Free trade agreement with the EU: pound exchange rate drops due to Brexit

A.In the face of a lack of progress in the struggle for a free trade agreement between the European Union and Great Britain, the pound exchange rate is once again under considerable pressure on Monday. The external value of the British currency fell by up to 1.3 percent after EU negotiator Michel Barnier had expressed himself rather pessimistically. Barnier said he could not guarantee that there would be a contract. In Brussels it was said from Commission circles that the chances were only 50 to 50.

The rate of the euro rose to 0.9137 pounds. The British currency is thus in a rapid devaluation in the short term, after having appreciated significantly between the beginning of September and the end of November and is approaching its lows against the euro. The pound also depreciated against the weak dollar. Currently paying $ 1,3278

The main points of contention are still fisheries, the playing field and control of the agreement. Analysts such as Holger Schmieding, chief economist at Berenberg Bank, are even more optimistic, but put the probability of a “hard Brexit” at 25 percent. The European Council of Heads of Government will meet in Brussels on Thursday. Some observers believe that only then, at the highest political level, will a breakthrough be achieved. In any case, time is extremely short. The Brexit transition period expires at the end of December. Without a free trade agreement, there is a risk of extensive tariffs on trade in goods.

The UK economy is deeply concerned. 24 days before the final Brexit, there are still 24 “huge unanswered questions in critical areas of the economy,” complained the BCC Chamber of Commerce in London. The traffic lights are still yellow or even red in 24 areas. That puts a strain on the preparations. The traffic light shows green in only eleven areas. The unanswered questions relate, among other things, to future border controls and rules of origin. The latter relates to the proportion of foreign components up to which products are considered “local” and the movement of goods remains duty-free.

Companies could not plan and face “unprecedented new administrative burdens and costs,” the Chamber of Commerce warned. There are so far very few guidelines from the British government for trade in goods with Northern Ireland. In addition, the ten-digit customs numbers were still missing and there was a lack of clarity about the ultimately applicable tariff rates of the most favored nation rules of the World Trade Organization (WTO). In view of the difficult situation, the Chamber of Commerce called for a relaxation of the rules or a temporary suspension of border controls.

The London government has already announced that it will only accept a subsequent customs declaration from traders in the first half of the year for imports from the EU. The EU side, however, does not want to grant any such relief.

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