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Northern Ireland Brexit deal offers reset of UK-EU relations

Today’s top stories

  • Higher than expected inflation of 9.3 per cent in Germany, 7.2 per cent in France and 6.1 per cent in Spain fuelled expectations that the European Central Bank would continue on its path of interest rate rises. Germany’s Bundesbank said it had suffered a €1bn hit from its bond holdings and warned future losses would wipe out its remaining financial buffers, thanks to the impact of higher rates.

  • Wall Street’s biggest financial businesses warned of the growing threat to profits from a backlash against sustainable investing led by high-profile Republicans attacking “woke capitalism”.

  • The UK government came under renewed scrutiny over its handling of the pandemic after a leaked dossier of WhatsApp messages involving former health secretary Matt Hancock raised new questions about the testing of people for Covid-19 in care homes.

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Good evening.

Is Brexit finally “done”?

More than 48 hours after the UK-EU deal on trading arrangements for Northern Ireland was announced, hopes are high that after four months of diplomacy, the issue can finally be put to bed, subject to one (potentially huge) caveat: gaining assent from the Democratic Unionist party.

The Windsor framework, as it is officially known, aims to smooth out problems with the existing Northern Ireland protocol, an attempt to reconcile the province’s status as part of the UK with the wish to avoid a hard border to the south with Ireland, an EU member state.

The amendments make it easier for goods including food and medicines to ship between Great Britain and Northern Ireland via a “green lane” with minimal checks. Items continuing into Ireland, and thus into the EU’s single market, would be subject to stricter controls in a “red lane”.

The framework will also give the Northern Ireland assembly — currently suspended after the DUP walked out over the operation of the protocol — a say over new EU rules.

The new deal, prime minister Rishi Sunak stressed, would leave Northern Ireland enjoying the best of both worlds, retaining its status in the UK as well as enjoying opportunities from the EU single market. The irony of a confirmed Brexiter extolling the benefits of EU membership was not lost on political leaders in other parts of the country such as Scotland, which (as did Northern Ireland) voted to remain.

Investors, however, say the successful implementation of the deal could undo some of the damage to sterling from the UK’s gloomy economic outlook. Warming relations between London and Brussels could also have beneficial spin-offs for the regulation of financial services and for Britain’s scientists, who may be able to re-enter the EU’s €96bn Horizon programme.

The single biggest beneficiary could be Sunak himself, with a successful deal changing the mood music around his premiership and helping his government overcome its recent loss of prestige. The overwhelmingly positive reaction also strengthens Sunak’s ability to push the deal through even if the DUP formally objects.

The FT editorial board characterises the agreement as a “significant moment for post-Brexit Britain”, which, with luck, could herald a sorely needed reset of relations with the EU and boost co-operation in other areas such as small-boat crossings in the Channel.

“Assuming it can be navigated safely through Westminster, it may at last begin to drain some of the venom of the Brexit years,” it concludes.

Need to know: UK and Europe economy

Bank of England governor Andrew Bailey pushed back against investors’ belief that many more interest rate rises were on the way to control inflation. Bailey said the BoE still had no presumption rates would rise from their current level of 4 per cent.

UK house prices had their biggest fall in a decade in the year to February as higher interest rates took effect, according to mortgage provider Nationwide.

UK grocery prices in February rose 17.1 per cent, the fastest rate in 15 years, adding £811 to the average household’s annual bill. Discount chain Lidl became the fifth out of the big six supermarket chains to ration salad vegetables, fuelling criticism of government policies as well as retailers’ strategies. Spain said the problem was driven by bad weather rather than Brexit.

New financial innovation hubs in cities across the UK and placement opportunities for students in fintech groups are part of government-backed plans to make the country a “technology and science superpower”.

Ten EU countries have formed a nuclear energy alliance despite opposition from Germany and Austria to having atomic power considered as a climate-friendly source.

Turkey’s economy grew at a rate of 5.6 per cent in 2022, much higher than in G7 economies and emerging markets, highlighting President Recep Tayyip Erdoğan’s strategy of prioritising growth over fighting inflation. The country intends to go ahead with its general election on May 14 despite the devastation caused by the recent earthquake.

Need to know: Global economy

There are clear signs that China has bounced back following the ending of its pandemic restrictions as new PMI data showed factory activity in February expanded at its fastest rate in more than a decade. Factory owners are on a global charm offensive to win back business. Hong Kong finally ditched compulsory mask wearing.

New government rules mean US chipmakers will be barred from expanding in China for 10 years if they want to benefit from the $39bn fund to build a leading-edge domestic semiconductor industry.

A still-tight labour market in the US has led a growing number of employers to illegally use teenagers to fill graveyard shifts, with violations of child labour rules rising 37 per cent during 2022.

Bola Tinubu, the former governor and self-styled godfather of Lagos, was declared the winner of Nigeria’s closest presidential election since its return to democracy in 1999. Opposition parties are disputing the result and have called for a rerun.

Our Big Read examines whether higher wages will keep global inflation at elevated levels. The head of Man Group, one of the world’s biggest hedge funds, told the FT it would “take a lot of years before inflation is put to bed again. We’re in a different paradigm.”

Need to know: business

Jaguar Land Rover owner Tata Motors is demanding £500mn from the UK government to set up a new battery factory, a decision that could be “pivotal” for the future of the UK car industry and the transition to electric vehicles. LG Energy Solution, South Korea’s biggest battery company, is betting that climate-friendly tax breaks will lead to the US leapfrogging China as the world’s biggest EV battery market.

The EU is focusing its long-running antitrust probe against Apple on the way it restricts apps such as Spotify from telling users about subscription options. EU commissioner Thierry Breton said Big Tech needed a “radical shift” in its business models as he set out a 12-week consultation on telecoms infrastructure.

There were more signs of UK consumers tightening their belts as online retailer Ocado reported “awful” results and a £500mn loss. US retail giant Target also warned of pressures on consumer spending.

Large global companies are also feeling the pinch: many are demanding writedowns on bills or payment delays on their legal bills.

Just Eat Takeaway was hit by a €5bn writedown on the mergers that created Europe’s biggest food delivery group, revealing the cost of buying rivals at the top of the sector’s lockdown-driven boom.

The World of Work

There is much disagreement about what it is causing ever more sick Britons to drop out of the workforce. Columnist Sarah O’Connor offers a practical solution: employ occupational therapists, and lots of them.

The UK desperately needs to tackle its shortage of skills and workers, says the FT editorial board. With slowing population growth ahead, a revamped education and training system could address low productivity and workplace inactivity, it argued.

Some good news

Much of the world’s biodiversity is in decline, highlighted by increasing numbers of animal species being listed as threatened. Reason then to celebrate environmental legislation in Australia that has helped 29 to recover, including the growling grass frog, the humpback whale and the yellow-footed rock-wallaby.

Jumping for joy: Humpback whale and calf off Cape Byron in Australia. © AP


Source: Economy - ft.com

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