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Sectors that will be hit by a no-deal Brexit



A ‘no-deal’ exit from the Brexit transition period on January 1 will plunge the UK into a world of uncertainty as Boris Johnson pulls the plug on nearly 30 years of EU single market membership overnight. 

Here, a team of FT writers and specialists looks at consequences that are likely to flow from such a decision in nine sectors — from food to financial services and travel to medicines. 

The currency

The first impact — which is likely to precede the January 1, 2021 departure date — is a sharp fall in the value of the pound. At its most extreme, analysts predict it could lose more than a fifth of its current value against both the dollar and the euro if talks break down irrevocably. 

Opinions differ on how low sterling could go. Jordan Rochester, a currency strategist at Nomura in London, predicts the pound could sink to near parity with the dollar, while Paul Robson, head of G10 currency strategy at NatWest Markets, is more optimistic, betting the pound may fall “to the low $1.20s”.

Leaving without a deal would most likely give UK government bonds — known as gilts — a boost as investors seek a safe-haven, allowing the Treasury to borrow even more cheaply than it can currently. 

Eva Szalay and Tommy Stubbington

The City 

The financial services industry — the UK’s largest services export — is likely to weather the initial storm of a WTO-terms exit since it has been preparing for several years to leave on ‘no-deal’ terms.

The City has tried to prepare itself © REUTERS

Many companies have already set up legal offices in the UK and EU to cater to local customers and have begun moving people and business. Some more relocations would likely be triggered by a hard rupture.

But no deal still jeopardises agreements to manage cross-border activity, from trading shares and derivatives to sharing data. How much business will leave London in the longer term is unknown.

Philip Stafford

Ports and borders 

Under the government’s published ‘reasonable worst-case scenario’, up to 7,000 trucks could stack up on the motorways outside Dover and other Channel ports, with delays of up to two days. 

Dover could be hit by long queues © AP

The government is expected to do everything it can to prioritise traffic flows on goods coming from Europe, but UK officials fear that queues will still form as a result of “blowback” from the EU’s decision to bring in full border controls from January 1. 

How long this will take to settle down is not clear. The government has warned that queues could last from three to six months and has plans to reroute traffic and deploy large numbers of portable toilets to the roadsides to cater for stranded drivers.

Peter Foster


UK travellers to the EU will feel some of the most obvious consequences of no deal, although the restrictions caused by the Covid-19 measures could mask these changes initially.

Covid curbs could initially mask no-deal repercussions © FTgraphic/PA

Unless deals can be rapidly agreed with the EU, drivers will need to obtain an international driving permit and get a physical copy of their ‘green card’ proof of insurance document from their car insurers. UK citizens will face longer queues at passport control as they use lanes for non EU-EEA passengers. Controls will also be stricter on bringing pets into the EU. 

Brussels has announced unilateral steps to keep planes flying, but some problems may be experienced with flight connections. Travellers will also need to obtain travel insurance since the EHIC card that offered reciprocal care in EU countries will no longer be valid. The UK government was trying to negotiate a new reciprocal scheme, but it is not clear how lack of a deal will affect this. 

Jim Brunsden, Peter Foster

Food supplies

A no-deal Brexit would lead to immediate food price inflation and shortages of some — mostly perishable — products in the supermarkets, say industry analysts. 

Food price inflation would be immediate if tariffs are imposed © REUTERS

Tesco predicts that tariffs imposed on January 1 will cause price rises for most EU goods, pushing up consumers’ overall food bills by 3 to 5 per cent. The government disputes this. The price of butter, which is mainly imported, will rise, while speciality cheeses such as feta will cost as much as 55 per cent more, according to the London School of Economics. 

Analysts have stopped short of predicting overall food shortages, but imports of fresh produce will face delays caused by EU checks. The UK relies heavily on European fruit, lettuce and tomatoes in January, and risks these products being left to rot at the border. At the same time, a collapse in lamb exports caused by tariffs is likely to lead to a domestic surplus.

Judith Evans and Emiko Terazono

The car industry

Few industries are as exposed to cross-border trade as the auto industry. It expects prices to rise for consumers even if sterling drops, as cars and their components face up to 10 per cent tariffs after Brexit.

The car sector is particularly exposed to cross-border trade © Bloomberg

More than 1.5m cars are imported to the UK in a typical year, while even those cars built domestically contain huge numbers of parts from across Europe. The industry has also warned it will be more difficult for the UK to attract electric cars, with manufacturers in Germany and elsewhere diverting their limited stock to more profitable markets.

