Johnson is having a hard time without Trump

It will take the British more time to conclude a trade agreement with the United States than expected. Moreover, post-Brexit trade with mainland Europe is difficult. The pound's recent rebound may have been on shaky ground.

Joe Biden can celebrate 100 days in the White House at the end of this month. Although his election victory was enthusiastically received in many countries, British Prime Minister Boris Johnson will remember the period when Donald Trump was in charge. As an outspoken supporter of Brexit, Trump promised Britain a nice trade agreement. However, the indications are mounting that Johnson can wait a long time for an agreement. Biden's priorities are to fight the pandemic and fuel economic growth at home.

Smoothing out wrinkles in the field of food and agriculture
By the way, Biden does have some eye for what is happening outside the United States. But Britain is not at the top of the priority list. In foreign trade policy, the focus is mainly on resolving the lingering subsidy dispute between Airbus and Boeing. The strategic importance of securing the future of the aircraft makers - and cutting off Chinese competition - weighs more heavily for Biden. As a result, the deadline for drawing up a trade agreement via an accelerated TPA procedure has expired. This opens the door for congressmen to submit amendment proposals. There is a good chance that many folds still need to be ironed out, especially in the field of food and agriculture.

Export misery
For British SMEs in particular, the departure from the EU will not turn out as well as hoped. A poll by the trade association FSB among small and medium-sized companies shows that a quarter have temporarily or even permanently stopped exports. Apart from an increase in paperwork, this is mainly due to delays at the border. In some cases it takes a month for British goods to be delivered to customers in Europe, while before Brexit it took a day. Of course, Covid-19 measures also play a role in this. But it is significant that UK exports to the mainland fell by more than 40% in January alone.

Pound shoots up
While negotiations with the United States drag on and British exports fall, the pound is soaring. This has everything to do with the vigorous vaccination program. More than 30 million Britons have already received their first vaccine. The prospect of the economy picking up steam ahead of the EU's has boosted the pound by 3% against the euro over the past 6 months. It remains to be seen whether this increase will also continue once it becomes clear how many loose ends there are still after Brexit. Because in addition to the challenge of negotiating a good solution for the Irish border, there are also the weak export figures and the lack of a US trade deal.

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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