”Hard Brexit” Leaves U.K. Vulnerable to Credit Downgrade

Brexit negotiations are expected to leave the U.K. economy vulnerable this year, with growth prospects significantly weaker if a new free-trade deal with the European Union is not reached, according to credit rating agency Moody’s.

The international agency says the U.K. is at risk of a sovereign credit downgrade if a deal allowing access to the EU market is not reached. Although the Conservative government says it prefers to maintain open access to the single market, that may come at the expense of immigration reform. Brussels has been adamant in upholding mobility rights of EU citizens, and this will likely be a precondition of any deal involving free trade.

In a July 11 press release, Moody’s said that the likelihood of an abrupt and damaging exit with no trade deal “has increased compared to our expectation directly after the referendum.”

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UK Admits it Has to Pay for Brexit, is Regulatory Passporting on the Table?

The financial services industry hopes that the UK would manage to secure financial services passporting

The financial services industry has been one of the hardest hit due to the Brexit process not least due to the volatility in the British pound’s exchange rate. The biggest concern for companies however has been the likely loss of free market access between the UK and the rest of the European Union, which may force them to relocate business to the EU.

With the ongoing Brexit negotiations casting a big shadow over the future business dealings of firms operating in the UK, the news that London has finally agreed that it needs to pay a settlement bill, is welcome.

The UK has finally put down on paper that they needed to pay a cost for leaving the European Union. This cost is termed as the Brexit bill and though the amount is not exactly clear as yet, the estimates vary between 40 billion to 100 billion euros.

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Morgan Stanley picks Frankfurt as their new trading hub

Fallout from post Brexit. GBPUSD waffles back and forth but a touch more bullish on the day after support holds.

Morgan Stanley has picked Frankfurt as their new trading hub.

Goldman Sachs is also scouting out Frankfurt in a post Brexit exodus out of London.

The UKs Brexit decision has forced global banks to establish new bases inside the European Union in order to secure continued access to clients in the region.

It is reported that Goldman Sachs is considering moving as many as 1,000 employees. Estimates are that London is set to lose as many as 30,000 financial services jobs after Brexit. This is according to the Bruegel think tank.

Brexit - British households' financial situation deteriorate fastest in 3 years

The monthly Household Finance Index survey from financial data company IHS Markit

to 41.8 in July from June's 43.7 and to its lowest since July 2014


The survey also showed that households' willingness to make big purchases fell to its lowest since December 2013.

Tim Moore, a senior economist at IHS Markit:

reflecting an ongoing squeeze on household incomes as inflation rises faster than wages
"There are signs that squeezed household budgets and worries about earnings have started to spill over to consumer spending patterns"

UK prepared to pay up to EUR 40bln for Brexit divorce bill

Sunday Telegraph today citing 3 unnamed sources close to the negotiations
  • British officials were likely to offer to pay €10 billion a year for three years after leaving the EU in March 2019, then finalise the total alongside detailed trade talks
  • payments would only be made as part of a deal that included a trade agreement
The paper quotes a "senior Whitehall source" as saying:

"We know (the EU's) position is 60 billion euros, but the actual bottom line is 50 billion euros. Ours is closer to 30 billion euros but the actual landing zone is 40 billion euros, even if the public and politicians are not all there yet"

"A second Whitehall source said Britain's bottom line was "30 billion euros to 40 billion euros" and a third source said Prime Minister Theresa May was willing to pay "north of 30 billion euros"

David Davis, the UK Brexit minister said on July 20 that Britain would honour its obligations to the EU but declined to confirm that Brexit would require net payments while Foreign Secretary Boris Johnson said last month the EU could "go whistle" if it made "extortionate" demands for payment.

The EU has floated a figure of €60bln ( some talk even of 100bln) and wants significant progress on settling Britain's liabilities before talks can start on future trading arrangements and other key areas, and yes the clock is well and truly ticking.

