UK’s first post-Brexit trade deals with Australia and New Zealand begin
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK’s post-Brexit trade deals with Australia and New Zealand came into force at midnight, but the economic impact may be relatively slight.
Under the first new trade arrangements struck since the UK left the European Union, the tariffs on all UK goods exports to Australia and New Zealand have been removed. It also removes UK import tariffs on the majority of goods from Australia and New Zealand.
The government says services markets have been opened up – something welcomed by the Law Society, for example – and that red tape has also been slashed for digital trade and work visas.
Hailing the deal, business and trade secretary Kemi Badenoch said:
“Today is a historic moment as our first trade deals to be negotiated post-Brexit come into effect.
“Businesses up and down the country will now be able to reap the rewards of our status as an independent trading nation and seize new opportunities, driving economic growth, innovation and higher wages.”
However…. the impact assessment of the deals shows that, in the long run, they would lift UK gross domestic product (GDP) by around £2.3bn “in the long run”. That’s when compared to projected levels of GDP in 2035, in today’s prices, without the agreement.
Former Conservative environment secretary George Eustice admitted last November that the UK’s post-Brexit trade deal with Australia was “not actually a very good deal” for Britain.
Eustice said the UK had given away “far too much for far too little in return”, as it strove to agree it’s first “from scratch” agreement.
According to Eustice, the then-trade secretary Liz Truss placed the UK in a poor negotiating position, by setting an arbitrary target to conclude an agreement by the time of a G7 summit.
The deal could give younger Britons the opportunity to experience Australia, thanks to the expansion of the shared Youth Mobility and Working Holiday Maker visa schemes.
On July 1 2023, the age limit for UK applicants going to Australia will go from 30 to 35 years old, and from July 1 2024, Brits will be able to stay in Australia for up to three years without having to meet specified work requirements.
Also coming up today
We’ll find out if Europe’s cost of living squeeze eased this month, with new inflation data from France, Italy and Germany due. They’re all expected to show a fall, says Michael Hewson of CMC Markets, adding:
While this is expected to offer further encouragement that headline inflation in Europe is slowing, that isn’t the problem that is causing investors sleepless nights.
It’s the level of core inflation and for that we’ll have to wait until tomorrow and EU core CPI numbers for May, which aren’t expected to show much sign of slowing.
And in the UK, passengers are bracing for the first of three rail strikes this week as services in England come to a standstill amid a long-running dispute over pay and conditions.
Members of the drivers’ union Aslef will embark on a 24-hour strike on Wednesday. The union also plans to strike on Saturday.
On these days, no trains will run on networks including Avanti West Coast, Chiltern Railways, CrossCountry, East Midlands Railway, Great Northern, Southern, Southeastern, Thameslink and Northern.
The agenda
-
7.45am BST: French inflation report for May
-
8.55am BST: German unemployment report for May
-
10am BST: Italian inflation report for May
-
1pm BST: German inflation report for May
-
1.30pm BST: Canada’s Q1 GDP report
-
5pm BST: FTSE quarterly reshuffle announced
Key events
French inflation drops
Economic news: Inflation across France has fallen, and by more than expected.
French consumer prices rose by 5.1% year-on-year in May, according to new estimates from statistics body Insee. That’s down from 5.9% in the year to April.
Insee estimates that consumer prices dropped by 0.1% during March, after rising by 0.6% in April, helped by a slowdown in food prices and services costs.
This is a boost to squeezed households and also the European Central Bank, which has raised interest rates since last summer to fight inflation.
Insee says:
This decrease in inflation should result from a year-on-year slowdown in prices of energy, food, manufactured goods and services. The prices of tobacco should accelerate for the third consecutive month.
On an EU-harmonised basis, French inflation fell in May. The Harmonised Index of Consumer Prices is estimated to have risen by 6.0% this month, down from 6.9% in April. That’s the lowest level in a year, Bloomberg points out.
In the City, shares in gambling group Entain have dropped 3.3% after it told shareholders it expects to incure a “substantial financial penalty” as part of an investigation by Britain’s tax authority.
