Spell out clear strategy on Brexit process

On Wednesday, Britain’s finance minister Philip Hammond cut UK’s economic growth forecast for next year from 2.2% to 1.4%. The announcement came exactly five months after the June 23 referendum and rattled businesses in London.
The UK economy has been in a tailspin as there continues to be ambiguity over the Brexit process. Even though British Prime Minister Theresa May has reassured that the transition would be as smooth as could be, she has done little to lay out a proper roadmap for the same. Brexit minister David Davis held his maiden meeting on Tuesday with the European Commission’s top negotiator Michel Barnier, but it was reduced to a “courtesy coffee”. With the picture as hazy as ever, the EU leaders slammed the May government for being unable to outline the Brexit strategy. They were unanimous in saying that the UK government appeared clueless about the plans that need to be implemented to ensure that the impact was minimal.
Frustration in the UK business fraternity over inability of the May government to produce a clear Brexit proposal is mounting as well. They are quite edgy about the “cliff-edge scenario” of Britain leaving the EU. They feel any sudden departure would create massive financial losses. The community has urged May to update it about her Brexit plans. But May has been dilly-dallying on it, while mouthing half-hearted promises.
The first UK budget after the referendum will aim at trimming austerity hampered by financial uncertainty over the EU exit strategy. Despite Hammond’s economic growth slowdown forecast, the British economy has remained quite resilient after the Brexit vote till now. However, if the uncertainty drags out, the looming economic chaos will prevail. The impact have started showing on the slowing employment growth and household incomes which are under stress. A good monetary policy which backs growth and a credible fiscal policy would help the market confidence to remain untouched.
May has said that the formal Brexit process will start by the end of March 2017. The EU has cautioned that there is an “intense” window of only 15 months to complete talks for UK’s exit by May 2019. Its leaders have pointed out that Britain won’t be allowed to cherry-pick. It won’t be permitted to keep access to the single market while limiting freedom of movement for EU citizens. It would be a daunting challenge for May to keep the business growing as well as tackling the migration.
As the confusion over the Brexit process perplexes traders, May has to allay their fears with proposals that can restore their sagging faith. Even though she says that she “will always believe” in free markets, capitalism and business, the PM has been vague on her insistence that these needed to serve the interests of everyone.
The Brexit vote has hit the British currency and has caused the pound’s free-fall. It is taking a toll on its economy as Hammond’s economic growth slowdown forecast reflects. This should be enough for the policymakers to swing into action.
Credit Suisse’s study should alarm them further. Switzerland’s second largest bank has revealed that Britain lost $1.5 trillion in household wealth in 2016. A full 406,000 Britons lost their status as dollar millionaires this year. Wealth per adult has already dropped by $33,000 to $289,000 since the end of June.
Time to clear the clouds is now…