Pound falls on breakdown in Brexit talksHeat Profit
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The pound dropped on Tuesday morning on uncertainty over Brexit talks as Theresa May fought to revive a deal to break a deadlock in EU divorce negotiations.
The UK prime minister will convene the cabinet later on Tuesday to explain the breakdown in the Brexit talks following opposition from the Democratic Unionist party.
She had hoped to be briefing ministers and the House of Commons about how she had secured an agreement in Brussels to move the talks on to the second phase, covering a trade deal and transition.
Instead, the prime minister and her team, including Julian Smith, the chief whip, will embark on an intense round of diplomacy to try to persuade the DUP, whose 10 MPs prop up Mrs May’s minority government, to drop their veto.
The pound dropped 0.7 per cent against the dollar early on Tuesday morning to $1.3390, the steepest fall since November 2, but then recovered partly to stand 0.4 per cent lower at $1.3420.
Against the euro, sterling is 0.3 per cent weaker with £0.8832 required to buy a unit of the shared currency.
Mrs May’s allies believe that Arlene Foster, the DUP leader, may have rejected the proposed deal covering the north-south border in Ireland after incomplete details of the agreement were leaked from Dublin on Monday morning.
They will argue that the “regulatory alignment” between Northern Ireland and the Republic proposed by Mrs May in Brussels was only a fallback position in the event that Britain and the EU were unable to agree a trade deal.
Mrs May has cleared her diary to return to Brussels on Wednesday after the weekly round of prime minister’s questions in an attempt to push the deal over the line ahead of a European Council meeting on December 14-15.
The pro-Brexit DUP objected to the deal, saying it would prevent Northern Ireland from leaving the EU “on the same terms” as the rest of the UK.
Dublin is insisting Brexit does not create a hard border with Northern Ireland, potentially undermining the 1998 peace accord that ended 30 years of violence in Northern Ireland.
The UK-EU draft referred to maintaining “regulatory alignment” between Northern Ireland and the Republic of Ireland after Brexit — a form of words that Leo Varadkar, Ireland’s prime minister, said met Dublin’s concerns about a hard border. If regulations in Belfast and Dublin both remain close to EU norms post-Brexit, new controls at Britain’s only land border are unlikely to be necessary.
Ruth Davidson, leader of the Scottish Conservatives, added to the pressure on Mrs May with a warning on Tuesday against special treatment for Northern Ireland.
Ms Davidson, who has in the past argued that the UK should remain in the EU single Market, said any “regulatory alignment” should be extended to the whole UK and that voters did not want the country to be “divided by different deals for different home nations”.
The DUP stance was backed by Brexit-supporting backbenchers in the Conservative party at a meeting of MPs at the Commons just as news was breaking on Monday that the deal had apparently fallen apart. They were addressed by Gavin Barwell, Mrs May’s chief of staff, and Steve Baker, a junior minister from the Brexit department.
“The DUP and the Conservative and Unionist party are at one in keeping the United Kingdom together, Gavin Barwell made it absolutely clear,” said Jacob Rees-Mogg, the Eurosceptic MP. “As he said, we are not going to trade on distinctions between Great Britain and Northern Ireland. That would be completely intolerable. We are the Conservative and Unionist party after all.”
Asked whether the government could propose different regulatory systems between the UK and Northern Ireland, Mr Rees-Mogg pointed out that the government did not have a majority in the Commons: “I don’t think that could possibly happen.”
He pointed the blame at Dublin, saying: “The Irish government leaked a document which isn’t the case, as far as I can tell. It has caused everybody to be concerned.”
Anna Soubry, one of the most vocal Europhile MPs, said the only solution was for the UK to stay in the customs union and single Market.
“Nobody now wants one part of our country to have a different set of rules to any other part of our country, on that Jacob and I are agreed.”
Ms Soubry questioned the lack of consultation by Mrs May: “The peculiarity seems that Arlene Foster was only involved towards the end of things as opposed to going on.”