Brexit: A Done Deal?

The flags are down, the fireworks are over, and the blue passports have been ordered. On January 31, the government’s Withdrawal Agreement Bill passed into law, taking the UK out of the EU.

But despite Boris Johnson’s election-winning mantra of ‘Get Brexit Done’, the hard work is just beginning. There’s no ‘deal’ as such yet, just an 11-month period of transition during which the UK will stay in the single market and the customs union, follow EU rules and carry on allowing freedom of movement.

During that 11 months, the UK needs to negotiate a new free trade agreement to make sure it can still trade with the EU. If it doesn’t succeed, it will leave with no deal on 31 December 2020.

But while Brexit is very far from ‘done’, it’s unlikely to have any significant effect on the markets until the next deadline looms. Businesses now, at least, have the certainty that the UK has in fact left the EU and can plan accordingly – a certainty considerably lacking over the last two years. The range of options is now limited to leaving with a deal, or leaving without a deal, with the former currently the most likely.

The Government hasn’t exactly been forthcoming with its intentions, with Johnson determined to take Brexit out of the public eye and focus on big-ticket domestic infrastructure projects such as HS2 instead. So what are the indications for the post-Brexit landscape?

Negotiations haven’t even begun in earnest yet, but relations are already fractious. The EU itself has backed European Commission president Ursula von der Leyen’s idea of a ‘level playing field’ to stop the UK imposing what it sees as unfair tariffs and conditions on European businesses. And it wants to see the UK continue to impose European standards on workers’ rights, safety and the environment.

But already, the UK is accusing Brussels of being too tough. A UK government source told the Independent: “half the time the EU is telling us they are surprised we are not more ‘ambitious’ and the other half of the time they are saying we’re looking for too much.

“It’s now the EU who are cherry picking, suggesting ambition only where it suits them and adding obligations that go beyond a standard FTA. We are clear and consistent about what we want – not a bespoke or special FTA, but similar to the one the EU already has with Canada.”

And once again, the clock is ticking, as former PM Sir John Major recently reminded the government in a speech to the European Financial Forum. He pointed out that the Canadian deal with the EU which the UK is using as a guide took seven years, not 11 months – and warned that a rushed deal would be a ‘flimsy’ deal.

But while for most in the UK, not much has changed yet, it hasn’t taken long for the first upset elsewhere. Elections in the Republic of Ireland saw Sinn Fein break through the country’s long-established two-party governance, with 37 seats – the second-biggest number – and the highest number of first-preference votes.

Fianna Fáil remained the party with the most seats, but Fine Gael – led by current taoiseach Leo Varadkar – slumped to 35. Varadkar’s smooth Brexit negotiations, it seems, didn’t cut through with voters.

Coalition negotiations are likely to continue for weeks, and this is new ground: nobody knows what will happen. As Rory Carroll, the Guardian’s Ireland correspondent writes: “One plausible outcome: deadlock, and another election.”

And another possible long-term outcome of this shift could be moves towards reunification of the Republic of Ireland (which is in the EU) with Northern Ireland (which, as part of the UK, is now not.)

Johnson’s deal calls for a border in the Irish Sea, treating Northern Ireland differently from the rest of the UK. That could have serious ramifications for how Northern Ireland regards its future.

So, while it’s business as usual for now, the end of the year is the time to watch. As a safe haven investment, gold prices tend to rise in times of uncertainty and doubt. And the decision to go no-deal, and leave the EU with the hardest of Brexits, is about as uncharted as you can get.

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Important disclaimer: this document is not an official research report and the views expressed in it are those of the authors. The authors are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000, therefore, this does not give rise to rights to claim compensation under the Financial Services Compensation Scheme.