Friday, 18 November 2016

Whither the UK's Implementation of #PSD2?

It's still a case of 'hurry up and wait' on the transposition of PSD2 into UK law. 

The Treasury had initially said it would issue the consultation paper on transposing PSD2 into UK law in August 2016, but nothing forthcoming as at 3pm today. In mid-October, the Treasury told a stakeholder meeting at the FCA that the paper was "being finalized" with no public explanation for the delay (though one could readily speculate that Brexit related projects might be a key distraction!). 

Officials have my deepest sympathy, but it's a little more frustrating because the European Banking Authority has moved forward with consultation on certain regulatory standards related to strong authentication and communication amongst PSPs, passporting, authorization and so on.

The EBA's proposed standards associated with authentication, in particular, have drawn a fair degree of criticism from the industry and European Parliament, partly for assumptions concerning the nature of payment initiation and account information services, as well as their inflexibility and the extent to which they perhaps give the incumbent 'account servicing' PSPs more control than PSD2 was intended to allow.  It will be interesting to see whether the concerns are reflected in the next iteration, expected in December/January (although they do not take effect until at least October 2018 to allow for development work).

Wednesday, 19 October 2016

May Won't Commit #Article50 Suicide

The cost of the Brexit referendum decision has finally begun to erode household confidence, even though Brexit hasn't even actually happened and the worst is yet to come. So you can bet the Tories will be preparing themselves for yet another U-turn as the costs and related uncertainty increase. Even they must now realise that triggering Article 50 would be committing economic suicide, pure and simple, and I doubt that even Theresa May will be fool enough to pull that trigger come her phoney deadline of March 2017. By then all but the most ardent 'BeLeavers' will have come to their senses, and the polls and regional high streets will be fearing the worst. UKIP has already imploded not because it has achieved what it set out to, but because what it set out to achieve has been demonstrated to be a very bad idea.

We know now that the Leave campaign was built on a tissue of lies, from the 'gross' figure of £350m a week, to the promise of extra spending on the NHS, to the idea that the UK can thrive economically on net migration of 100,000 people a year or lose any of the 1.5m EU citizens working in Britain today who would have to leave under the rules applied to non-EU migrants (even plans to publish lists of foreign workers have fallen flat). Indeed, the UK faces having to pay the EU billions for Brexit (at a poor exchange rate), not only to 'true-up' the UK's current EU budget contributions, but also if it is to secure any preferential access to EU markets (although that is not just a question of money, but of free movement of people etc). 

We also know that in reality the EU has no control over the major areas of government expenditure - social welfare, health, education, defence, public order, housing, transport. These are policy areas that the UK continues to screw up all by itself. And it's dawned on the UK's poorest regions that they rely on EU grants that Whitehall will not be set up to maintain after the current EU budget expires in 2020.  

And all the 'silly rules' on bananas etc that the Leavers complained about are international trade rules, not attacks on British 'sovereignty'. The UK would still have to play by those rules if it wants to engage in international trade.

Finally, we know that the UK imports more than it exports and that investment in Britain's export opportunities have relied on trade deals that the EU has achieved over decades by offering a market of 500m people - the world's largest economy, the world's largest trading bloc, the world's largest trader of manufactured goods and services and the top trading partner for 80 countries. We've learned that it would take the UK over 2 years to drive its own deals, and it will have to take what's offered because it can only offer a market of 60m - the 21st on the list of the world's most populous countries and right next door to the world's biggest trade bloc. Yet the UK can't even sign any trade deals until it has left the EU, which is scheduled to take two years. So investors would be waiting nearly 5 years to see what returns they might get for investing in British export industries that would be facing their biggest ever test. They would surely invest elsewhere in that timeframe. That would mean insufficient investment for export targets to be met. The trade deficit would worsen as the UK imported more (and at a poor exchange rate). Prices would go up, but incomes would not. The government wouldn't be able to raise more in taxes and wouldn't be able to borrow at low rates anymore (that credit rating is only going one way), so many more difficult spending decisions and cuts would loom.

