After a choppy morning, the pound has now hit its
lowest level in nearly four weeks against the US dollar.
The
pound/US dollar exchange rate Photograph: Refinitiv
The
pound/euro exchange rate Photograph: Refinitiv
It’s firmly
lower against the euro too, with the resignation of the UK’s top legal civil
servant adding to market jitters about Brexit.
Pound/dollar: down 1.2 cents or 0.9% at $1.3044, its
lowest level since 12 August
Pound/euro: down 0.8 eurocents or 0.75% at €1.105, its
lowest level since 20 August.
Not major
falls, but its notable that sterling has dropped steadily in the last few days,
as these charts show:
The drop in
the pound is supporting the FTSE 100 (as it boosts the value of multinational
companies), so it’s only down 22 points at 5914 points.
But the
smaller FTSE 250 index, which contains more UK-focused companies, has dropped
by almost 0.9% this morning.
Brexit trade talks: What is the difference
between a deal and a no deal?
By Alasdair
Sandford • last updated: 08/09/2020 - 13:10
Boris Johnson's threat to pull the UK out of trade
talks with the EU has heightened tension still further in the already-flagging
process.
Brexit: 'If you leave the club there are
consequences', EU's Charles Michel warns UK
Regardless
of whether or not a deal is struck on future ties, acute changes are in store
once the transition period expires on December 31. The UK will leave the EU's
Single Market and Customs Union and is seeking a free trade deal with maximum
independence from EU rules.
However,
failure to strike an accord would mean a rupture in relations. There would be a
greater degree of trade friction, weaker security ties, and many other mutual
arrangements would cease.
Here is a
look at some of the main differences between "deal" and a
"no-deal scenario" regarding the future relationship.
Post-Brexit
Guide: Where are we now – and how did we get here?
Trade in
goods
Big changes
are afoot given the UK's departure from the Single Market and Customs Union,
even in the event of a trade deal. There will be two different customs and
regulatory regimes, bringing extra bureaucracy and border checks for standards
and legal compliance.
If there is
no deal then the EU and the UK will trade on World Trade Organization (WTO)
terms.
Tariffs and
quotas may apply even if there's a trade deal, though both sides are seeking to
avoid them. But a no-deal outcome is likely to be more costly for traders in terms
of tariffs. The EU rate for third countries is 10% for car imports, and 90% for
some lamb imports.
Customs
declarations will be costly even with a deal but failure to strike an agreement
could eliminate possibilities to simplify procedures, for instance via trusted
trader schemes. The EU is planning full customs checks from January, while the
UK plans to phase them in over six months.
Rules of
origin would mean more red tape and checks under a no-deal scenario.
Full
regulatory controls are in store, deal or no deal. The EU and the UK will
implement two different systems for standards, involving more red tape and
costs. But an agreement could reduce physical checks for agri-food imports:
particularly important for Northern Ireland, a major importer from GB.
The UK
chemicals industry says failure to reach a data-sharing agreement with the EU
will bring an extra £1 billion (€1.11 billion) in administration costs. A
mutual recognition deal would reduce costs, but the UK is seeking to diverge in
regulations covering medicines, chemicals, and industrial goods.
Transport
Road: With
no deal in place, UK and EU hauliers would no longer have the right to operate
in each other's territories. This could be very damaging for EU lorries, which
make up vast majority of trucks arriving daily in the English port of Dover.
Instead,
operators would need permits under the European system but quotas are limited:
far fewer numbers are issued than the number of drivers currently operating.
This has led to fears of serious trade disruption. There is also a question
mark over the mutual UK-EU recognition of driving licences and professional
standards.
Under
no-deal planning in 2019, the EU said it would allow UK lorries temporary
access for nine months.
Rail: Deal
or no deal, there would be little difference for cross-border operators and
drivers. They would need to comply with two different systems from 2021. But
failure to secure a bilateral agreement between the UK and France for the
Channel Tunnel could bring disruption if standards on each side diverge.
Air: In
2019 both sides agreed to preserve basic connections under no-deal. But UK
airlines are unlikely to be able to fly routes within the EU, and vice versa.
Services could be restricted as the UK would need bilateral agreements with
countries inside and outside Europe. Even a deal would see restricted UK access
to the EU and more complicated regulation, as the UK is opting out of the
European Aviation Safety Agency (EASA).
Post-Brexit
trade: Border chaos warning piles pressure on UK government
Services
Without an
agreement, the EU and UK may not recognise each other's professional
qualifications, although member states would be able to make unilateral
decisions.
EU firms
would have to comply with UK establishment rules to operate in Britain, while
UK services companies would need to meet the EU's stringent "third
country" requirements to set up on the continent. Some large firms have
already taken preventative measures.
Short-term
business trips by service providers between the UK and the EU may also be
subject to extra red tape and costs.
On
financial services, unless a deal is agreed, UK businesses will no longer have
the right to "passport" services into EU countries. UK-based advisers
and insurance companies may find their ability to operate in the EU is limited.
UK
companies may need to rely on individual "equivalence" decisions,
where one state recognises another state's service requirements.
Unless the
EU rules the UK's data protection system to be adequate, it may become harder
to transfer data from the EU to the UK. It may also be more difficult for law
enforcement bodies on both sides to share information relevant to criminal
investigations.
Post-Brexit
deadlock: Four areas threatening to scupper EU-UK deal on trade and future ties
Fisheries
A
"no-deal scenario" could actually enable UK fishing boats to catch
more fish in UK waters than if there is an agreement, which may impose
restrictions. Both the UK and the UK would have exclusive rights in their own
waters, and each would need permission to operate in the other's territory.
However, UK
exporters to the EU would be severely hit if, as is likely under no deal,
tariffs and stringent regulatory checks are imposed.
International
law stipulates annual negotiations regarding access, something the UK wants as
part of a deal but which the EU opposes.
Security
Failure to
secure agreement on policing and criminal justice would make it harder to
extradite criminals between the UK and EU, in both directions. The UK would
lose access to the European Arrest Warrant and to EU databases. The EU would
lose the benefits of the UK's contribution to policing across the EU.
Alternative
systems are available but are less effective and out-of-date. Even with a deal,
the UK's decision not to accept European Court of Justice (ECJ) jurisdiction is
likely to weaken security co-operation.
Asylum
rules
Some EU law
concerning asylum may remain on the UK statute book after the end of the
transition period until it is expressly repealed.
The EU's
Dublin regulations allow EU states to return asylum seekers to an EU country
they passed through, in certain circumstances. However once outside the EU, the
UK may find other countries less willing to take them.
The issue
is not part of the talks. However the UK -- which has been trying to send back
migrants who have crossed the English Channel in small boats -- wants a new
agreement, but the EU however has reportedly rejected British proposals.
This raises
the prospect that there may be no Europe-wide legal mechanism for the UK to
send asylum-seekers back to other nations.
Instead,
the UK is likely to rely on bilateral treaties it has with other countries
already, such as France -- although the agreements do not cover people who
arrive in the UK and claim asylum.
What won't
change
Whatever
the outcome of trade talks, the divorce deal which set the terms of the UK's
departure from the EU last January remains in place and has the force of an
international treaty.
The UK will
have a new immigration policy from January 2021. However, the Withdrawal
Agreement protects arrangements for EU citizens already living in the UK, and
Britons resident on the continent.
It also
covers the UK's financial obligations to the EU, and arrangements to avoid a
hard border between Northern Ireland and the Irish Republic. This will entail
more red tape and costs between Great Britain and Northern Ireland, which will
stick to some EU rules.
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