UK and EU agree draft withdrawal deal
Posted by Andrew_Smith on Friday 16th of November 2018.
On Tuesday 13th November, the UK and the EU agreed a draft Brexit withdrawal deal.
• The deal covers the terms under which the UK will leave the EU: the financial settlement, residency rights, a backstop to avoid a hard border in Northern Ireland and the transition period;
• It does not establish the future trading relationship between the two sides, but it includes a statement outlining a trade deal;
• The UK cabinet approved the deal following a lengthy meeting on Wednesday 14th November;
• Mrs May must now bring the deal to parliament where she will need to secure the support of a majority of MPs;
• Parliamentary approval is, at present, far from assured and three cabinet ministers have already resigned. The date for the vote has not been confirmed;
• The EU will hold a special summit on Sunday 25th November to formalise the deal;
• UK government bonds rallied on the morning of Thursday 15th November and sterling weakened against the US dollar;
• Stocks deemed exposed to the domestic economy drifted lower, though broader measures of the UK stock market were little changed;
• UK assets could remain volatile ahead of the parliamentary vote.
A withdrawal agreement between the UK and the EU would be an important milestone but only the first step in a Brexit process which does not yet seem to have a definite end date. Both our Graphene and OMPS portfolios are globally diversified, so they remain well positioned to weather short-term volatility in UK assets. Within the OMPS portfolios, we reduced our underweight exposures to UK equities and sterling; unless we end up with an extreme outcome, clarity should prove supportive for domestic assets.