BREXIT Policy Accelerates Despite COVID19
Every day this week, this blog features details of major policy initiatives that have not been derailed by the pandemic. Mostly, these developments have been lost in the noise in the news cycle. But our PolicyScope platform users and our daily COVID19 Report readers have watched the incremental forward progress on each of these important issues.
Today’s focus is on Brexit Policy.
The Data Tells Us Brexit Is Definitely
Happening at Year-End 2020
The patented PolicyScope platform has been tracking Brexit since January 2019.
Whether we take the long view
the COVID19 period view
Or even just look at the month of April
the momentum trendlines are consistent: steadily declining volumes of public activity characterize Brexit preparations.
Unlike Fintech and stablecoins policy (our focus yesterday), Brexit is not a momentum story.
Spikes in activity signal uncertainty and increased risks for random action by policymakers or voters. Steadily declining activity levels in the Brexit context signal certainty about the outcome.
Specifically, as noted last week following the Brexit negotiation session, policymakers in London and Brussels have agreed to agree. Neither side seeks delay at this point:
After this statement, some held out hope that at least the transition period might be extended.
This is unlikely as well.
An extended transition period would likely require the UK to continue contributing to the EU budget during the transition period. With massive pandemic relief packages still under construction in Europe, policymakers will not want to be obligated to contribute to those packages. As noted HERE last year, one major original reason for Brexit in the first place was that the government in London at the time did not want to be financial responsible for EuroArea sovereign debt during the Great Financial Crisis. The current British government will not want to assume these liabilities either.
Ironically, the pandemic also makes it easier for EU leaders to take a hard line and hold to the year-end 2020 deadline. Supply chains are already disrupted globally as well as in Europe. The economic stress from the pandemic swamps the stress that might otherwise occur from Brexit. Since all companies and consumers will be re-building, re-vamping, and reconsidering their supply chains, a clean break with the UK right now is relatively easier to implement from a European perspective.
What Comes Next – Inflection Points and Details
Activity levels may be relatively low, but this does NOT mean that policymakers are being passive. It only means that they are not sharing information publicly. In fact, negotiators have been meeting every day this week. They will meet every day at specified intervals between now and June with the express purpose of making progress on specific technical details. The publicly announced week-long negotiation dates are as follows:
April 20 - 24
Spikes at the end of each negotiating week can be expected as negotiators share updates about the progress of their talks. In addition, June was originally scheduled as the month during which the Commission would provide a determination about whether (or not) the UK would be provided with a favorable equivalence determination.
Brexit policy risk will therefore become more predictable in the near-term. Capital Markets participants trading volatility will want to set their calendars for the weeks identified above.
Because the high level outcome is now known, and because the COVID-19 pandemic dominates media coverage, strategists and analysts seeking insight regarding forward policy trajectories will have to read the documents issued by the negotiating parties in addition to the media coverage. Last week’s coverage of the negotiation outcomes provides a good example. Most headlines showed that the UK government was committed to the year-end deadline; but most media coverage also failed to note that the EU shared the UK commitment to reaching agreement by year-end.
The details announced between now and June will help determine not only the trajectory of Brexit policy but also the shape of the economic recovery across Europe. Staying on top of the technical details now will provide strategic informational advantages as the web of economic interdependencies shift. Our platform will capture each of these shifts as they occur.
BCMstrategy, Inc. is a start-up company using patented technology to automatically measure and analyze global public policy developments. The company began tracking daily global COVID19 activity in late February 2020, which means the company has captured in its time series the full global reaction cycle for this issue as it occurs. For more information and to get started using the next generation of policy intelligence tools, please visit www.policyscope.io.