In a statement, Entain said it is negotiating a deferred prosecution agreement (DPA) with the with the Crown Prosecution Service (CPS) and is working towards resolving an investigation by HMRC.
HMRC is examining “potential corporate offending” by a former Turkish subsidiary of Entain, whose brands include Ladbrokes, Coral, Gala and partypoker.
Entain told the City:
The Company understands that the HMRC investigation, which is ongoing, includes a review of its former Turkish-facing business and acknowledges that historical misconduct involving former third party suppliers and former employees of the Group may have occurred.
The Group continues to co-operate fully with HMRC and the CPS.
Australian exports are hoping for a boost to business through the new free trade deal with the UK.
Australian producers of wine, beef, sheep meat, grains, rice, sugar and dairy products will benefit from duty-free quotas or tariff elimination.
Manufactured products such as auto parts and electrical equipment, as well as cosmetic products, will also receive a boost through the immediate elimination of UK tariffs.
But going the other way, British products including cars, whisky, confectionery, biscuits and cosmetics coming into Australia are expected to be cheaper.
The Australian assistant trade minister, Tim Ayres, said the deal would provide more opportunity for exporters, firms and workers.
He told ABC News Breakfast.
“They are one of our oldest friends of course, the United Kingdom, but this is a new chapter in the economic relationship and it means means new opportunities for Australian businesses.”
More here:
Farmer: It’s a bad deal; UK gave away too much
UK farmers are concerned that the British government gave too much away with the Australia/New Zealand trade deal, creating a bad precedent for the future.
Farmer David Barton, the chair of the National Farmers Union’s Livestock Board in the South West of the country, fears there will be a cumulative effect
Barton, who runs a beef suckler herd and grows cereals, told Radio 4’s Today Programme that the UK gave away “so much on this deal”.
He said:
It is such a bad deal because they gave so much away and any other trading nation will want exactly the same deal. So it’ll be the communicative effect over time that will be the problem.
So it may not be Australia on its own, but it will be other nations that want that deal.
The United States will certainly want that same deal of unlimited access to the UK markets. It is an important market, it’s a lucrative market.
Barton also warned of the risk of a ‘race to the bottom’ on food standards, given the differences between the UK and Australian agriculture, saying:
A race to the bottom for cheap food is not the way to sustain food security in the UK.
Plaid Cymru MP Ben Lake, the party’s agriculture spokesman in Westminster, fears the trade deals mark the “beginning of a worrying chapter” for Welsh farming.
Lake warned:
“As negotiations progress with Canada and Mexico, it is crucial that market protections are upheld.
“The UK Government’s evident failure to champion the interests of the Welsh economy in previous negotiations underlines the importance of according the devolved nations a role in future talks.”
Two handpicked consignments of UK goods including signed copies of the Beano are heading to trade ministers of Australian and New Zealand, to mark the new trade deal that came into effect at midnight.
International trade minister Nigel Huddleston was expected to tour DHL’s Southern Distribution Centre near Heathrow to see the two shipments.
British goods from across the country including Beano comics signed by the comic’s editor John Anderson, Penderyn single malt Welsh whisky, Brighton Gin, The Cambridge Satchel Co. bags and Fever-Tree mixers are among the items being sent.
The parcels will also include an England cricket top signed by James Anderson and Emma Lamb, a Wales rugby shirt signed by the men’s team and a tennis racket from Gray’s of Cambridge.
UK’s first post-Brexit trade deals with Australia and New Zealand begin
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK’s post-Brexit trade deals with Australia and New Zealand came into force at midnight, but the economic impact may be relatively slight.
Under the first new trade arrangements struck since the UK left the European Union, the tariffs on all UK goods exports to Australia and New Zealand have been removed. It also removes UK import tariffs on the majority of goods from Australia and New Zealand.
The government says services markets have been opened up – something welcomed by the Law Society, for example – and that red tape has also been slashed for digital trade and work visas.
