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Brexit: UK gets closer to a final settlement
S Zone
ome 18 months aſter voting to leave the EU, it looks like the British government is getting close to agreeing the terms
of divorce. This is particularly important because, come a crunch meeting in the middle of December, EU leaders will decide if enough progress has been made on the financial front to begin negotiations on a future trade deal between the EU and the UK. According to the BBC, the UK
has offered a larger potential ‘divorce bill’ to the EU – which could be worth up to 50bn euros (£44bn). This is a lot higher than estimates from only three months ago when Prime Minister Theresa May suggested the UK was willing to pay about 20bn euros to meet obligations arising
from its membership. No 10 has played down reports the final sum could be up to 55bn euros (£49bn) but Foreign Secretary Boris Johnson, who would not give a firm figure, said the UK would make a ‘fair offer’ to help break the current deadlock. “Now is the moment to get the whole ship off the rocks and move it forwards,” he said. Brexit Secretary David Davis and the EU’s chief negotiator Michel Barnier have been trying to reach a deal for some time with Barnier saying ‘we are not there’ and ‘negotiations were continuing’.
The EU says the UK needs
to settle its accounts before it leaves. It says the UK has made financial commitments that have to be settled as part of an overall withdrawal agreement. The UK accepts that it has some
Prime Minister Theresa May greeting European Commission President Jean-Claude Juncker
obligations and has promised not to leave any other country worse off in the current EU budget period from 2014-20. The BBC reports that
detailed conversations are still taking place on which specific components will be included in the final bill and how they are calculated. The final bill is likely to be paid over many years rather than in a single upfront sum. According to the FT,
negotiators are working on how to present the settlement as a net estimate, with the UK side pressing for an implied figure of between €40bn and €45bn once UK receipts and other deductions are taken into account. “They have promised to cover it all, we don’t care what they say their estimate is,” said one senior EU diplomat. “We’re happy to help them present it.”
CARNEY: BANKS COULD HANDLE DISORDERLY EXIT
The UK’s banks could cope if Britain leaves the European Union in a disorderly Brexit in 2019, according to the Bank of England, which has recently carried out stress tests on the UK’s biggest lenders. For the first time since the financial crisis in 2007/8, all the big banks passed the tests, which look at whether they
4 DIRECTOR OF FINANCE
could continue to operate under various adverse economic scenarios. In what will be a major relief to the finance sector, Bank of England Governor Mark Carney said that, even in the unlikely event of a ‘no deal’, the banks will be able to function. Carney said that all
parties were working to avoid the situation but warned that if the
UK did leave in a ‘sharp, disorderly’ way there would be some economic ‘pain’ for households and businesses. The worst case scenario imagined in the stress tests included a 33% fall in house prices, a rise in interest rates from 0.5% to 4% within two years, and the unemployment rate rising to 9.5% from its current rate of 4.3%.
Michael Snapes, financial services director at PwC, told the BBC: “There is some comfort to be had in the knowledge that the UK banking system is strong enough to withstand a severe economic deterioration. The results suggest that the major UK banks may finally be emerging fully from their post-crisis downturn.”
dofonline.co.uk
FINANCIAL
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