- UK unlikely to have access without free movement
- Countries pledge support for free trade agreements with the UK
- Negotiations unlikely to be in the interest of the UK
It’s been said many times and it will likely be said many times again. The UK’s decision to leave the EU will not favour the UK when it comes to the negotiation table. Words echoed by the likes of Jean-Claude Juncker and German Finance Minister Wolfgang Schauble. And with the recent appointing of Michel Barnier – the EU’s Brexit negotiator, a man named Europe’s most dangerous man by The Telegraph in 2010, it’s clear they want to play hardball with the UK.
No single market without free movement
The UK will not have access to the single market without free movement, another subject reiterated by EU officials, a common principal no country with access to the market has ever negotiated.
Given that the main agenda supporting Brexit was concerns surrounding immigration, maintaining access to the EU in any form would not bode well for the majority of Brexit supports.
From a trade and certainly a currency perspective, maintaining access to the single market provides certainty for the UK and Sterling, over four decades of integration and common interests would be maintained. But what if Theresa May could use Article 50 as a smokescreen to negotiate trade arrangements with other nations?
Growing support for free trade agreements with other nations
Australia and China have already pledged support for free trade agreements with the UK post-Brexit, opening trade could help the UK long term by making for a more competitive marketplace.
The UK could replicate, to some degree, current terms with other nations to replace existing ones with the EU, without the need for open borders. This period could take longer to materialise, adding extended periods of uncertainty for Pound, but could be the best option for the UK long term.
The UK is still an attractive place for investment hence the huge inflow of capital into the city of London, there is very little doubt that the UK could prosper in the event of a hard Brexit.
In any event, Article 50 will be held off until 2017 which will likely keep Sterling on the lower end, and with the Bank of England’s interest rate decision next week, it’s plausible further losses are on the horizon. Be rest assured that no matter the outcome, the UK and Pound Sterling will recover once a clearer picture develops over the future relationship with the EU.