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Windsor Framework: An End in Sight to the Long Walk?

After months of political back and forth between Westminster, Brussels and Stormont, yesterday saw Rishi Sunak and Ursula von der Leyen agree on amendments to the Northern Ireland protocol as the two leaders met in Windsor.

It is hoped that the deal will allow for power sharing in Stormont to continue, given that the DUP have refused elect a speaker in Stormont (the pre-requisite of forming a government) while the current arrangements are in place. The existing Northern Ireland Protocol was ratified by the UK and EU in 2019 and allows for the free movement of goods to take place across the border between NI and the ROI. However, given the political sensitivities of establishing a physical customs border on the Island of Ireland, Westminster and Brussels agreed to establish controls on goods entering Northern Ireland from Great Britain – a state of affairs which has been vehemently opposed by the DUP.

Under the new arrangement however, for goods traveling between GB and NI, two lanes will be created. One will be a green lane for goods remaining in NI, while the other red lane will be for goods set to be sent to the ROI in the EU. In the case of the former, customs checks will be pretty well scrapped while red lands will be subject to checks. Moreover, NI would no longer have to be subject to EU rules including their specific taxes on alcohol. As expected, the European Court of Justice will also be the final arbiter on single market issues – a sticking point to many in the ERG.

The DUP leader Sir Jeffrey Donaldson said that the deal still had some way to go, putting into question whether the Unionists will support the deal. For example, Ian Paisley said that the deal “does not cut the mustard”. Given that the deal will go to Parliament, the DUP’s support will be seen as a critical win especially for winning over the ERG wing of the Conservative party. It appears as though the Labour party have agreed to back the deal, though even if it passes in Westminster – the DUP’s support will still be critical to the functioning of power sharing in NI – as a rejection of the deal may see them refuse to elect a speaker.

As such, while the Windsor Framework is clearly a turning point, the question is whether the end is in sight to the Long Walk?

PE and VC Investments into the UK Drop Significantly

According to S&P Global Market Intelligence, the transaction value for private equity and venture capital investments in the UK fell 61% over 2022 on an annualised basis, with a decline in large deals driving much of this fall. Last year there were just nine deals of this type valued at over $1bn. Given that large deals accounted for some 75% of the overall transaction value, the fact that they were at their lowest level in 5-years thus fed into the overall grey picture. S&P Global Market Intelligence wrote that “Private equity transactions in the U.K. are expected to remain slow during the first quarter due in large part to a gap in pricing. The pricing dislocation between sellers and buyers will impact the number of deals until that gap is bridged, according to Tom Whelan, partner and head of private equity in London at McDermott Will & Emery.””

EU Carbon Permit Price Continues to Rise

EU Carbon Permits rose close to 3% during the course of yesterday’s session to over €105 per tonne, hitting fresh record highs. This comes as the prospect of a rise in industrial activity has thus sent prices rising, given the forecasted increase in demand for permits. An easing of energy insecurity fears has brought about a sustained fall in energy prices which have in turn seen carbon permits trade higher as expectations of higher energy usage rise. Yesterday’s rise thus saw permits trade some 12.2% up on the month and 27.8% on the year.

The latest rally follows last week’s rise which saw permits breach €100 per tonne for the first time in history. According to the FT, “The threshold has been seen as psychologically important, and a price at which companies may start looking more seriously at investing in expensive emerging technologies such as carbon capture and storage.”

It is thought that the carbon credit system helped reduce emissions in the EU by roughly 4% by 2020, with much of this reduction being driven by firms shifting from fossil fuel usage to renewables. Hence, as permit prices rise, it is hoped that firms will decarbonise. Following yesterday’s rally, all eyes will be on energy prices and economic outlook figures to see whether this recent surge will continue.

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