Meanwhile former BOE gov Mervyn King Britain needs to make clear to the European Union that it is prepared to go it alone if it fails to reach a satisfactory deal in Brexit talks

"If you are going to have any successful negotiation, you have got to have a fall-back position, which the other side understands and believes is credible"

Can Paris Overtake Frankfurt in Bid to Secure Brexit Banking Jobs?

Despite lagging behind Frankfurt, Paris is hoping to attract upwards of 20,000 banking jobs.

It was not that long ago that Paris was in the running to be the new EU banking capital along with the likes of Frankfurt, Dublin, and Amsterdam. However, after a busy July that saw myriad banks move forward with relocation plans ahead of Brexit, France finds itself on the outside looking in.

Indeed, the country has failed to move the needle and entice any major lenders to its borders even at a time when banks are setting up new units within the EU en masse. Even Amsterdam has emerged as a late entrant to the race, recently welcoming Japanese firms MUFG and RBS.
Labor laws discouraging banks?

France has seen marquee banks shift their focus elsewhere due to a range of factors, perhaps none more than rigid labor laws in the country. The country currently levies harsh labor restrictions in terms of terminations, with a corporate tax rate of 33 percent. However, President Emmanuel Macron has stated that he would like to gradually lower the tax rate down to 25 percent, according to a Bloomberg report.

Perhaps recognizing its position relative to other European cities, French Finance Minister Bruno Le Maire addressed the situation, stating that Paris still sees itself at the top of the post-Brexit banking hierarchy. Despite behind noticeably behind, he echoed this sentiment:

“We will take the difficult decisions, we will lower French taxes, we will make our country more attractive. We will win the race,” he explained in a recent television interview.

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Re: Brexit - everything you need to know

Probably they will choose Frankfurt as it is more certain perspective from economic and political point of view. Additionally, according to the Global Financial Centers ranking as of March 2017, Frankfurt was ranked 23th, while Paris wason 29th position. Though Paris is a good replacement as it is a great cosmopolitan city which is also very well connected

Brexit: Cable says there is a 'significant possibility' it still won't happen

Vince Cable is a former business secretary in the UK and now leader of the Liberal Democrat Party
He believes there is a "significant possibility" that Brexit will not happen
  • "I think there is more than a possibility that it may never happen. I'm not saying it definitely won't but there is a significant possibility."
  • Said the Government was dependent on the support of the Labour party to get Brexit legislation through parliament, which may not continue
read more ...

Brexit: Britain consumer confidence rank in Europe falls from 2nd to 9th

Reuters article on Nielsen survey findings:

  • 53% of Britons scrimped between April and June - the highest proportion since 56 percent did so during the same period of 2015
  • This marked a swing back towards household cost-cutting over the course of the past year, which had been at its lowest level on record - 40 percent - in the two months after the Brexit vote in June 2016
  • Britain declined from second in Europe's consumer confidence rankings just before the Brexit vote to the ninth now
  • Shoppers have changed their behaviour in a way that is reminiscent of the aftermath of the financial crisis in 2008/9, said Steve Smith, managing director of Nielsen UK and Ireland
  • Thirty percent of respondents cited switching to cheaper grocery brands as their money-saving tactic, with another 27 percent working to save on gas and electricity
  • A quarter of respondents spent less on new clothes and take-away meals, while fewer were willing to cut down on out-of-home entertainment, holidays and alcohol.

Re: Brexit - everything you need to know

bonifaas_abe wrote:
Fri Aug 11, 2017 12:05 am
Probably they will choose Frankfurt as it is more certain perspective from economic and political point of view. Additionally, according to the Global Financial Centers ranking as of March 2017, Frankfurt was ranked 23th, while Paris wason 29th position. Though Paris is a good replacement as it is a great cosmopolitan city which is also very well connected
I do agree with you bonifaas_abe. Frankfurt is stable and perspective
Plus they do have extensive experience at the bank sector – they are fast, effective and precise

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