Longer term, industry analysts warn that consumer choice is likely to dwindle if the government sets up its own standards and certification regime that may make it too costly to bother registering some models in the UK. 

Peter Campbell

Research and education

Leaving the EU without a deal would end UK involvement in the €80bn Horizon programme of research funding and collaboration, which could dent the ability of universities to do groundbreaking research in areas including science and medicine. The UK government and research organisations have said they will try to negotiate to secure a future relationship with Horizon even in the event of a no-deal Brexit.

The €80bn Horizon research collaboration project could be hit © Getty Images

The future of the Erasmus student exchange programme is unclear whether or not a deal is struck. Existing students will still be able to participate, but the government has said it will fund a UK global student exchange programme to replace Erasmus if it decides to end British participation.

Bethan Staton

Medicines and pharmaceuticals

Pharma leaders in the UK and mainland Europe are unanimous that patients will face the risk of delays to obtaining vital medicines in the event of a no-deal Brexit. Without a “mutual recognition agreement” accepting the validity of each others’ safety testing regimes, pharmaceutical trade bodies on both sides of the Channel have warned of delays of up to six weeks in obtaining medicines for patients.

Delivery of medicines could face delays © Getty Images

In the short term, the UK government says it has taken contingency measures to avoid medicine shortages. The department of health has created a stockpile and instructed pharma companies to keep back six weeks’ worth of supply in the UK.

Sarah Neville

Northern Ireland 

The protocol to keep open Northern Ireland’s 310-mile land border with the Irish Republic will continue to apply in a no-deal scenario, protecting the Good Friday peace agreement that ended the conflict in the region. However, arrangements to create a trade border in the Irish Sea could come under pressure.

The Good Friday Agreement will be at risk © AP

Even with the temporary measures agreed with Brussels this week to reduce border disruption, the imposition of full WTO tariffs between the EU and the UK will put a strain on the agreement that all goods flowing into Northern Ireland from Great Britain must follow EU customs rules.

Some hardline Brexiters could also use a no-deal exit to renew demands to drop the protocol entirely, damaging the Good Friday Agreement and threatening trade talks with US president-elect Joe Biden, who strongly supports the peace pact.

A no-deal could also destabilise the region’s devolved executive which is led by the pro-Brexit Democratic Unionists and remain-supporting Sinn Féin Irish nationalists.

Arthur Beesley

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EU plans digital vaccine passports to boost travel




Brussels is to propose a personal electronic coronavirus vaccination certificate in an effort to boost travel around the EU once the bloc’s sluggish immunisation drive gathers pace.

Ursula von der Leyen, European Commission president, said on Monday the planned “Digital Green Pass” would provide proof of inoculation, test results of those not yet jabbed, and information on the holder’s recovery if they had previously had the disease.

“The Digital Green Pass should facilitate Europeans‘ lives,” von der Leyen wrote in a tweet on Monday. “The aim is to gradually enable them to move safely in the European Union or abroad — for work or tourism.”

The plan, expected to be outlined this month, is a response to a push by Greece and some other EU member states to introduce EU “vaccination passports” to help revive the region’s devastated travel industry and wider economy. 

But the commission’s proposed measures will be closely scrutinised over concerns including privacy, the chance that even inoculated people can spread Covid-19, and possible discrimination against those who have not had the opportunity to be immunised.

In an immediate sign of potential opposition, Sophie Wilmès, Belgium’s foreign minister, raised concerns about the plan. She said that while the idea of a standardised European digital document to gather the details outlined by von der Leyen was a good one, the decision to style it a “pass” was “confusing”. 

“For Belgium, there is no question of linking vaccination to the freedom of movement around Europe,” Wilmès wrote in a tweet. “Respect for the principle of non-discrimination is more fundamental than ever since vaccination is not compulsory and access to the vaccine is not yet generalised.”

The travel sector tentatively welcomed the news of Europe-wide vaccine certification as a way to rebuild confidence ahead of the crucial summer season, but warned that regular and rapid testing was a more efficient and immediate way to allow the industry to restart.

Fritz Joussen, chief executive of Tui, Europe’s largest tour operator, said “with a uniform EU certificate, politicians can now create an important basis for summer travel”. But he added that testing remained “the second important building block for safe holidays” while large numbers of Europeans awaited a jab.

