UK factory orders recover after October slump - CBI

Business correspondent(wp/Reuters):

British factory orders bounced back in November after falling sharply in October, a survey showed, potentially easing concerns about the scale of a slowdown in the economy ahead of Britain’s departure from the European Union in March.

The Confederation of British Industry said its monthly order book balance rose to +10 from -6 in October, the sharpest fall in two years.

November’s reading was stronger than all forecasts in a Reuters poll of economists.

“It’s encouraging to see an improvement in the manufacturing sector after October’s stark survey, with order books and output growth on the up,” Rain Newton-Smith, the CBI’s chief economist, said.

“But the future prosperity of manufacturers depends on getting the Brexit deal right. The overwhelming message from business to the government is to make progress, don’t go backwards.”

British Prime Minister Theresa May last week agreed a withdrawal deal with Brussels that would give the country a transition period for leaving the EU.

But the agreement faces stiff resistance in May’s Conservative Party, meaning it could fail in parliament.

Manufacturing accounts for about 10 percent of total British economic output.

With Carney warning of 1970s-style shock, UK firms ready for no-deal Brexit

Business correspondent(wp/Reuters):
Companies began triggering plans to keep operating if Britain leaves the European Union without an agreement, a “no deal” scenario the Bank of England said could plunge the economy into a crisis not seen since the 1970s.

With less than five months before Britain leaves the bloc, Prime Minister Theresa May is struggling to persuade parliament to back a draft divorce deal agreed with Brussels last week.

She won the backing of Bank of England Governor Mark Carney, who warned that a no-deal Brexit could hit the economy in a way not seen since the oil crisis that pushed many western nations into recession just after Britain had joined what is now the EU in 1973.

But the warnings and a charm offensive launched by May to court public opinion have done little to win over her critics, who are trying to force her to change tack over Brexit, Britain’s biggest policy shift in more than 40 years.

Northern Ireland’s Democratic Unionist Party, which props up May’s minority Conservative government, again said it would vote against her deal in parliament.

“All of our efforts are directed along with a large number of Conservative MPs from both the remain camp and the leave camp as well as opposition parties to defeat this deal and force a rethink,” the DUP’s Brexit spokesman Sammy Wilson told Sky News when asked if his party would bring down May’s government.

The prime minister may have hoped opposition to what is a draft divorce deal with the EU would fade after an attempt to unseat her by pro-Brexit Conservatives seemed to be fizzling out.

For her, it was business as usual. She will meet European Commission President Jean-Claude Juncker in Brussels on Wednesday to discuss an agreement on future ties before EU leaders are due to rubber-stamp the divorce deal on Sunday.

But one eurosceptic lawmaker, Jacob Rees-Mogg, said May had taken a “deliberate decision not to deliver a proper Brexit” and the prime minister’s opponents were adhering to the mantra that “patience is a virtue” in their attempt to oust her.

STARK CHOICE

May has warned lawmakers they have a simple choice: back her deal or risk ushering in a no deal departure, a delay to Brexit or possibly no Brexit at all.

Carney, who angered many Brexit campaigners by warning of the hit to economic growth from the decision to leave the EU, was also keen to illustrate the risks if the deal were voted down in parliament.

“This would be a very unusual situation ... It is very rare to see a large negative supply shock in an advanced economy. You would have to stretch back at least in our analysis until the 1970s to find analogies.”

Welcoming the transitional period in the draft deal with the EU, he also said there were limits to what the central bank could do in the event of a Brexit shock to the economy, both in terms of a fall in demand and ensuring lending by banks.

Earlier, the BoE said it would fulfill a request from parliament’s Treasury Committee to provide analysis of how the draft Brexit divorce deal “will affect the Bank’s ability to deliver its statutory remits for monetary and financial stability, including in a ‘no deal, no transition’ scenario”.

Doubts over the vote in parliament have pushed companies which have “no deal” contingency plans to start triggering them.

