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5yrs ago Hedge Fund hfm.global Views: 246

Remaining part of a European customs union could be “appropriate” for the UK after Brexit, according to Toscafund economist Savvas Savouri, who supports leaving the European Union.

His comments come as the continent’s hedge funds closely monitor developments surrounding Brexit, with less than 50 days until the UK’s planned departure at the end of March.

Savouri said on Tuesday that the UK’s independent currency would offer flexibility “to separate itself from its Customs Union partners when needed.” Most members of the European customs union use the euro.

Describing sterling as a “skeleton key,” he said the pound could be moved lower when “a bout of improved competitiveness” was needed and moved higher if the economy overheats.

The comments represent a break with many leading Brexit supporters, who say leaving the customs union is essential for the UK to have an independent trade policy.

Leader of the opposition Jeremy Corbyn said he would support continued customs union membership, which is widely seen as a way of avoiding a short-term economic Brexit shock. Prime Minister Theresa May ruled out the plan.

In other recent industry comments on the subject, Mark Dowding, BlueBay Asset Management’s co-head of developed markets, said the Brexit outlook was bleak.

“Our perception from spending time around Westminster is pretty bleak and we continue to express worries related to the UK accidentally sleep-walking off the cliff edge of a ‘no deal’ Brexit at the end of March,” he said in a note.

“For now, we see ‘no deal’ risks as underpriced, though ultimately we continue to see a material possibility that Brexit will end up cancelled. Either way, it seems increasingly unlikely that we will know which way the chips will fall until well into March.”

Meanwhile, Anthony Clake of Marshall Wace, who donated money to the Brexit campaign, penned a piece for the Brexit Central website at the end of January, outlining his proposal to navigate the Brexit crisis, which has centred on unhappiness with the Northern Ireland “backstop”.

“It should not be forgotten that [May’s proposed] Withdrawal Agreement itself does allow for the backstop to be avoided until December 2022 via an alternative arrangement, namely via an extension of the transition period to act as ‘front-stop’, thereby eliminating the backstop requirement,” he wrote.

 

Toscafund’s Savouri calls Customs Union membership “appropriate” on EuroHedge.


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