Brexit: Weekly Update

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Posted on July 19, 2016

Story of the Day: Nuclear Deterrence Vote
The House of Commons voted today on the renewal of the Trident nuclear program, the United Kingdom (UK)’s nuclear deterrent. Renewing Trident, which been operational since 1969, will cost an estimated ᆪ31 billion over the next 20 years, although critics such as Labour leader Jeremy Corbyn argue the price tag to be three times as much. Renewal was supported by a vote in 2007, led personally by Theresa May. So why is Parliament rehashing the decision?

Labour Party Split Exposed
Last September, Labour voted for full Trident renewal in opposition to the views of their leader. It is and has been official Labour Party policy to support Trident renewal. However, Corbyn himself is strongly opposed to the program. Leading a party that opposes him is not a new phenomenon for the embattled leader but still the government is using this to further damage his credibility and that of the Labour Party.
Weakening Support for Corbyn
In another twist of the Corbyn saga, the trade unions, who make up a major network of active voters and donors that overwhelmingly support Corbyn, support Trident. As pointed out by Labour Deputy, Tom Watson, Corbyn’s position against Trident jeopardizes the unions and the jobs of many defence workers who depend on it.

A UK Commitment to NATO
Although the UK is to leave the EU, the UK remains totally committed to NATO and her security obligations in Europe. This vote on renewal is intended to calm both NATO and EU allies.
An unfortunate negative consequence of holding the vote is the unanimous rejection of Trident by the Scottish National Party (SNP) Members of Parliament (MPs). Reportedly, all 54 MPs voted against the program, even at the cost to Scottish jobs as the UK submarine fleet is based in Faslane, Scotland.

Scotland
SNP Leader Nicola Sturgeon has warned that Article 50 should not be triggered without the full backing of Scottish Parliament. The SNP have threatened to call a second independence referendum if Westminster fails to comply.
In a perceived attempt to reassure Sturgeon, Theresa May offered an indirect response by stating: ‘ won’t be triggering Article 50 until we have a UK-wide approach.’ Meanwhile Brexit Minister David Davis seems to have created some turbulence in stating that it is impossible for Scotland to remain part of the EU and that no one can have a veto over Brexit. Critics view such contradictory views as evidence the government is making policy “on the fly” and posturing ahead of negotiations with the EU.
Canada-UK Trade
Chrystia Freeland, Canada’s Minister of International Trade today reaffirmed her government’s commitment to ratifying the Comprehensive Economic and Trade Agreement (CETA). The minister’s statement came in response to comments by British International Trade Secretary Liam Fox that productive talks had been opened between Canada and the UK. This appeared aimed at dampening expectation of trade discussions between the two countries.

Markets
EY Item Club, the only non-governmental forecasting group used by HM Treasury, released an array of economic forecasts judging the UK’s economy post-Brexit. The forecast is largely negative, slashing estimates for GDP growth. In 2016, forecasted growth fell from 2.3 per cent to 1.9; in 2017, forecasted growth fell from 2.6 per cent to 0.4 per cent. They predict that the slump that will take hold in 2017 will begin in the second half of this year. Business investment is predicted to fall 0.9 per cent this year and two per cent in 2017. By the end of 2019, they forecast unemployment to increase to 7.1 per cent. One bright note from EY’s analysis is that with the value of the pound dropping, it predicts UK exports to increase by 3.4 per cent in 2017.
The FTSE 100 was up over half a point today while the FTSE 250 climbed over one per cent. The pound sterling was trading at $1.3292 today.
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To speak to someone on the ground in London, connect directly with our London lead Ashley Prime at aprime@navltd.com.

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