Electrocomponents (ECM.L), which stocks more than half a million industrial and electronics products, said it would spend 30 million pounds ($39 million) to increase its holding of fast-moving lines in Britain and Europe. AO World (AO.L), an online electricals and white goods group, said it might increase stock to mitigate any friction in the supply chain while Compass (CPG.L), the world’s biggest catering firm, said it was looking to build inventory and vary its menus before Brexit next March.

More than two years after Britons voted by 52-48 percent to leave the EU, it is still unclear how, on what terms or even if it will leave as planned on March 29, 2019.

The EU is due to hold a summit to discuss the draft deal on Nov. 25. Some eurosceptic ministers in May’s cabinet want her to rewrite parts of it, though EU governments have largely ruled this out.

Justice Secretary David Gauke said talks were now moving on to Britain’s future relationship with the EU.

“The withdrawal agreement is essentially done. We have had thousands of hours of negotiations with the European Commission and we have reached a deal where there have been compromises on both side,” he told BBC radio.

“The withdrawal agreement meets our key objectives in terms of the integrity of the United Kingdom which is so important to all of us in government, especially the prime minister.”

Bank of England chief Carney backs UK PM May's Brexit deal

Business correspondent(wp/Reuters):
Bank of England Governor Mark Carney gave his backing to a Brexit deal struck by British Prime Minister Theresa May, saying the alternative of leaving the European Union with no transition could be akin to the 1970s oil shock.
“We have emphasized from the start the importance of having some transition between the current arrangements and the ultimate arrangements,” Carney said, speaking to lawmakers on Tuesday. “So we welcome the transition arrangements in the withdrawal agreement ... and take note of the possibility of extending that transition period.”

May agreed with Brussels last week on a deal for Britain’s withdrawal from the EU in little more than four months’ time. But the agreement faces stiff resistance in her Conservative Party, meaning it could fail in parliament.

The value of sterling fell sharply on concerns that Britain could leave the EU with no deal.

Carney angered many euroskeptics before the 2016 Brexit vote by warning of a hit to economic growth from a decision to leave the EU. On Tuesday he said a lack of a transition would deliver a “large negative shock” to the British economy

“This would be a very unusual situation,” he said. “It is very rare to see a large negative supply shock in an advanced economy. You would have to stretch back at least in our analysis until the 1970s to find analogies.”

An oil embargo by OPEC exporters imposed over the 1973 Arab-Israeli war and a leap in crude prices plunged many western economies into deep recessions.

Carney also said there were limits to what the BoE could do in the event of a Brexit shock to the economy, both in terms of offsetting a fall in demand and ensuring the country’s banking industry was able to continue lending.

“I think we’ve put (the financial sector) in a position ... where it would dampen it,” he said. “That is not the same thing as saying it will be alright.”

Carney and other BoE officials speaking alongside him on Tuesday repeated their warning to investors not to assume that the central bank would respond to a no-deal shock by cutting interest rates, as it did after the Brexit referendum in 2016.

“That depends on the balance of demand, supply and the exchange rate... We could see either scenario,” Carney said.

He also said a planned analysis by the central bank of the economic implications of Brexit would not include a scenario in which Britain stays in the bloc.

Some of the analysis is due to be published on Nov. 28 alongside the latest bank stress tests and an assessment of Britain’s financial stability by the BoE.

UK's top court rejects government bid to stop ECJ hearing Brexit reversal case

Staff reporter(wp/Reuters):
Britain’s Supreme Court on Tuesday rejected a last ditch bid by the British government to stop Europe’s top court from considering a case which seeks to determine whether London can unilaterally reverse Brexit.
Scottish politicians who are opposed to Britain exiting the European Union want the European Court of Justice (ECJ) to clarify whether London can withdraw its notification to leave without permission from the EU’s other member states.

Pro-EU supporters who want a second referendum are hoping the case will give the option that Britain could change its mind in a second referendum and remain in the bloc after all.

