Ahead of the UK’s official departure date from the EU on January 31st, 2010, the first rumblings about the deadline for the transitional phase are already starting to emerge. The UK is due to enter into talks with the EU. These are aimed at agreeing on terms of future trade between the two economies.
This period, during which time the UK will remain in the single market, currently has a deadline of December 31st, 2020. The PM has been adamant in his affirmation that a deal can be done within that time. Although, he has also added that the deadline will be honored, regardless of whether a deal is done. Critics, however, argue that the current timeframe is unrealistic and accuse of Johnson of setting trade talks up for failure.
Johnson announced this week that he is launching a special task-force aimed at delivering a deal ahead of the deadline. Johnson’s new team, called “Taskforce Europe” is slated to begin operating by January 31st. They will take over from the former Department for Exiting the European Union (DExEU). Taskforce Europe will be the vehicle through which Johnson negotiates with Europe regarding the terms of a free trade agreement. It will be led by the PM and David Frost, his Europe adviser.
EC President Calling For Transition Phase Extension
Despite Johnson’s insistence that the current timeframe offers ample room for agreeing to a deal, the EU does not seem to share the same confidence. Ursula von der Leyen, the new European Commission president told the French newspaper Les Echos “I am very concerned about how little time we have.”
She further commented:
“It seems to me that, on both sides, we should seriously consider whether the negotiations are feasible in such a short time.”
The new EC president went on to say that pending a review of negotiations in summer 2020, the deadline might need to be extended. Von der Leyen said:
“it would be reasonable to evaluate the situation mid-year and then, if necessary, agree on extending the transition period.”
Johnson’s Defensive Over Trade Talks Deadline
While the EU might push for such an adjustment, the political backdrop in the UK poses a challenge. As part of the Withdrawal Agreement Bill, Johnson included a clause to prevent parliament from extending the deadline. As such, the deadline can now only be extended if Johnson passes a motion to revoke that clause.
However, it seems unlikely that such a motion would pass. This is given the concern shared among many Brexiteer MP’s that a Brexit deal would result in the UK entering an indefinite limbo with the EU. As a result of this, while the UK has avoided the immediate economic risks of Brexit, later into next year, we could see fresh risks arise if trade negotiations look to be struggling.
The post-election rally in GBPUSD was capped by a test of the 1.3379 level, following the break of the bearish long-term trend line from 2015 highs. While price was knocked lower following this test, 1.2967 offered support. Price is once again moving back above the trend line. While above the 1.2697 level, a further test of the 1.3379 level is likely, in line with the bullish channel which has framed the recovery in GBP. For now, the focus remains on further upside.