Prime Minister Theresa May’s latest speech on Brexit (2 Mar) may initially have calmed tensions within her party but it is receiving a lukewarm reaction from the European Union and currency traders.

Sterling traded lower in the aftermath of the address as May acknowledged that leaving the single market will reduce access for British companies to EU markets and failed to deliver resolution on the Irish border issue.

Capital Economics senior UK economist Paul Hollingsworth comments: ‘Theresa May’s speech rounded off a week of important Brexit developments.

‘Labour leader Jeremy Corbyn’s speech on Monday confirmed the party’s change in Brexit policy, to favour staying in “a” customs union.

‘This is important for two reasons; first, it puts some fresh air between Labour and the Conservatives on this issue. And second, it means there is now no clear majority in Parliament for leaving the customs union, and makes it more likely that the Government will be defeated on the Customs Bill.’

As we went to press the European Commission was poised to publish proposals for the EU’s future relationship with the UK.

Business leaders, desperate for clarity, will be looking for a transition agreement to be more or less in place in time for a meeting of the European Council on 22 March.

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