Macroeconomic statistics from the UK over the past two weeks, as well as the results of the meeting of the British regulator, clearly and distinctly showed that the economic situation in the country is deteriorating, the economy is slowing down and needs to be stimulated. The British regulator has not yet lowered its key rate, although, in our opinion, it already had sufficient reasons to do so. However, here you need to understand that Mark Carney and the rest of the monetary committee clearly wanted to save such a serious tool of influence on the British economy in the end, at the moment when the issue with Brexit will be resolved. Unfortunately, Brexit was once again postponed, and the state of the economy continued to deteriorate. That is why, without waiting for the exit from the European Union, the Bank of England can still take such a step as lowering the key rate by 0.25%. However, given the rather serious slowdown, we believe that even such measures will not be enough to stop the decline in growth rates.
We have repeatedly said that the British economy, together with the pound, has been in a fever for the past three years, but in fact, Brexit has not even taken place. We have repeatedly wondered, what will happen to the UK economy after leaving the EU, if the economic recession is so serious now? It is clear that the economies of many countries of the world are experiencing problems due to the slowdown in global economic growth caused by the China-US trade conflict. But in Britain's case, these global problems are also multiplied by the consequences of a "divorce" with the European Union.
The key question for Britain, if it does leave the EU, what will its foreign trade policy be like? In which sectors of the economy and trade will it draw closer to the European Union, America, or the rest of the world? How long will the UK not have any trade deals and negotiations with all trading partners continue? Indeed, now we see that negotiations on the China-US trade agreement have been going on for more than a year, and "things are still there." Currently, the United States remains the largest source of investment for the UK, as well as the largest trading partner. Given the friendship between Boris Johnson and Donald Trump, it is really not surprising that the UK wants to further build relations primarily with America. However, it is now absolutely obvious that America wants to conclude a trade deal with Britain if it does not have similar deals with the European Union. That is, in fact, London will have to choose with whom to trade fully and with whom not. In addition, you should be aware that if negotiations are conducted with the Trump administration, it is unlikely that the trade deal will be beneficial to the UK. First of all, it will be beneficial to Washington, or negotiations will continue for several years.
At the moment, it seems that countries are indeed moving towards each other, but in practice this trade agreement may never happen. Firstly, Donald Trump will have a year of presidency, elections will be held next November and the likelihood that Trump will remain at his post is extremely small. Secondly, parliamentary elections in the UK. If the Conservatives do not win a landslide victory, then they will not have enough votes to implement Brexit according to Johnson, which will delay the Brexit procedure for several months, or even years. It should also be understood that the longer Johnson cannot realize his exit from the EU, the greater the likelihood that he will leave his post ahead of schedule, just like Theresa May. Thus, from our point of view, the situation can radically change several more times, and the UK may even remain in the European Union if, for example, the Labour Party comes to power. Thus, we believe that in any case, the economic situation in Great Britain will deteriorate, and with it all macroeconomic indicators and the pound will fall. Even if Brexit is in a deal, after the initial bullish euphoria, the economic plan will again come to the fore, which will pull down the pound further.
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