Page 4 - ISQ UK_October 2017

INVESTMENT STRATEGY QUARTERLY

Can a Brexit Compromise Really Happen?

Chris Bailey, European Strategist, Raymond James Euro Equities*, considers some of the barriers and
opportunities that the UK is faced with on the road to reaching a deal - or not - with the European
Union.

"Let no one think that flexibility and a predisposition to WHY COMPROMISE?
compromise is a sign of weakness or a sell-out" What is the logic for striking a compromise deal? Well it has to be
centred on trade and its contribution to economic activity. After
Paul Kagame
all, from a UK perspective, exports of goods and services to other
European Union (EU) countries were worth £274 billion in 2017
Life is full of surprises. I am pretty certain that UK Prime (over 40% of total UK exports), while exports from the rest of the
Minister Theresa May would have preferred not to have EU to the UK were worth about £341 billion. No deal does not
been so surprised by the reaction to her Brexit preferences stymie this completely, but every new frictional cost or barrier is
a hindrance or a loss that has to be overcome or sourced from
in Salzburg, during late September. However - as with life - elsewhere.
it is how you react that really matters.
ANSWERING THE BORDER QUESTION
SORRY NO CHERRIES TODAY Common sense and political/economic decision-making are rarely
So how do you react? Theresa May’s grumpy press conference one and the same thing and the world of Brexit is replete with
followed Donald Tusk’s now infamous ‘sorry no cherries today’ emotional, instinctive thinking. The Irish border question is clearly
Instagram reflecting, if we did not know already, that the whole one of these issues. Fortunately, the full weight of the history
Brexit process has been a series of forward steps followed by underlying this question is not apparent and policymakers need to
backward one. What was most striking to me however was the just concern themselves in avoiding a ‘hard border’. Could
sharp distinction between the hope of just a few days prior to the technology take up the strain as with so many other elements in
Salzburg summit, when talk of a November - or even possibly an our modern lives, tracking goods to their final destination? Certainly
October - final deal was apparent. With time ticking away these a next generation version of the current fluid Swedish-Norwegian
border (average wait time nine minutes) or US-Canadian border
scenarios appear less likely... so can a compromise be reached that (average wait time just under sixteen minutes - assuming Fast and
will solve the Irish border and general future trade relationship, Secure Trade Program membership) could exist for the Irish border.
and sell it to Parliaments and underlying citizens?

4 *An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc.