the Canadian model, indeed Angela Merkel said today that the UK would have to accept freedom of movement. The EU do not want to encourage other exits. Many are trying to find legal ways to vote out of the Referendum result.