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Brexit weekly digest 2 September

This week has seen a dramatic swing in the likelihood of a no deal Brexit, with PM Boris Johnson effecting an extended prorogue of Parliament. The possible effect of this will be that the Commons will not have enough time to pass legislation that will block a no deal exit.

Signs that Brexit concerns are starting to bite  emerged as businesses flagged a freeze on spending and delays in hiring workers as confidence plunges over the prospect of leaving the EU without a deal. Micro Focus, the FTSE 100 IT services company, said revenue would be lower than expected this year because business customers faced with an uncertain outlook were putting off spending. In a trading update Micro Focus said: “Weak sales execution has been compounded by a deteriorating macro environment, resulting in more conservatism and longer decision-making cycles within our customer base.”

Japan’s Toyota will not build cars at its British factory the day after Britain leaves the European Union as part of plans to handle any disruption from a potentially disorderly Brexit.  The autos sector, Britain’s biggest exporter of goods, has been one of the most vociferous opponents of a no-deal Brexit, warning that production would be hit with tariffs, border delays and new bureaucracy, ruining the viability of plants.

CNBC report that George Buckley of Nomura CNBC report that George Buckley of Nomura says the cable could still go as low as 1.05. He also says there are market watchers talking about the potential for the pound to reach parity with the U.S. dollar in the event of a no-deal Brexit.

The European Commission said on Thursday its Economic Sentiment Indicator (ESI) for Britain fell to 92.5 from 94.3  in July, its lowest level since September 2012. The drop came despite an uptick in morale in the struggling manufacturing sector, toward which the ESI is heavily weighted. British manufacturers, who account for about 10% of the country’s economy, are facing the possibility of a no-deal Brexit which is likely to hurt their supply chains, plus a slowdown in the global economy.

Business Secretary Andrea Leadsom unveiled a £10 million grant scheme for business organisations and trade associations to support businesses in preparing for Brexit ahead of 31 October 2019. The Business Readiness Fund is open to business organisations and trade associations throughout the UK and will support events, training and the production of advice packs to assist businesses in making sure they are fully prepared for a Brexit on 31 October 2019.

Shares in UK airlines and housebuilders fell on Wednesday after reports the government may seek to suspend parliament in a push to prevent politicians from derailing its plan to exit the European Union. Companies that are exposed to the domestic economy like housebuilders were knocked particularly hard. Taylor Wimpey (TW.L), Persimmon (PSN.L) and Barratt Developments (BDEV.L) were down between 2% and 2.3% at 0906 GMT, among the top decliners on the FTSE 100 .FTSE. British Airways-owner IAG (ICAG.L) fell 1.7% and easyJet dropped 3.2%.

Sarah Hewin, chief economist for Europe and Americas at Standard Chartered Bank, gives her take on what Brexit means for markets here.  

Amsterdam Reuters report that nearly 100 companies have relocated from Britain to the Netherlands  or set up offices there to be within the European Union due to the United Kingdom’s planned departure from the bloc, a Dutch government agency said on Monday. Another 325 companies worried about losing access to the European market are considering a move, the Netherlands Foreign Investment Agency said.

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