Why is the British govt going so hard with the No Deal rhetoric?

in busy •  4 months ago

It's noticable that the No Deal rhetoric coming out of the British govt has increased in the past few weeks.

First we had Mark Carney, governor of the Bank of England, saying that the risk of No Deal was "uncomfortably high".

Then the Trade Secretary Liam Fox popped up on the Sunday news shows and in an interview said that the risk of a No Deal scenario was 60%.

That un-nerved the forex markets and the pound dropped below $1.30.

As one banking strategists commented, the 60 percent chance of a no-deal Brexit “is above what most clients had penciled in at this stage”.

Some Europeans think this is merely a bluff, designed to get them to soften their negotiating stance. But much of the No Deal rhetoric is coming from hardline Brexiteers who want a No Deal because it means a clean break and will save Britain from having to pay an exit fee.

I personally think the rhetoric is aimed at the general public and British businesses. The govt is warning them to start making their contingency plans now. There are signs that the public is heeding this. Sales of high ticket items like cars are down this year. Some businesses have switched their supply chains, subsitituting cheaper asian suppliers where they can't get British suppliers. The goal is to avoid anything that might have to go through what will be choked Channel ports, and import from countries sending goods to Bristol or Liverpool instead.

We are actually starting to see this in the stats: German factory orders for June were down by 4%. They vaguely blamed it on Trump, but all Trump has done is put tariffs on EU steel and aluminium, whereas the Germans recorded sharp falls in orders from EU countries that are not in the eurozone, the biggest of which is Britain. In fact German factory orders have been down in five of the last six months, and that can't be down to Trump. It's down to Brexit.

Paradoxically the more serious Britain is about No Deal, the more businesses prepare for it, the more effect it has on the EU and the more likely it is that they panic and do a deal.

But it's possible that the data on an EU slowdown will come too late to move the Commission though.

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