The Daily Update - UK data and Brexit developments

UK’s Industrial Production for November 2017 came in this morning as forecasted at 0.4% mom: the 8th consecutive rise. Last time this happened was over 23 years ago in May 1994. Moreover, because of revisions to prior months’ data the yoy Industrial Production growth read 2.5%, beating forecasts of 1.8%. And although we are a nation built more upon the service industry, such an improvement should at least help the 2017 GDP figure reach its 1.5% target, which was notoriously revised downwards over the course of last year, as stalled Brexit negotiations took their toll.

But with Chancellor Philip Hammond and David Davis in Germany today to charm businesses and politicians this figure will be nothing to boast about as yesterday’s data showed German Industrial Production for the same period rose 5.6% yoy. But this uncharacteristic pairing perhaps demonstrates an easing of internal Brexit strife. These ministers who have spoken out against each other’s ‘bonkers’ Brexit views on numerous occasions have co-authored an article for a German newspaper (FAZ) pushing for a transitional period before final exit from the Union and arguing that ‘the EU's priorities are not incompatible with ours: a deep and special partnership with our closest trading partners and allies’.

The pair wrote advocating for a deal that ‘supports collaboration within the European banking sector, rather than forcing it to fragment’ stressing that ‘we must redouble our collective effort to ensure that we do not put that hard-earned financial stability at risk’. ‘As two of Europe’s biggest economies, it makes no sense to either Germany or Britain to put in place unnecessary barriers to trade in goods and services that would only damage businesses and economic growth on both sides of the Channel’ and that the future relationship ‘should cover the length and breadth of our economies including the service industries — and financial services’.

There are at least some early signs of such ‘intelligent cooperation’ with Michel Barnier, European Union's chief Brexit negotiator, yesterday conceding that effective equivalence for some UK financial rules should be possible, but clarifying that there would not be a general passport for UK financial firms to conduct business in the EU. So there are still wide differences as the second round of Brexit negotiations gets underway; let’s hope Hammond and Davis are right as they conclude, ‘with the next set of negotiations just around the corner, a bold, positive and exciting new chapter in our history together awaits.’

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