Boris Johnson is already demonstrating how an 80 seat majority can really get things done after his Withdrawal Agreement Bill sailed effortlessly through the House of Commons. Next stop for the legislation is the House of Lords, where peers will vote on the historic bill, which writes Mr Johnson's Brexit deal into law.
What next for Brexit and the pound?
While the British public sent a blue army of Conservative MPs back to Westminster, their forces are less prevalent in the upper chamber. Peers – who dealt significant blows to Theresa May's administration – are expected to give it a more challenging hearing but are unlikely to obstruct its path this time around.
With the Brexit legislation’s journey through parliament well underway, Brexit day is almost certain to take place on the 31st of January. So, what happens next, assuming the Withdrawal Agreement Bill becomes enshrined in law this month after three years of constitutional disruption?
What happens on the 31st January?
It is no longer possible to revoke article 50 – the formal process of exiting the EU – after 11pm on the 31st January. The UK enters an 11-month transition period, during which it will remain in the customs union and the single market. This deadline has been provided to allow government and EU officials time to work out their future relationship on key issues like trade.
When do negotiations begin?
Negotiations won’t automatically begin on the 1st of February. Firstly, both sides must publish their negotiating objectives; the Withdrawal Agreement Bill requires Mr Johnson to publish his objectives within 30 days; while the EU is expected to agree its negotiating mandate on the 25th of February.
What if they fail to reach an agreement by the end of the transition period?
The government can request an extension of the transition period for one or two years, provided they do so before the 1st of July. However, armed with a powerful Brexit mandate, Mr Johnson has amended the Brexit bill to make it illegal to request an extension of this period; a move that is seen as an attempt to force the EU into giving him a comprehensive free trade deal by the end of the year. While it would be easy to repeal the ban if necessary; if the government changes its mind and requests an extension after the 1st of July, the door will be locked.
What does this mean for the pound?
The post-election optimism, which was built on the back of the Conservatives strong mandate to “get Brexit done”, that had given the pound an injection of strength soon dissipated when Mr Johnson made clear his intention to outlaw an extension of the transition period. The currency subsequently arrested its gains, as fears of a no-deal Brexit resurfaced.
If the government is unable to agree a workable trade deal with the EU by the December deadline, the UK will walk away without one. This potential scenario would trigger another sustained period of political and economic uncertainty that could push the pound off a cliff-edge. In the meantime, the pound’s performance will be largely dictated by the progress of trade talks, which now must be completed within a tight deadline.
What does this mean for anyone with international payment requirements?
The chance of a no deal scenario is now firmly back on the table, which is likely to prolong the uncertainty that has plagued the pound since the 2016 EU referendum. The outlook for the pound in 2020 is uncertain and likely to remain changeable until the future trading relationship with the EU is solidified.
Being in contact with a specialist international payments provider and discussing your upcoming currency requirements will enable you to utilise different contract options and make a plan to minimise your exposure to the changing currency markets.
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