There’s been a new update on Brexit – but what does it all mean? Guy Thornewill, of Pie Funds, explains.
In the early hours of 11 April, the EU granted the UK another delay until 31 October to sort out the Brexit mess. What does this mean for us?
If Prime Minister Theresa May’s Withdrawal Agreement is ratified by the UK parliament before this date and a deal is agreed, then the UK can leave earlier – what they’re calling a ‘flextension’.
If the UK hasn’t left by the European elections in May, it’ll still have to be involved in them, leaving Brexiteers furious.
May looks for cross-party deal
Theresa May will keep talking to the opposition Labour party to get agreement for some kind of cross-party deal. A customs union or even another referendum looks likely at this point.
Although the Brexit process will now drag on, the risk of a no-deal Brexit has been taken off the table for now.
This is good news for markets, and for the currency. But it was expected, so market moves after this latest delay have been minimal. However, for consumers and businesses in the UK, uncertainty goes on.
London houses down
Luckily for New Zealanders, we’re not likely to notice the impact of this extended delay. For those with property or other investments in the UK, further uncertainty is not helpful. The London property market continues to struggle, although price declines have eased recently.
The main mechanism reflecting Brexit uncertainty has been the British pound. While it’s good for the sterling that a no-deal Brexit is off the table for now, the extended delay partially offsets this. Sterling remains weaker than it might normally be at this stage of the economic cycle.
With UK employment remaining strong, the Bank of England would usually have raised interest rates further by this time, but Brexit is keeping Governor Mark Carney on hold.
Enjoy your UK holiday now
When a Brexit deal is finally passed, we would expect sterling to strengthen against all major currencies, including the New Zealand dollar. Perhaps this is your last chance for a relatively cheap UK summer holiday for some time.
For those looking to transfer money from the UK, it might pay to wait until Brexit is resolved. But if the UK government has still not reached an agreement on a Brexit deal by the end of October, that risk of a no-deal Brexit might return.
Join JUNO KiwiSaver Scheme
Story by Guy Thornewill
Published 18 April 2019
Guy Thornewill is the Head of Research UK and Europe and Senior Investment Analyst at Pie Funds Management Limited. Pie Funds Management Limited is the issuer of the JUNO KiwiSaver Scheme. You can read our Product Disclosure Statement here. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with a financial adviser. All content is correct at time of publication date.