The ECJ is due to hear the case on Nov. 27.

In a final attempt to prevent the referral, the British government asked the Supreme Court whether it would hear an appeal but on Tuesday, three of the country’s top judges rejected the application.

The government had argued that whether or not Britain could reverse the decision was immaterial, since ministers had no intention of doing so.

The anti-Brexit petitioners are hoping the ECJ will rule that Britain has a legal unilateral option of staying in the EU, the world’s biggest trading bloc, once the final outcome of divorce negotiations are known.

Last week, May concluded a withdrawal agreement with the EU but many in her own party along with the small Northern Irish party which props up her minority government and opposition lawmakers have said they will oppose it.

She has said the country faces three options: backing her deal, leaving the EU in a disorderly “no deal” Brexit, which would be very disruptive for businesses and citizens, or no Brexit.

It is not clear when the ECJ might issue its ruling to clarify the interpretation of Article 50 of the EU treaty, under which London last year gave two years’ notice of its departure.

Spain to vote against Brexit accord if text on Gibraltar not changed - PM

Political reporter(wp/Reuters):
Spain will vote against the European Union’s draft Brexit deal on Sunday unless it is modified to make clear that the future of the disputed British territory of Gibraltar relies on talks between Madrid and London, Prime Minister Pedro Sanchez said.

Spain’s demands on Gibraltar are the latest push by EU states to obtain more on national interests ahead of Sunday’s summit of EU leaders, but diplomats said there was little concern these would scupper prospects for a deal.

“As of today, if there are no changes with respect to Gibraltar, Spain will vote no to the agreement on Brexit,” Sanchez said during a conference in Madrid on Tuesday.

According to EU rules, the withdrawal treaty is adopted by qualified majority and not unanimity. So a single state like Spain cannot block it. The EU’s executive said it was aware of Spain’s concerns and it expected the issue to be resolved.

A small peninsula on Spain’s southern coast and a British territory since 1713, Gibraltar is a major point of contention in Anglo-Spanish relations. Spain has long claimed sovereignty over it.

Gibraltar is due to leave the European Union along with the United Kingdom in March, although 96 percent of its population voted in the 2016 referendum to remain in the bloc.

SUNDAY SUMMIT

While Spain last week initially welcomed a protocol on Gibraltar in the draft Brexit agreement, Foreign Minister Josep Borrell on Monday said there was confusion over Gibraltar in the main body of the agreement.

That needed to be clarified in the broader political declaration on the new relationship between the EU and the UK, Borrell said. Sanchez reinforced that message on Tuesday.

“If on Sunday in the @EUCouncil the Brexit deal does not recognise that Gibraltar’s situation must be negotiated directly between Spain and the United Kingdom, this government will not accept it,” Sanchez said on Twitter.

“If this government, which is a pro-European government, finds itself in this situation, this means that someone in Brussels didn’t do their work well,” he said, adding that Spain had offered various drafting options both to Britain and to EU negotiator Michel Barnier.

In Brussels, EU spokesman Margaritis Schinas said the bloc agreed last year that “after the UK leaves the Union, no agreement between the EU and the UK may apply to the territory of Gibraltar without the agreement between Kingdom of Spain and the United Kingdom”.

Diplomats in Brussels expected the issue to be resolved by adding more such language in the withdrawal agreement and the declaration on post-Brexit ties between the EU and Britain by Sunday, when they are due to be presented to EU leaders for approval.

Gibraltar borders the Andalusia region where regional elections key for Sanchez’s socialist party as well as his main opponents are held on Dec. 2. Several thousands Spaniards cross the border every day to jobs in the territory.

Gibraltar’s Chief Minister Fabian Picardo on Monday issued a statement regretting the Spanish position.

“It does not come as a surprise that Madrid should seek to raise new Gibraltar issues at the last minute on our negotiations to leave the EU. Raising issue at the 11th hour is a well-known tactic that has been used by Spain in the past while were in the EU,” Picardo said.