With less than two months before leaving the European Union, British lawmakers are back from summer recess, with their Brexit batteries recharged and ready to get back into the ring. But while British parliament regales everyone with a back-and-forth over whether this will be a no-deal Brexit under new Prime Minister Boris Johnson, the rest of the world is losing interest, with Bloomberg now reporting that as much as $75 billion of insurance business has fled the UK to seek safer grounds in European Union financial centers.
It’s not shocking news considering that many financial institutions in the UK had already opened up EU hubs to minimize disruption in the event of a no-deal Brexit, with EY reporting earlier this year that banks and other financial companies had already shifted at least $1 trillion worth of assets out of the country.
But the insurance business is a big one, too. The UK insurance industry is the biggest in the EU, and the third-largest globally. It contributes over $30 billion a year to the UK’s GDP.
And quietly on the sidelines of the Brexit exodus, China is laying its claims. This year already has registered 15 major acquisitions by Chinese companies valued at a total of $8 billion.
In other words, one country’s loss is another’s gain. Foreign investors have been snapping things up on the cheap.
According to the UK’s Office for National Statistics (ONS), the value of mergers and acquisitions of UK companies by overseas businesses was $22.3 billion in the three months from April to June. That’s more than double the amount recorded in the first three months of the year.
In the midst of all of this deal-making, the politicians continue to play things out in the usual fashion.
PM Johnson recently vowed to leave the EU on October 31stwith or without a deal in place, giving the ultimatum to MPs to back him. The country has already postponed two Brexit deadlines.
However, it seems that PM Johnson is facing new opposition as of earlier this week, when a group of lawmakers launched a bid to stop the country from quitting the Union by the deadline without a deal.
Opposition lawmakers, as well as some members of parliament from Johnson’s ruling Conservative Party, are poised to legislate over the coming days in a bid to stop the possibility of a no-deal Brexit. The BBC reported that the bill would force the prime minister to ask for Brexit to be delayed until January 31, 2020. But if the bill passes, Johnson may call a snap election for October 14.
Opponents of a no-deal Brexit also refused to rule out the prospect of holding a vote of no confidence in a bid to bring down Johnson's brand new government.
The high level of uncertainty caused the pound to fall Tuesday below $1.20 to its weakest level in three years.
A no-deal Brexit would likely involve the construction of barriers to Britain's trade with its biggest international partners.
The probability of that outcome, which most economists say would deal a severe blow to the British economy, was seen to have increased as Johnson designated a cabinet loaded with Brexit supporters. That, together with his hard line on rebooting negotiations with the EU, has lowered prospects for a last-minute deal.
The move will likely reduce UK economic output. That means that it’s not a great bet for global financiers. This could have a domino effect that would see the Bank of England cut interest rates, which in turn would lead to lower returns on UK financial investments.
By Josh Owens for conil.me
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