Nothing should surprise in the UK’s sorry mess

Nothing should surprise in the UK’s sorry mess

After two and a half years of extraordinary events on the Brexit front, last week was even more extraordinary than usual.

British prime minister Theresa May and the EU have agreed a transition deal that is in the best interests of the Irish economy and the Irish political apparatus, but few in the UK are happy and the DUP side in the North is particularly apoplectic.

No surprises there, because such is the dangerously divided nature of the Brexit concept, it was never going to be possible to achieve agreement or consensus.

Unfortunately, amongst all of the recriminations we have seen over the past week, we are still no clearer as to how the whole process might unfold.

Yesterday, the UK and the EU agreed on a declaration of their future relations after Brexit.

Some suggested last week that we are approaching the end game, but I somehow suspect there is a lot more game to be played.

It appears inconceivable that Theresa May will get parliamentary approval for the withdrawal agreement as it stands when it eventually reaches Parliament, unless there are significant revisions to it, which is something that the prime minister has categorically ruled out.

I suspect the EU side would be less than enthusiastic about any revisions, in any event.

It looks likely that the EU leaders will meet on Sunday November 25 to ratify the deal before the UK Parliament rules over it.

It seems strange that the European Union will agree on a deal that has little chance of being successfully navigated through the UK political system. However, nothing should come as a surprise in this whole sorry mess.

At one stage last week, it certainly appeared that Ms May would not be around by the time it got to a vote in the House of Commons, but to date, her more virulent opponents have failed to accumulate the 48 votes necessary to challenge her leadership.

It appears likely that she will still be around to present it to parliament, but her chances of success in that venture are anybody’s guess.

If the withdrawal agreement were rejected by parliament, chaos would ensue.

The resignation of the prime minister and a quick general election is one possibility; a hard Brexit next March is obviously another; or from a position of deep crisis and impending Armageddon, a decision to revisit the Brexit referendum might be an option.

There are, of course, many other possible permutations, but the problem is that applying logic to the problem is a big problem.

For Ireland, the stakes are obviously very high from both an economic and political perspective.

Sterling is the most immediate concern.

The UK currency has been remarkably stable over the past year, but over the past week we have got some taste for how vulnerable it is.

It rallied strongly against the euro and the dollar once the agreement was announced last week, but that sense of euphoria quickly turned to despair as the political situation was thrown into a state of chassis.

Despite the volatility, sterling has settled to trade around 88.5 pence. It has, however, slumped from 76 pence on the eve of the Brexit vote almost two and a half years ago.

The slowdown in UK economic growth are having a negative impact on the Irish export performance. No major surprises there.

Trade data released last week show that the overall Irish export performance is still very strong. In the first nine months of the year, the value of overall merchandise exports increased by 12.2%.

However, exports to the UK are down by 4%, and in September alone, they were down by 5.3%.

Interestingly, exports of food and live animals to the Great Britain part of the UK market were up by 1.4% in the first nine months of the year.

Exports of chemicals and related products declined by 15.4% and exports of machinery and transport equipment were down by 12.4%.

For the agri-food sector, margins are clearly under massive pressure, but the sector is still proving amazingly resilient.

The problem for the whole UK exposed part of the Irish export sector is that there is little clarity on the future trading relationship and the future path of sterling.

Suffice to say, a hard Brexit would seriously damage the trading relationship and could do considerable damage to sterling.

Despite last week’s apparent progress, we remain in deeply uncertain times.

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