Brexit update: Making it legal - ING

James Knightley, Senior Economist at ING, notes that the key event this week is the publication of the Repeal Bill.

Key quotes:

"This will repeal the 1972 European Communities Act that made EU law effective in the UK while also converting all current EU legislation into UK law. This is important for Brexit for two reasons."

"Firstly, by bringing everything into UK law, this allows the British government to change or remove individual laws once Brexit negotiations are concluded."

"Secondly, without the Repeal Bill, EU law changes would technically apply to the UK even after the UK had officially left in March 2019. Given both the Conservative and Labour Parties have backed Brexit, this should pass when voted on in the Autumn, but the government’s reliance on the DUP for a majority means there could be amendments. A key one to look out for is if the government has to back down on its insistence that the European Courts of Justice should have no authority in the UK."

Economic worries build as raft of UK data points to slower second quarter growth

"Last Friday’s trade and manufacturing data were very poor, which is disappointing given that sterling’s plunge should have boosted the UK’s international competitiveness, especially with data suggesting that the global economy is entering a stronger period of growth."

"The latest data from Visa suggested that the last three months were the worst for consumer spending since 2013. This is a key reason why the disappointing growth we saw in the first quarter (0.2%), previously seen as a one off, is persisting."

"The latest wage data could have been worse, but at 2%, it is still lagging behind inflation. The next few months could see the annual rate fall back towards 1.5%, as firms contend against Brexit uncertainty, lower demand and rising cost bases from higher import prices. Given this backdrop, the hawkish rhetoric from some Bank of England officials seems perplexing. We see little prospect of an imminent BoE interest rate hike."