Yahoo Finance Pound jumped briefly as UK agrees to drop controversial Brexit legislation
Watch: Pound jumps as UK agrees to drop controversial Brexit legislation
The pound jumped briefly on Tuesday after UK cabinet minister Michael Gove confirmed the government would drop a controversial legislation that would break the Brexit withdrawal deal.
The EU-UK Joint Committee announced it has agreed “in principle” on all issues relating to the Brexit withdrawal agreement.
“Ensuring that the Withdrawal Agreement, in particular the Protocol on Ireland and Northern Ireland, is fully operational at the end of the transition period, i.e. as of 1 January 2021, is essential,” a statement by the Cabinet Office read.
“In view of these mutually agreed solutions, the UK will withdraw clauses 44, 45 and 47 of the UK Internal Market Bill, and not introduce any similar provisions in the Taxation Bill,” the statement added.
Boris Johnson had extended an olive branch to the European Union an olive branch on Monday, offering to drop contentious clauses in the UK internal market bill if a trade deal is agreed.
The UK government had formally offered to withdraw or deactivate parts of the bill that would allow it to override aspects of the Brexit withdrawal agreement if it reached an accord with the EU this week.
In a tweet, Gove, also co-chair of the committee, thanked his European counterpart Maros Sefcovic and his team “for their constructive and pragmatic approach.” He added that he will update parliament on Wednesday.
The pound jumped briefly against the dollar (GBPUSD=X) and euro (GBPEUR=X) after the statement to trade close to flat against both. Sterling went back to being down as much as roughly 0.4% against the pairings by late Tuesday afternoon, as it had been before the news.
Fawad Razaqzada, market analyst with ThinkMarkets, said that the pound “has bounced off its lows and it may go on to rise further. It is worth watching the pound against the euro given that the European Central Bank will be keen to shoot down the single currency with its latest monetary policy decision on Thursday, when it is widely expected to announce an increase in its QE programme.”
He added that the “unexpected” announcement “is potentially good news as it removes one of the stumbling blocks in the negotiations. But it remains to be seen whether the UK government will be able to secure a final trade deal with the European Union given the vast differences on the issues of fisheries, governance and the "level playing field" remain. The focus will turn to Boris Johnson who will travel to Brussels to continue the talks.”
READ MORE: UK food supplies may arrive 'late, tatty or not at all' next month from Brexit disruption
An agreement in principle has been found in the following areas, amongst others: Border control posts/entry points specifically for checks on animals, plants and derived products, export declarations, the supply of medicines, the supply of chilled meats, and other food products to supermarkets, the Cabinet Office said.
WATCH: Why is fishing so important in Brexit talks?
The parties have also reached an agreement in principle with respect to the decisions the joint committee has to take before 1 January 2021.
In particular, this concerns the practical arrangements regarding the EU’s presence in Northern Ireland when UK authorities implement checks and controls.
This also impacts the exemption of agricultural and fish subsidies from state aid rules.
This agreement in principle and the resulting draft texts will now be subject to respective internal procedures in the EU and in the UK. Once this is done, a fifth regular meeting of the EU-UK Joint Committee will be convened to formally adopt them. This will take place in the coming days and before the end of the year.
Aodhan Connolly, director of the Northern Ireland Retail Consortium, said the latest developments “are very welcome and is hugely positive. However, business in Northern Ireland will need the technical detail of these solutions as soon as possible. Even more than the detail, we will need to see that they work and enable the retail industry to continue to provide the people of Northern Ireland the choice and affordability that they desperately need.”
Meanwhile, food and drink firms fear “confusion and chaos” as Brexit forces radical changes on how Britain imports and exports food next month.
Business chiefs warned firms not only face uncertainty over how new border checks will hit food and drink supply chains, but also have “no clue” whether they face tariffs as well.
“Goods will arrive late, they will arrive potentially tatty...and there may be interruptions randomly in supply,” warned Ian Wright, chief executive of the Food and Drink Federation on Tuesday.
Northern Irish shoppers could face particular disruption, with the business chief dubbing border arrangements a “complete shambles.”
WATCH: Brexit countdown: 23 days until the end of the transition period