For Boris Johnson to continue to insist that the UK will achieve better trade deals on its own in these circumstances is the same kind of fraud we saw painted on his big red bus: serving up any old lie that people can use to justify their blind, ignorant, nationalistic fervour, rooted only in the dust of an Empire long gone and, ironically, a genetic hotch-potch that has more in common with the French, Germans, Danes and Belgians than anyone else. It is just vacuous, populist politics, and an exercise in narcissism - like making the decision whether or not to back Brexit by writing his own newspaper articles either way and then taking the course suggested by what he thought was his own better article.

But you can't eat nationalistic fervour. It doesn't make your fuel cheaper or cut the price of whatever else you buy with ingredients that have to be imported. And you won't be able to 'buy British' when the UK, like Switzerland, is forced to open its market for 15 years before bigger trading partners open theirs. Competing home industries will be crushed, along with the related jobs.

So, somehow, the Tories have to find a way to avoid triggering Article 50, and it's my bet they will.

Monday, 19 September 2016

Little Interest in Pre-Article 50 #Brexit Discussions With British EC Staff?

The crowdfunding campaign against the ban on British European Commission staff, in particular, discussing Brexit plans with UK officials before the UK triggers Article 50 has raised less than a tenth of the £35,000 target from only 109 people, with 18 days to go.

The campaign is intended to attack the ban on all EC staff announced by EC President Jean-Claude Juncker in June: "No notification, no negotiation."

But it seems few people are interested in pushing the issue. Perhaps another reason for doubting that the UK will ever be adequately prepared to trigger Article 50?

Saturday, 3 September 2016

Economic Impact of #Brexit (If Any) Is Years Away...

Not a day goes by without someone declaring that the economic  impact of Brexit has been either overestimated or is being underestimated. 

This has to be utter rubbish. 

The UK is still in the EU. Situation normal. Nothing has changed. Changes in the economic data must be due to other causes.

While the impact of the referendum itself - and the related political nonsense - might have affected some figures, I don't see how the actual impact of the UK leaving the EU could be reflected in any way. 

When might any impact be felt, if ever?

Not only is the UK still waiting to decide exactly when to trigger the formal two year 'Article 50' leaving process, but it is also still trying to figure out the list of issues that need to be resolved and the appropriate negotiating strategy and tactics to resolve them favourably (if possible), not to mention how to recruit the people who are supposed to be doing the negotiating. 

Personally, I doubt the UK is capable of getting this done in any conceivable time frame, and to trigger the Article 50 process without figuring these things out would be insane. So it would not surprise me if the UK never actually manages to trigger the Article 50 process (the wisest course). 

Which would mean Brexit itself would have zero economic impact. 

There may be economic volatility while the implications of triggering Article 50 are being worked through, but that would still not really be the result of actual Brexit. The referendum experience has shown that people don't really look beyond the horizon, so they would not be reacting to an actual decision either way, just the trigger decision itself.

If the UK does manage to trigger Article 50, then we would see another burst of economic volatility while everyone digests (the madness of) that decision and what it might mean when the leaving process is complete. The chief issue would be whether the UK would be able to complete the necessary negotiations within the two year time limit, in order to avoid the default trade position (the worst case, unless of course the UK manages to negotiate an even worse set of deals than that - not inconceivable!).

There would then be all sorts of fresh economic volatility during the two year Article 50 period, while everyone reacts to the latest news about each of the trade negotiations might affect them and their sectors. Speculators would have fun, but everyone else would need to wait and see what actually shakes out. Meanwhile, any news about the plight of other EU members and the EU itself would also affect everyone's view.

Of course, if the leaving process were completed, there would be reactions to how the various deals actually unfold and whether they would be extended or renegotiated. But that position would be the 'new normal', so not really Brexit related at all.

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