If delay leads to cancellation, disaster is complete

Negotiators are pushing back the date for a Brexit deal. If it takes a long time before a settlement is in sight, the decline in the British pound threatens to turn into a free fall.

Everyone has a chore that they may put off and prefer not to do at all. The European Union (EU) and Great Britain are taking a similar stance on Brexit talks. Initially, it was intended that an agreement would be reached in June. Then that deadline shifted to the EU summit on October 18.

However, Tuesday, August 28, the financial news service Reuters reported that that date is probably too early. Instead, both sides would now aim for mid-November.

Problem at the border
The delay indicates that the negotiations are difficult. One of the biggest problems is finding a solution for the border between Ireland and the British Northern Ireland. Last year Prime Minister Theresa May guaranteed that the movement of goods and people will continue to be possible. However, under pressure from conservative party members, she soon had to renege on that promise.

However, European negotiators insist that finding a solution to the Northern Ireland border is a precondition for reaching a provisional Brexit settlement.

Deadline is moving
The shift in the deadline indicates that the two sides haven't gotten much closer. The great division in the British camp plays a major role in this. At the beginning of July, the Secretary of State (Boris Johnson) and the Brexit Minister (David Davis) resigned because May would choose a lenient course.

The explosive situation in British politics will not change for the time being. Chances are, Johnson will change May's policies at the Conservative Party's annual convention in early October extremely hard attacks.

Pound is the victim
The British pound is the biggest victim of the slowdown. At the start of the week, the coin fell below the $1 mark for the first time in nearly a year. Since mid-April, the pound has fallen 1,10% in value. As a result, currency traders are opting for the growing risk that there is no deal before March 5. In that case, the consequences are incalculable.

If the EU and Great Britain separate without proper agreements, it will become more difficult overnight to get goods across the border. Some parties warn that there is a deficit to medicines and medicines can arise. Even if both sides come to an agreement at the last minute, there may be too little time to implement all measures.

It is obvious that the pressure on the British pound will only increase the longer an agreement is delayed.

Lawrence Martins

Laurens Maartens is a currency expert at the Dutch Payment and Exchange Company (NBWM). Maartens analyzes current currency developments and also provides lectures and training in the field of currency management.

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