Conflicting messages coming from the UK and the EU have sent investors away from the pound as renewed infighting from within Britain’s governing Conservative party spreads uncertainty through the markets.
With the deadline coming closer for the UK to secure a trade deal with the EU ahead of its exit from the trading bloc in March 2019, negotiations appear to have escalated. Despite EU Chief of Negotiations Michael Barnier suggesting that an “unprecedented” deal was on the table in the last couple of weeks, which allowed the pound to recover, he has since cooled on his proposition.
As Prime Minister Theresa May struggles to secure support in her own party for a so-called “Chequers” deal, rival factions of the Conservative party have suggested that the deal does not go far enough, which appears to be weakening May’s bargaining position.
This has led to Barnier confirming that he “strongly opposed” some of the Brexit deal negotiations suggested by the UK. May looked to take a defining stance herself, saying that she refused “to be pushed into accepting compromises on the Chequers proposals that are not in our national interest.”
Her words, published in the Sunday Telegraph, saw the pound slump against the US dollar by 0.5% when the markets opened on Monday, dropping to $1.2902. The pound also did not perform well in the Asian markets, which opened earlier.
Barnier criticized May and the UK for trying to cherry-pick the best bits of a trade deal as he looked to highlight the strength of the European trading bloc. Given that “our own ecosystem has grown over decades,” he noted, it would therefore be unacceptable to the EU for the UK to be able to “play with it by picking pieces.”
Speaking to German newspaper Frankfurter Allgemeine Zeitung, Barnier suggested that going along with the UK proposal “would be the end of the single market and the European project.”
He also mentioned that plenty of other options are available to the UK and its negotiating team, including a model replicating that of Norway’s, which would allow the UK to not be part of the EU but still have access to the single market. However, this would require the UK to take on “all the associated rules and contributions to European solidarity.”
A government spokeswoman replied to Barnier’s comments by saying that the UK has “put forward a proposal that is precise, pragmatic and that will work for the UK and the EU.” She also said that there is “no other proposal” that could achieve a good deal for both parties while protecting the UK Constitution.
Meanwhile, May has a fight on her hands to dismiss the suggestions of two of her former ministers, ex-Foreign Secretary Boris Johnson and ex-Brexit Minister David Davis, who both released statements through the media over the weekend disputing the usefulness of the proposal on the table by May’s current team of negotiators.
Johnson suggested that the deal would see “the UK lying flat on the canvas” and said that it “would throw away most of the advantages of Brexit.” Davis said that the proposals for leaving the EU are worse than what is already in place for the UK as part of the European bloc.