Time Ticking for Brexit

By Klavs Valters

In just over a year – on 29^th March 2019 to be exact – Britain is scheduled to leave the European Union. It has been nearly a year since Theresa May triggered Article 50 and began the two-year process to negotiate an exit deal. As we know, the negotiations so far can’t be classed as successful. Even though a breakthrough on the key issues of the deal (the Irish border, divorce bill, citizens’ rights and the European Court of Justice) was made back in December last year, there hasn’t been a great deal of clarity on how the relationship will look moving forward.
A No-Deal Scenario
A no deal would be bad news for both parties involved and could potentially cost £58 billion a year, with Britain’s financial sector taking the largest hit, according to a new research.
The additional direct “red-tape cost” of tariff and non-tariff barriers would be £27 billion to UK firms and £31 billion to their EU counterparts, a report from global management consulting firm  Oliver Wyman and law firm Clifford Chance estimates. “These increased costs and uncertainty threaten to reduce profitability and pose existential threats to some businesses” the report stated.
Britain’s relationship with the EU would revert to World Trade Organisation (WTO) rules if no deal is in place by the end of a transitional period. This is set to start after the official Brexit deadline in March 2019 – a scenario which both sides would like to avoid. Five sectors – finance, automotive, agriculture, food and drink, and consumer goods would bear 70% of the burden of additional costs resulting from this scenario, according to the report.
The financial services industry would be hit the hardest and we are seeing some of the largest financial firms making plans of relocating their staff to other European Union countries. Last week, UBS and Goldman Sachs announced they had begun to transfer jobs to Frankfurt in preparation for Brexit. The Bank of England has also warned that around 10,000 jobs from the financial sector might leave by the end of next year because of Brexit.
Financial Markets
GBP/USD

Source: GO Markets MT4
At the end of January, we saw the Pound strengthen to its highest level since the Brexit referendum was announced. Since then we have seen the Pound weaken slightly against the US Dollar and currently trading at around 1.38 level (as of 13/3/18).
EUR/GBP

Source: GO Markets MT4
There hasn’t been too much movement against the Euro in recent months, however further developments in the talks will certainly have an impact moving forward. The Euro currently trading at around 0.88 level against the Pound (as of 13/3/18).
FTSE100

Source: GO Markets MT4
Since reaching its lowest level since the end of 2016 of around 6916, the FTSE100 has somewhat recovered the losses and currently trading at 7213 level (as of 13/3/18).
Theresa May has repeatedly said that she wants a “strong and special relationship” and “Canada style trade deal” with the European Union and in every speech since the process began. This hasn’t however  given the public much clarity or confidence in what will happen. With the exit date just around the corner, can the “strong and stable” leader deliver the Brexit people of the UK voted for?