UK doesn’t have a clue on Brexit

Financial analysts and investors trying to make sense of what the UK general election result means for the upcoming Brexit negotiations should take a step back and ignore what they read for some time. The British government is clueless on its approach to Europe.

  • By Sam Kerr
  • 13 Jun 2017
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A number of bank analyst reports since the election on June 8 have predicted how the hung parliament in the UK, which is likely to lead to a loose Conservative/DUP alliance, will affect the British negotiating stance towards Europe.

Some have predicted a “soft Brexit” where the UK retains so-called “access” to the single market and customs union, others a “hard Brexit” where the UK crashes out of the EU without any deal, and some even saying Brexit will not go ahead at all.

While analysts are trying to decipher political events in order to aid investors with their decision making, it is a fruitless task given the state of the UK at this moment.

Such analysis requires a logical actor and the country’s politics are more illogical than they have been for some time.

Market participants only have to look at the obfuscation taking place in the UK’s political media — supposedly the best-informed outlets of government strategy — to realise that the UK doesn’t have a plan for Brexit.

Unsurprisingly, the confusion is leading to mixed messages circulating in markets.

A UK ABS issuer who sells debt into Europe said at the beginning of this week that it was hoping that a hung parliament might lead to the UK staying in the EU single market, which would allow for business to continue relatively uninterrupted.

In the SSA world market participants are split over whether the election result could lead to a softer Brexit because of the Conservatives’ confidence and supply deal with Northern Ireland’s DUP, or a harder Brexit due to Tory right-wingers chipping away at the government until the UK crashes out without a deal.

There are other issues such as euro clearing, regulatory equivalence, financial passporting and more granular issues such as the status of British ABS issuers under the European Union’s simple transparent and standardised (STS) framework all linked to the final Brexit terms.

For there to be no tangible way to even guess what those terms will be is a severe indictment on the UK political class given the importance of financial services to the UK economy.

The chatter in the market shows that there really is no clear idea among investors on what the UK’s and EU’s relationship will be in the long term, and any company which operates or invests in Europe’s most important financial hub has no grounds on which to formulate a strategy beyond March 2019.

While the market will doubtless attempt to gain any crumbs of insight from government utterances, leaks and other Brexit-a-brack nonsense, it isn’t the basis for making informed decisions about long or medium-term strategies regarding the UK.

We all need to filter out the Brexit noise until something coherent and credible appears. At the moment analysts, investors and all capital markets participants should treat the UK as the basket case it currently is.

  • By Sam Kerr
  • 13 Jun 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 415,838.72 1590 9.03%
2 JPMorgan 379,647.36 1732 8.25%
3 Bank of America Merrill Lynch 359,324.90 1302 7.81%
4 Goldman Sachs 267,102.04 920 5.80%
5 Barclays 266,010.35 1070 5.78%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 45,073.36 191 6.67%
2 Deutsche Bank 37,312.62 138 5.52%
3 BNP Paribas 36,204.20 208 5.36%
4 JPMorgan 34,040.23 112 5.04%
5 Bank of America Merrill Lynch 32,958.96 107 4.88%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 22,398.41 104 8.67%
2 Morgan Stanley 19,092.40 102 7.39%
3 Citi 17,768.49 110 6.88%
4 UBS 17,693.89 71 6.85%
5 Goldman Sachs 17,256.05 98 6.68%