If a good compromise is one which leaves each party dissatisfied then the Brexit draft Withdrawal Agreement may be greeted as a singular achievement.
Published last night at the end of a marathon five hour cabinet meeting the agreement has been met with opprobrium on all sides save that of Prime Minister Theresa May and Michel Barnier, the EU’s chief negotiator.
The devil will lie in the detail, of which there is much in the 585 page document. However, the Prime Minister’s assertion that it “Brings back control of our money, laws and borders, ends free movement, protects jobs, security and our Union” was immediately under fire from various factions, all with their own political agendas to pursue.
Dominic Raab, the Brexit Secretary, and Esther McVey, Work and Pensions Secretary, resigned this morning and further resignations have followed.
In the midst of such a political furore the markets have remained calm reasoning perhaps that other options are not realistically on the table. Sterling is slightly weaker against both the Euro and the Dollar but remains within its recent trading range.
The index of leading shares idled, showing single digit gains for much of the morning.
In truth nothing has fundamentally changed. The government, despite cabinet “unity”, is now tasked with getting the deal agreed by Parliament. If it fails, the option of a second referendum, a general election or exiting the European Union without a deal are all scenarios that have been discussed but rejected as not keeping faith with the original vote. Each one has been modelled, as best they can be, by investors for some time.
While Brexit will continue to provide work for political and financial journalists, uncertainty will persist over the eventual outcome and what the ultimate ramifications for the UK and European economies will be.
In discussions with our manager partners there is a strong sense that UK stocks are being undervalued, particularly in light of the international complexion of many of our biggest companies. Undeniable, too, is the pent up demand from international investors looking at the UK market. They seem poised to commit cash when there is greater clarity knowing that the UK is still a great place to do business.
As we near the day of departure on March 29 next year any further weakness in the currency could make UK assets irresistible and if short term investors remain reluctant to enter the market then longer term corporate buyers are likely to recognise the value inherent in UK stocks. A pick up in merger and acquisition activity will be something to watch out for.
In the meantime, Harold Wilson’s observation that “A week is a long time in politics”, is likely to prove apposite.
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