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On election day in the U.S., there are echoes of Brexit in the air, most of them starting with Donald Trump.
The Republican candidate predicted voters will deliver “Brexit plus, plus, plus” by handing him the presidency. If he's right the effect could ripple across the Atlantic before and after the U.K. leaves the European Union.
Pre-referendum, President Barack Obama was caustic about Brexit, warning that Britain would be at the “back of the queue” for a trade deal with the U.S. if it left the bloc.
On the campaign trail, Trump called himself “Mr. Brexit” and said he too would ride a populist wave to victory against the odds. He said the U.K. “would certainly not be at the back of the queue” and declared Britons were right to seize back control.
By contrast, Democrat Hillary Clinton's campaign warned against Brexit, with adviser Jake Sullivan telling the Observer in April that she “believes that transatlantic cooperation is essential, and that cooperation is strongest when Europe is united.”
Following the referendum she said she respected the decision and that the main task would be to ensure any economic uncertainty didn't hurt the U.S., and to then make clear “America's steadfast commitment to the special relationship.”
Clinton and Trump: Echoes of Brexit?
In a podcast released yesterday, researchers at the Centre for European Reform said Clinton would likely follow Obama in favoring regional deals rather than a bilateral pact with the U.K. They said U.S. politicians are worried Brexit will distract the U.K. and EU from other matters such as fighting terrorism, and make it harder for U.S. busineses and investors to access the region.
In an accompanying report, Ian Bond and Agata Gostynska-Jakubowska said the U.S. is unlikely to take sides despite British hopes that whoever is in the White House will lobby the EU to grant concessions.
“As Britain gears up for Brexit it should not expect too much from the U.S. America will watch the Brexit talks like someone watching their best friends go through a divorce. It will sympathise, console, and offer support where it can. But fundamentally, it is a bystander and will avoid taking sides, in the hope it can still hang out with both.”
U.K. Prime Minister Theresa May said today she will call whoever wins as soon as possible to reinforce the special relationship with the U.S.
No Turning Back
May continues her tour of India today as she and Brexit Secretary David Davis contend there's no going back, despite last week's High Court ruling that Parliament rather than the premier must trigger the negotiations. The government is appealing the decision to the Supreme Court, which became more complex on Tuesday when Scotland's government said it would join the case.
“We won't achieve a good negotiation outcome if this is a negotiation being run by 650 people in this House of Commons, or nearly 900” in the House of Lords, Davis said. “If Parliament insists on setting out a detailed minimum negotiating position, that will quickly become the maximum possible offer from our negotiating partners.”
Labour Party's Brexit spokesman Keir Starmer urged him to “abandon the furtive executive approach adopted so far” and give more information on the plan. He has said Labour won't block Brexit.
Business Secretary Greg Clark committed the government to preserving EU worker protections against discrimination and dangerous workplaces as well as the rights to paid vacations and support for parents guaranteed under regional law.
The Financial Times reported May could begin outlining details of her plan for financial services before Christmas.
Meanwhile, Mark Gilbert and Mihir Sharma of Bloomberg View both looked at the U.K. outlook.
Budget Hole
Chancellor of the Exchequer Philip Hammond is facing a £25 billion hole in the public finances following the Brexit vote, the Institute for Fiscal Studies warned.
Diminished economic growth will result in £31 billion pounds of lost tax revenue, only partially offset by a £6 billion reduction in spending if Britain ceases to contribute to the EU budget, the non-partisan research group said. It means Britain is heading for a deficit of £14.9 billion in 2019-20 instead of the £10.4 billion surplus predicted in March.
The report was released as Hammond prepares to announce his new fiscal program on Nov. 23 and will likely reinforce his view that he cannot afford a “splurge for the economy.” Meantime, he plans to miss the regular meeting of EU finance ministers for a second straight month.
Michael O'Leary, chief executive officer of Ryanair Holdings Plc
Brexit Bullets
- Irish executives lash out at the U.K. over its Brexit preparations
- Factory output surges as pound impact downplayed
- May tells BBC that general election “should be” in 2020 as planned
- Chatham House says Brexit threatens U.K.'s economic model
- Adecco saw first signs of Brexit uncertainty in third quarter, CEO says
- Berlin said to attract start-ups from London, says FT
- Glaxo CEO Witty says Medicines Agency should stay in London
- Hong Kong says Brexit complicates EU's equicalence rules
- Record number of new luxury homes unsold in London
On the Markets
While markets are rallying as polls point to a Clinton victory, those who remember the Brexit referendum provide a cautionary tale. A similar rise in stocks, emerging markets and commodities on the day of the U.K. vote gave way to a slump -- and a rebound in haven assets -- after the unexpected decision to leave the EU.
And Finally…
Higher costs in the U.K., where a Brexit-battered pound is squeezing the retail sector, has chiseled away at the Alpine shape of Toblerone chocolate bars. Mondelez International also changed the shape of some of the bars, expanding the gaps between the triangular segments.
“Like many other companies, we are experiencing higher costs for numerous ingredients,” the company said in a statement.
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To contact the author of this story: Simon Kennedy in London at skennedy4@bloomberg.net.
To contact the editor responsible for this story: Emma Ross-Thomas at erossthomas@bloomberg.net, Andy Reinhardt
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