23 July 2019

Javier Maquieira

23 July 2019

Good morning,

The relationship between the European Union and the United Kingdom has never been ideal. It’s been filled with British opt-outs from EU legislation and treaties as well as disagreement over sovereignty and leadership issues. Now there’s the fundamental challenge of the UK’s decision to leave the bloc. But even when we’ve had enough of Brexit talks, deadline extensions and economic predictions, a new stage in EU-UK relations seems to be on the horizon.
 
With Ursula von der Leyen elected the next (and first female) president of the European Commission and Boris Johnson on the verge of becoming Britain’s next prime minister, Brexit enters a new (but still uncertain) phase. As it stands, if the UK doesn’t manage to leave the EU before Jean-Claude Juncker steps down as Commission president in November, both Johnson and von der Leyen are set to perform the leading roles in a continued saga of negotiations.
 
But what can we expect from these leaders in the months to come?
 
On the one hand, Johnson has threatened the EU with a “clean break” if he doesn’t get his way with a new exit deal, hoping for better withdrawal terms as the Union seeks to avoid a no-deal Brexit. Von der Leyen, on the other hand, has insisted that a Brexit without a deal would have “massively negative consequences for both sides” and that the existing Withdrawal Agreement would remain the basis of future negotiations ahead of the current deadline.
 
While the Tory hopeful refuses to acknowledge the severing economic (and territorial) effects of a disorderly exit for the UK, the Commission president-elect is open to consider a new deadline extension beyond Halloween, although she’s unwilling to renegotiate the current agreement. In the event of a no-deal Brexit, she has promised to roll out a European unemployment benefit reinsurance scheme to help those EU member states hardest hit by it, such as Ireland.
 
At the end of the day, however, the UK’s eventual withdrawal from the EU will be just another issue to solve in an ever-growing list of challenges affecting both parties. While tensions continue to grow within and outside the UK and the EU, striking a deal remains the sensible thing to do.

News

UK Foreign Secretary Jeremy Hunt called on European allies to protect commercial ships sailing through the Strait of Hormuz in a new maritime alliance after Iran’s Revolutionary Guard seized the British oil tanker Stena Impero. Describing the event as a “an act of state piracy”, Hunt also said that the European-led initiative would complement the US’s “maximum pressure” strategy on the Gulf country, from which the foreign secretary wants to distance the UK as the crisis between Western allies and Tehran intensifies. (£)
 
Jo Swinson was named new leader of the Liberal Democrats yesterday after winning 47,900 votes against 28,021 for Ed Davey on a turnout of 72%. In her acceptance speech, Swinson paid tribute to former party leader Vince Cable, who announced his resignation in May. She also appealed to disaffected Conservative and Labour MPs to join a party she says is ready to compete for government and stop Brexit after rising in the polls. The 39-year-old liberal is the youngest politician leading a major UK party and the first woman to hold the role in the Liberal Democrats.
 
The US government announced the introduction of a new fast-track deportation process that will see any undocumented migrant unable to prove their continuous stay in the US for more than two years immediately deported. The process, which had been limited to those arrested after crossing the Mexican border, will bypass immigration courts, prompting the American Civil Liberties Union (ACLU) rights group to announce that they will challenge the policy in court.
 
Sir Alan Duncan resigned as Foreign Office minister ahead of Boris Johnson’s expected appointment as prime minister , describing Brexit as a “dark cloud” in his resignation letter and demanding an emergency debate in the House of Commons to give MPs an opportunity to say whether they supported a government led by Johnson. The outcome of the ballot of about 160,000 Conservative members will be announced just before midday today, with the winning candidate becoming prime minister on Wednesday. Although Johnson is the favourite, senior figures have said they will not serve under his government. 

Business & Economy

Credit reference agency Equifax agreed to pay a $700m penalty in a settlement with the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPD) and 50 US states and territories over a mass data breach in 2017. More than 147 million consumers were affected after hackers exploited a vulnerability in a company database, gaining access to personal information such as social security numbers, names, addresses and credit card numbers. Up to $425m will be put into a fund to compensate affected consumers and offer them credit monitoring services.
 
British Airways pilots who are members of the British Airline Pilots’ Association (Balpa) supported strike action over a pay dispute with the company despite three days of negotiations. Although strike dates have not been announced by the union yet, it is obliged to give two weeks’ notice before taking action. The airline is now seeking an injunction in the high court to prevent the strike, resulting in the suspension of negotiations between both sides. The action may coincide with the Heathrow Unite workers’ strike, which will take place on Friday and Saturday, as well as selected days in August. (£)
 
A report by leading economists in the National Institute of Economic and Social Research (NIESR) forecasts that Brexit may have already brought the country into a technical recession. Estimating the likelihood of a no-deal withdrawal from the EU at around 40%, the NIESR also said that if the situation is avoided, the UK could grow 1% this year and the next. In case of an orderly no-deal Brexit, the think tank expects the British economy to stagnate and begin to grow again in 2021.

Markets

What happened yesterday?

London stocks edged higher on Monday, with the FTSE 100 closing up 0.08% at 7,514.93. The pound was weaker both against the dollar by 0.18% at $1.2480 and the euro by 0.14% at €1.1127 following the resignation of Foreign Office minister Alan Duncan and the prospect of Boris Johnson becoming prime minister.
 
In corporate news, travel company Tui (up 4.6%) rose after an upbeat note from Stifel. Metro Bank (up 5.89%) was also among the risers as it confirmed talks to sell a mortgage portfolio in a £500m deal. Miners BP (up 1.02%) and Shell (up 0.9%) reported gains amid heightened tensions between the UK and Iran over a British tanker seized by the Gulf country last week.
 
On the downside, Premier Inn owner Whitbread (down 1.56%) fell after a Manhattan-based trading firm was reported to be leading a £1.5bn bet by hedge funds against the company. British Gas owner Centrica’s shares (down 2.19%) also plummeted following reports that it plans to slash its dividend for the second time in four years.
 
Across the Atlantic, Wall Street closed on the green with technology and oil stocks leading the advance. The S&P 500 (up 0.3%), the Down Jones Industrial Average (0.07%), and the Nasdaq Composite (up 0.7%) all finished higher by close of trading.

What's happening today?

Finals
Carclo 
Cohort
Ig Group Holdings
Joules Grp
Pz Cussons
 
AGMs
Cake Box Holdi.
Dekeloil
Mobilityone
Motorpoint
Pathfinder Minerals
Primorus Inv.
Scapa
Stobart Group
TR Property Investment Trust
Vodafone
 
UK Economic Announcements
(11:00) CBI Distributive Trades Surveys
 
Int. Economic Announcements
(14:00) House Price Index (US)
(15:00) Existing Home Sales (US)

Columns of Note

In yesterday’s New York Times, James Butler wrote that Boris Johnson’s laziness and opportunism could lead to the end of Britain as we know it if he becomes prime minister. He argues that Johnson faces the worst political crisis in the UK since the end of the Second World War, with calls for an independent Scotland and a United Ireland set to further complicate his premiership. Against the inclemency of the political situation, Butler concludes that Johnson would fail at tackling the country’s deep divisions due to his lack of character, conviction and principles.
 
Also ahead of Boris Johnson’s likely appointment as UK prime minister, Hugo Rifkind opines in The Times that neither Johnson nor Jeremy Hunt would be particularly skilled at fighting the political battle over the environment. Rifkind highlights that almost every climate sceptic in Britain has also been a Eurosceptic in the past two decades, reflecting what is happening in other countries and regions where there is a correlation between right populism and climate scepticism. With sales of low-emission cars falling again in the UK, the author resolves that the new PM should take action if he aims to reduce the UK’s CO2 emissions to net zero by 2050, as pledged by outgoing PM Theresa May. (£)

Did you know?

98% of British people consider themselves to be among the nicest 50% of the population.

Parliamentary highlights

TODAY
 
House of Commons

Oral questions
Health and Social Care (including Topical Questions)
 
Ten Minute Rule Motion
Tibet (Reciprocal Access) - Tim Loughton
 
Motion
To approve a Statutory Instrument relating to the draft Cableway Installations (Amendment) (EU Exit) Regulations 2019 - Chris Grayling
 
Reappointment of an Electoral Commissioner
 
To approve a Statutory Instrument relating to the British Nationality Act 1981 (Remedial) Order 2019 - Sajid Javid
 
General debate
Body Image and Mental Health
 
Adjournment
Provision of lower limb wound care - Ann Clwyd
 
House of Lords
 
Oral questions
Including road safety targets for England as part of the Government road safety statement - Lord Jordan
 
Decriminalising homosexuality in Commonwealth countries - Lord Lexden
 
Impact on children of the no recourse to public funds immigration condition - Baroness Lister of Burtersett
 
Reviewing development planning rights - Baroness Thornhill
 
Legislation
National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill - Third reading - Lord Young of Cookham
 
Wild Animals in Circuses (No.2) Bill - Third reading - Lord Gardiner of Kimble
 
Orders and regulations
Draft Small-scale Radio Multiplex and Community Digital Radio Order 2019 - Lord Ashton of Hyde
 
Draft British Nationality Act 1981 (Remedial) Order 2019 - Baroness Williams of Trafford
 
Short debate
Delays in processing rape cases by the Crown Prosecution Service and what steps the Government are taking to review the Crown Prosecution Service’s 'Rape and Sexual Offences guidance' - Baroness Chakrabarti
 
Scottish Parliament
 
On recess until 1 September 2019
 
TOMORROW
 
House of Commons
 
Oral questions
Scotland
 
Prime Minister's Question Time
 
Ten Minute Rule Motion
Dockless Bicycles (Regulation) - Daniel Zeichner
 
Legislation
Kew Gardens (Leases) (No. 3) Bill [Lords]: Legislative Grand Committee (England) and remaining stages
 
General debate
The role and sufficiency of youth services
 
Adjournment
Water safety and tampering with life-saving equipment - Alison Thewliss
 
House of Lords
 
Oral questions
Independent Review of the Foreign and Commonwealth Office’s support for persecuted Christians - Lord Singh of Wimbledon
 
What assessment the government has made of the human rights situation in Bahrain over the last two years and whether that assessment was made independently of the government of Bahrain - Lord Scriven
 
Impact of climate change on the livelihoods of people in the Sahel region of Africa - Baroness Sheehan
 
Legislation
Birmingham Commonwealth Games Bill [HL] - Report stage - Lord Ashton of Hyde
 
Short debate
Contribution of Members of the House of Lords to the work of the Council of Europe - Lord Balfe
 
Scottish Parliament
 
On recess until 1 September 2019