Weekend in London? Wait a while before booking!

At midnight last Friday, the time had finally come: Great Britain to leave the EU. It was mainly a symbolic moment. In the spring the whole circus starts all over again. And this time, there's more at stake than ever.

Across the North Sea, they celebrated Brexit as a victory on Friday night. A clock was projected on the official residence of Prime Minister Boris Johnson that counted down to the moment when Great Britain officially leaves the EU. To celebrate the departure, the Conservative Party is even selling special tea towels with Johnson's image and the British flag.

However, anyone who thinks that all Brexit uncertainty is finally coming to an end will be disappointed. Good trade agreements must be made with the EU before the end of this year. If that doesn't work, the disaster scenario will still loom on December 31: that the border will be completely locked from one day to the next.

Fish for finance
It will be very difficult to find an agreement, as Johnson attaches great importance to some symbolic matters. An example of this is the closing of British waters. To protect European fishermen, negotiators have already hinted that in return they will keep the door open for British banks and insurers.

The value of that financial sector is 169 times greater than the fishing industry. More than a million people work there, compared to about 8.000 fishermen. Still, it seems that Johnson is not interested in 'fish for finance'. If he insists on locking up British fishing waters, Dutch fishermen risk losing 38% of their profits. The damage in the business center of London is of course much greater.

Will there be an agreement?
According to negotiators, the chance that an agreement will be reached before December 31 is very small. You therefore expect that both parties do not want to waste a second and immediately sit down at the table with each other. However, the first talks are only scheduled for March 3. If those don't go smoothly, pressure will quickly mount on Johnson to push the deadline back. The Brexit agreement stipulates that he must make that decision before the end of June. However, Johnson only requests a postponement if he really has no other choice. He is eager to close the entire Brexit book this year.

When do I book my weekend in London?
Since the negotiations will not start until March, the pound will probably remain in calmer waters in the coming weeks. That could change if it turns out in April or May that an agreement is still a long way off. Last year, the currency fell nearly 10% in the spring as fears of a no-deal Brexit mounted. That could just happen again.

If you want to go to London for a weekend without a visa requirement, it may be cheaper if you book the hotel in the spring instead of now. Of course there is also a (tiny) chance that both parties will work out very quickly. Then the pound - just like in the second half of 2019 - can rebound by 10%. The wonders are not yet over.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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