After weeks of the phoney war following the Brexit vote, yesterday PM Theresa May officially fired the starting pistol for the UK to leave the European Union when she announced the Conservative Government will invoke Article 50 before the end of March 2017. In her first speech to the Conservative Party conference in Birmingham, May said that control of immigration and withdrawal from EU law will be the priorities during the negotiations. She made it very clear that immigration and border controls will be lines in the sand during negotiations, saying that “we are not leaving the European Union only to give up control of immigration again” adding that the UK will be a “a fully-independent, sovereign country that will no longer be in the jurisdiction of the European Court of Justice”.
Theresa May also rejected the argument that the UK must choose between a hard Brexit, where the UK would lose access to the single market, and a soft one where there would have to be a trade-off, allowing the free movement of people. “Brexit should not just prompt us to think about our new relationship with the European Union,” May said. “It should make us think about our role in the wider world. It should make us think of Global Britain, a country with the self-confidence and the freedom to look beyond the continent of Europe and to the economic and diplomatic opportunities of the wider world. Because we know that the referendum was not a vote to turn in ourselves, to cut ourselves off from the world. It was a vote for Britain to stand tall, to believe in ourselves, to forge an ambitious and optimistic new role in the world.” She added that “Countries including Canada, China, India, Mexico, Singapore and South Korea have already told us they would welcome talks on future free trade agreements. And we have already agreed to start scoping discussions on trade agreements with Australia and New Zealand”. She finished saying Britain does not need to punch above its weight because “our weight is substantial enough already”.
Also this morning the UK chancellor Philip Hammond said in an interview that although he would not follow the same course that was set out by his predecessor George Osborne, in that the UK would have a budget surplus by 2020, spending had to be controlled still. However, he acknowledged, that due to both Brexit and a slowing global economy, the UK economy will need supporting. In his “new plan for the new circumstances Britain faces" approach, Hammond believes the distinction between day-to-day spending and borrowing to invest should be emphasised. He believes there is a strong argument for targeted, high-value investment in infrastructure that creates jobs in the short term, and helps the economy in the long term.
The talk of hard Brexit has pushed sterling back towards the 31-year lows seen in July earlier this year. Earlier today sterling traded at 1.2836, the lowest level in 7 weeks, with traders worried that a hard Brexit would cause significant disruption for the City and EU passporting rights. However, also this morning we had the Markit UK PMI Manufacturing, showing that UK factories had their best month in over 2 years. Market analysts were going for a reading of 52.1, however the figure came in at 55.4, up from 53.4 in August. Rob Dobson, a senior economist at Markit, said “The weak sterling exchange rate remained the prime growth engine, driving higher new orders from Asia, Europe, the U.S. and a number of emerging markets,” adding that improvements in both new business and goods sector may be a “sign that capital spending is recovering from its early year lull, in the short term at least.”