Marco Corradino, chief executive of online travel agent, said he feared the infrastructure needed would not be ready in time for the summer season: “It will not work . . . at EU level because it is too complicated and would not be in place by June.”

He suggested that bilateral deals, such as the one agreed between Greece and Israel in February to allow vaccinated citizens to travel without the need to show a negative test result, had more potential.

Vaccine passport sceptics argue it would be unfair to restrict people’s travel rights simply because they are still waiting for their turn to be jabbed. 

Gloria Guevara, CEO of the World Travel and Tourism Council, said it was important not to discriminate against less advanced countries and younger travellers, or those who simply cannot or choose not to be vaccinated. “Future travel is about a combination of measures such as comprehensive testing, mask-wearing, enhanced health and hygiene protocols as well as digital passes for specific journeys,” she added.

A European Commission target to vaccinate 70 per cent of the bloc’s 446m residents by September means many people are likely to go through summer unimmunised.

While some countries around the world have long required visitors to be vaccinated against infectious diseases such as yellow fever, a crucial difference with coronavirus is that those inoculations are available to travellers on demand. 

Questions also remain about the risk of people who have already been vaccinated passing on coronavirus if they contract the disease.


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EU must prepare for ‘era of pandemics’, von der Leyen says




Europe must prepare its medical sector to cope with an “era of pandemics”, the European Commission president said, as she warned the bloc was still in its most difficult period for Covid-19 vaccine deliveries. 

Ursula von der Leyen told the Financial Times that the EU could not afford to sit still even once Covid-19 has been overcome, as she described her plans for a Europewide fast-reaction system designed to respond more quickly to emerging medical threats. 

“Europe is determined to enlarge its strength in vaccine production,” she said in a telephone interview. “It’s an era of pandemics we are entering. If you look at what has been happening over the past few years, I mean from HIV to Ebola to MERS to SARS, these were all epidemics which could be contained, but we should not think it is all over when we’ve overcome Covid-19. The risk is still there.” 

Von der Leyen last month unveiled plans for a biodefence preparedness plan called the HERA Incubator, which will combine researchers, biotech companies, manufacturers and public authorities to monitor emerging threats and work on adapting vaccines. This will become part of a Health Emergency Preparedness and Response Authority (HERA). 

The concept is an attempt to mirror some of the benefits conferred by America’s Biomedical Advanced Research and Development Authority, which is charged with the job of responding rapidly to new health threats.

“The US has a strong advantage by having BARDA . . . this is an infrastructure Europe did not have,” von der Leyen said. “But Europe has to build up to be prepared for whatever comes, and also for the next possible pandemics. This is the HERA incubator.” 

The EU remains within its “most difficult quarter without any question” for vaccine deliveries, she said, cautioning “many, many problems” could always occur within the production process.

Looking towards the second quarter, she pointed out that a second EU contract with BioNTech/Pfizer for their vaccine would kick in, alongside the new jab from Johnson & Johnson, which is expected to be authorised in March.

In an EU summit on Thursday, von der Leyen addressed vaccine production and the threat of virus mutations after a rocky start to the year, when she was hit by complaints from politicians in member states, including Germany, about supply shortfalls. 

Von der Leyen acknowledged to the European Parliament in early February that mistakes had been made in the EU’s vaccination effort, and the campaign remains behind those of the US and UK. Among the difficulties are continued production problems at AstraZeneca’s European facilities. 

Von der Leyen said she was sticking with the EU’s target for the delivery of 300m doses in the second quarter, saying the challenge will shift from vaccine production to national rollouts. As for AstraZeneca’s shipments, she said: “I need to see the proof of the pudding . . . It’s very good that they also delivered from the rest of the world, but they have to honour their contract and we want our fair share.”

Ursula Von der Leyen says she is sticking with the EU’s target for the delivery of 300m doses of the AstraZeneca vaccine in the second quarter © Remo Casilli/Reuters

The good news for the EU is its access to mRNA technology, which is used in the BioNTech/Pfizer vaccine and which scientists believe can be used to rapidly adapt to mutations, said von der Leyen. 

But she also supported French president Emmanuel Macron’s proposal to share up to 5 per cent of supplies to permit the vaccination of healthcare workers in developing countries.

“We all suffer from the fact that the scaling up was not and is not as rapid as we thought at the beginning. This has a general effect all over the world,” she said. “With production picking up I think we should never forget that only if everybody has access to vaccines will we overcome this virus.”

Von der Leyen added that the EU needed to be particularly concerned about developments in its immediate area. 

