That was pretty much the PM’s position yesterday as he gave a classically BoJo speech to the Tory party conference yesterday, which as well as touching on Brexit covered off a range of domestic pledges as he tries to pre-emptively move on from Brexit. The spending spree he’ll be taking us on will only be possible if we get a deal, but includes 40 new hospitals, 20,000 more (or re-hired) police officers, a £25bn road upgrade – the Asphalt Industry Alliance put the cost of repairing all the potholes in the UK at £10bn, so we should round that number down to £15bn – climate change gets tackled with an additional £0.4bn.
As this all rests on the getting of a deal, we should look at what’s proposed: the backstop has been binned and replaced by Northern Ireland leaving the customs union in 2021, but remaining in an “all-island regulatory zone” which would see the free flow of goods across the border with technology drafted in to help with customs checks which would take place away from the border line. The deal has holes in it (most notably because the tech doesn’t yet exist) but has got the backing of the DUP – though they’ve now got a veto over any plans to extend the “all-island regulatory zone” when time would come for its renewal.
The proposal also has the backing of the European Research Group and would likely sway a few Labour MP’s with leave constituencies to cross the divide and get behind the deal – knowing that if Boris does get it through then he’ll go to general election as the man who delivered Brexit and they won’t want to stand in their constituency as the person that tried to stop him.
So we’ll see what Europe come back with. They have said there are still issues, but have recognised the concessions and the press are hanging onto Leo Varadker saying he’d study it “in further detail”!
The EU has other things to worry about, as the US has delivered a list of goods that are going to be subject to tariffs as early as the 18th of this month. The list includes UK cashmere and wool products, French wine and Italian cheeses. Scotch also made the list and all could be subject to an additional 25% in import tariffs. The biggest single target though is Airbus; their products now face a 10% tariff band. With the exception of Airbus, a lot of the targets have little to no home grown alternative, meaning that people won’t be able to switch to a US product. There’s a cheese joke somewhere about ‘Making America Grate Again’…
In commodity markets, despite the geopolitical uncertainties and recent attacks on Saudi pipelines, the oil price is continuing to fall. US stockpiles increased by nearly twice what analysts were expecting. Markets have been starting to price in a US recession into the oil price, which has seen it hit its lowest levels in a month and only a couple of bucks away from breaking below $50.
We’re awaiting the resumption of trade talks between the US and China next week and everyone is hopeful that there’s a breakthrough. One big setback will be if the US bring up the situation in Hong Kong, which China has continually called a ‘domestic issue’. Peter Navarro, the US director of trade and manufacturing, has said they’re trying to resolve the “seven deadly sins” of China – cyber-hacking, intellectual property theft, forced technology transfer, goods trade imbalance, China state-owned enterprise, currency manipulation, Chinese fentanyl killing US citizens. That seems like a list too long to get optimistic about.
Today’s the day we see how the service sector is holding up in the UK, Europe and the US – the biggest sector in all economies, the consensus is that we will see growth in all regions. Fine if we do, terrible if we don’t.
Have a great day