Hailing the deal, business and trade secretary Kemi Badenoch said:
“Today is a historic moment as our first trade deals to be negotiated post-Brexit come into effect.
“Businesses up and down the country will now be able to reap the rewards of our status as an independent trading nation and seize new opportunities, driving economic growth, innovation and higher wages.”
However…. the impact assessment of the deals shows that, in the long run, they would lift UK gross domestic product (GDP) by around £2.3bn “in the long run”. That’s when compared to projected levels of GDP in 2035, in today’s prices, without the agreement.
Former Conservative environment secretary George Eustice admitted last November that the UK’s post-Brexit trade deal with Australia was “not actually a very good deal” for Britain.
Eustice said the UK had given away “far too much for far too little in return”, as it strove to agree it’s first “from scratch” agreement.
According to Eustice, the then-trade secretary Liz Truss placed the UK in a poor negotiating position, by setting an arbitrary target to conclude an agreement by the time of a G7 summit.
The deal could give younger Britons the opportunity to experience Australia, thanks to the expansion of the shared Youth Mobility and Working Holiday Maker visa schemes.
On July 1 2023, the age limit for UK applicants going to Australia will go from 30 to 35 years old, and from July 1 2024, Brits will be able to stay in Australia for up to three years without having to meet specified work requirements.
Also coming up today
We’ll find out if Europe’s cost of living squeeze eased this month, with new inflation data from France, Italy and Germany due. They’re all expected to show a fall, says Michael Hewson of CMC Markets, adding:
While this is expected to offer further encouragement that headline inflation in Europe is slowing, that isn’t the problem that is causing investors sleepless nights.
It’s the level of core inflation and for that we’ll have to wait until tomorrow and EU core CPI numbers for May, which aren’t expected to show much sign of slowing.
And in the UK, passengers are bracing for the first of three rail strikes this week as services in England come to a standstill amid a long-running dispute over pay and conditions.
Members of the drivers’ union Aslef will embark on a 24-hour strike on Wednesday. The union also plans to strike on Saturday.
On these days, no trains will run on networks including Avanti West Coast, Chiltern Railways, CrossCountry, East Midlands Railway, Great Northern, Southern, Southeastern, Thameslink and Northern.
The agenda
-
7.45am BST: French inflation report for May
-
8.55am BST: German unemployment report for May
-
10am BST: Italian inflation report for May
-
1pm BST: German inflation report for May
-
1.30pm BST: Canada’s Q1 GDP report
-
5pm BST: FTSE quarterly reshuffle announced
China’s factory activity falls faster than expected as recovery stumbles
The start of the UK’s trade deals with Australia and New Zealand comes as concerns grow over the health of the global economy.
Slowdown fears are swirling through markets after China’s factory activity contracted for the second month running.
Weakening demand hit Chinese manufacturers this month, suggesting activity is easing off – a worrying sign.
The official manufacturing purchasing managers’ index (PMI) fell to a five-month low of 48.8 in May, data from the National Bureau of Statistics (NBS) shows. That’s down from 49.2 in April, and below the 50-point mark that separates expansion from contraction. Economists had hoped for a rise to 49.4.
It’s the biggest drop in output since Beijing ended its zero-Covid policy in December.
The slowdown could prompt China’s government to consider stimulus policies to support the economy.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explains that China’s recovery is taking longer than hoped.
We shouldn’t expect China to post growth numbers comparable to levels pre-2020 because China under Xi Jinping’s rule is willing to avoid euphoric, and unhealthy growth.
This is why the government put in place severe crackdown measures on real estate, tech and education. That does not mean that China won’t get back in shape, but recovery will likely take longer, and growth will likely be more reasonable and a better reflection of the reality of the field.
The PMI data has helped to push Asia-Pacific stock markets lower. China’s CSI 300 has dropped 1%, while Japan’s Nikkei has lost 1.6% – its biggest daily decline since 5 April.
Australia’s S&P/ASX 200 is down 1.65%, reflecting the close economic links with China.
