Arbuthnot Banking : The Government’s White Paper on the future UK-EU relationship

The Government's White Paper on the future UK-EU relationship

Date: 23^rd July 2018

The Government's White Paper on the future UK-EU relationship
In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the White Paper on the future UK-EU relationship.

• As in the Chequers Agreement, the preferred relationship includes a free trade area for goods, commitment to a common rulebook for goods, major restrictions on a swathe of other regulations, and a new Facilitated Customs Arrangement (FCA).
• There would, however, be 'regulatory freedom' for services, based on enhanced equivalence.
• Michel Barnier, the Commission's chief negotiator, responded to the White Paper with caution and reservations.

Other recent Brexit developments have included:

• The European Union is stepping up its preparations for a 'no deal' Brexit.
• The Customs (or the Taxation (Cross Border Trade)) Bill and the Trade Bill have both been passed in the Commons.

Recent IMF papers have included:

• An updated World Economic Outlook, in which the growth forecasts for the Eurozone and the UK were downgraded.
• An assessment of the economic impact of Brexit, with an FTA scenario and a 'hard Brexit' (WTO) scenario, on the Eurozone economies. Ireland would be most adversely affected.

On economic developments:

• The ONS estimates the GDP in the 3-months to May rose 0.2% (QOQ), driven by services growth. Production and construction both slipped.
• The trade deficit widened in the 3-months to May, as exports fell and imports rose.
• Retail sales rose by 2.1% (QOQ) in 2018Q2, supported by the Royal Wedding and better weather.
• NIESR estimate that GDP rose by 0.4% in 2018Q2 and could rise by 0.5% in 2018Q3.
• Inflation remains fairly benign, CPIH inflation was 2.3% in June. But higher oil prices are pushing up producer prices.
• House price growth is slowing, partly reflecting the slowdown in the south and east of England, including London.
• The public finances are improving. Public Sector Net Borrowing in 2018Q2 was £16.8bn compared with £22.2bn in 2017Q2.
• The decision of the MPC's August meeting will be announced on 2 August. It is reasonable to be expect a 50% chance of a 0.25% rise. If there is not a rise in August, then expect an 80% chance of a 0.25% rise in November.

Ruth Lea said, 'The Government's White Paper on the UK-EU future relationship contained no major surprises. It was much in line with the Chequers Agreement. It can be assumed that the UK-EU negotiations will now proceed, 'informed' by the White Paper. Michel Barnier hopes to have a UK-EU agreement on the Withdrawal Agreement by October or by December, at the latest, to give time for the Withdrawal Agreement to be ratified before Brexit Day on 29 March 2019. But given the rising probability of 'no deal', both the EU and the UK are now stepping up their planning for a 'no deal' outcome.'

For full story: http://www.arbuthnotgroup.com/economic_perspectives_group.html

Press enquiries:

Arbuthnot Banking Group PLC:

Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482
[e-mail]
Follow Ruth on Twitter @RuthLeaEcon

Maitland:
Sam Cartwright
020 7379 4415
Jais Mehaji
020 7379 5151
[e-mail]

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