“The mutant story is worrying me the most,” she said. “When the virus is still raging in the neighbourhood, the probability that mutants will occur, that will come back, for example, to Europe, is only rising.”

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Did US hiring accelerate in February?




Did US hiring accelerate in February?

US hiring picked up markedly in February from the previous month, economists have forecast ahead of the monthly employment report that is due to be released on Friday.

After the country lost 227,000 jobs in December, hiring rebounded in January — albeit with a modest gain of 49,000 jobs — as the rise in coronavirus infections abated and vaccinations accelerated.

Economists polled by Bloomberg anticipate that the US will add 145,000 jobs in February, pushing the unemployment rate 1 percentage point to 5.3 per cent. If that forecast holds, it would mark the strongest pace of hiring since November.

The prospect of a resurgence was bolstered by data released last Thursday showing that filings for first-time jobless benefits fell to a three-month low in the week ending February 20.

The labour market stumbled in the final stretch of 2020 under the weight of the pandemic’s upswing in the autumn, which prompted tighter restrictions on businesses and social activity across the US.

The leisure and hospitality sector alone shed 597,000 jobs in December and January, according to labour department figures, whereas the January payroll gains were concentrated in government employment and professional and business services.

However, the outlook is brighter for the coming months, particularly with the expected passing of the Biden administration’s $1.9tn stimulus plan, which last week won the support of a large group of senior Wall Street executives, and further vaccination progress.

“US households appeared quite febrile at the end of 2020 as the cocktail of a worsening health situation, weakening employment and expiring fiscal aid weighed on private sector confidence and restrained mobility,” analysts at Oxford Economics said. “Fortunately, we see hope on all three fronts.” Matthew Rocco

Will eurozone inflation continue to rise?

Eurozone inflation hit its highest level since the start of the coronavirus pandemic in January, after five months of falling prices. On Tuesday the bloc’s statistics body will publish a preliminary estimate of February’s level, which is expected to continue the upward trend.

Many economists are predicting a steady rise over the spring on the back of higher energy costs, continuing supply chain disruptions that have raised costs for retailers and manufacturers, and the reversal of a VAT tax cut in Germany.

“For eurozone inflation, the only way is up,” said Carsten Brzeski, economist at ING, who forecast that headline consumer price inflation in the bloc would reach 1.3 per cent in February, from an 11-month high of 0.9 per cent in January.

Claus Vistesen, chief economist at Pantheon Macroeconomics, said a further increase in the price of oil — international benchmark Brent crude is up more than 30 per cent this year — could be the biggest driver of inflation in coming months.

A change in the inflation basket of goods and services is also at play. The 2021 basket reflects that people are consuming more food, where prices are rising, and less recreation activity, where prices are generally falling.

The European Central Bank has forecast that price growth will rise to 1.5 per cent in the fourth quarter this year before dipping to 1.2 per cent a year later — still under its target of below but close to 2 per cent.

“The ECB will not contemplate raising its policy rates until eurozone inflation expectations and wage inflation have increased substantially and persistently,” said Andrew Kenningham, economist at Capital Economics. “That is probably several years away.” Valentina Romei

Line chart of By date of forecast, % showing Economists revise up their eurozone inflation forecast for 2021

Can the copper bull run continue?

If, as the commodity market adage goes, the cure for high prices is high prices, where does that leave copper?

The world’s most important industrial metal, used in everything from electric vehicles to power cables, has risen more than 100 per cent from its pandemic lows in March last year.

Last week it hit a 10-year high above $9,500 a tonne before falling back as speculators piled in and a Chinese brokerage amassed a $1bn long position on the Shanghai Futures Exchange. 

A growing number of banks and brokers believe the bull run will continue and copper will go on to surpass its all-time high of $10,190 reached in February 2011. 

Citi and Goldman Sachs are both predicting big supply deficits for 2021 that would further drain already-low stockpiles of the metal, citing strong demand from China but also the rest of the world as the economic strain from the coronavirus pandemic eases. 

Unlike previous cycles, a dearth of “shovel-ready” copper projects means a flood of supply is not going to hit the market and send prices tumbling. If anything, even higher prices might be needed to spur production of low-grade ores in far-flung parts of the world where it is difficult to build a mine.

“It takes 15 years from discovery to navigating approvals to ultimately getting a development up and running in our industry,” Anglo American chief executive Mark Cutifani said. “So you can’t just wiggle your nose. It does need high prices, but it also needs time.” Neil Hume

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