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Brexit or Brino? 

01 February 2025 

by Tony Redondo 

Four years since Brexit officially took effect on 31 January 2021, the UK’s departure from the EU remains a  divisive topic. Some argue that what we have is closer to Brino (Brexit in Name Only) due to the continued  influence of EU regulations in certain areas. Others claim Brexit has given the UK more independence, at a  cost. 

Sovereignty and political independence from Brussels; new trade agreements, especially the  Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP); the UK no longer has to  pay into the EU budget saving an estimated £32-40 billion over the last four years; the UK introduced a  points-based system prioritizing skilled workers from around the world rather than giving automatic  preference to EU citizens; the UK was able to roll out vaccines faster than the EU by approving them  independently can be argued to have been Brexit wins. An increase in economic friction between the UK and  the EU; lost access to the EU Single Market and Customs Union; the Northern Ireland trade issues can be  argued to be Brexit losses.  

It comes down to perspective. Brexiteers argue that the UK still hasn’t fully taken advantage of Brexit, and  that regulatory divergence should be accelerated. Remainers say the current arrangement is worse than EU  membership, leading to economic decline. Pragmatists suggest the UK has partially left but still follows  many EU rules – a “Brino” outcome rather than full sovereignty. In reality, Brexit is still a work in progress, and  its long-term effects will take more time to unfold.  

Currency Exchange Rates Update 

The Pound finished January at a 3-week high against the Euro, but 0.87% down on the month. 

The Pound endured a volatile month against the US Dollar, falling 3.77% between 7 and 13 January before  recovering by 2.3% by month end to finish the month 0.75% down. 

On Thursday, 6 February, the BoE (Bank of England) make their next interest rate announcement with the  majority of analysts expecting them to announce a cut of 0.25% taking the headline rate to 4.5%.

What’s in the news? 

UK 

In total, the UK lost a net 10,800 millionaires in 2024, according to the NWW (New World Wealth) analytics  firm, more than any other country except China, a rise of 157% from 2023. Between 2017 and 2023, the UK  only lost 16,500 millionaires. NWW say the top cities that UK millionaires are moving to are Amsterdam, Dubai,  Geneva, Monaco, Paris, Singapore and Sydney whilst millionaires of retirement age preferthe Algarve, Florida,  the Italian Riviera and Malta. 

Chancellor Rachel Reeves has confirmed the government’s backing for a third runway at Heathrow in a speech  on economic growth last week. Any Heathrow third runway will cost tens of billions of pounds and is unlikely  to be completed before 2050. Determined to talk up the UK’s economy, Reeves pointed to the IMF  (International Monetary Fund) 2025 upgrade which forecasts the UK will have the fastest growth among major  European countries. 

A survey from Find Out Now put Reform top of the latest opinion poll at 26%, 1 point ahead of the  Conservatives and 4 points ahead of Labour.  

Good news 

The BoE reported the number of mortgages approved by the UK banking sector rose unexpectedly in  December, suggesting buyers are looking to beat the upcoming increases in stamp duty. Karim Haji, global  and UK head of financial services at KPMG said, “It’s surprising to see mortgage approvals rise in December  given rising mortgage rates and the challenging economic outlook.” Recent figures from Zoopla showed that  buyer demand was up 13% year-on-year in January thanks to the looming tax changes, its strongest start in  three years. Consumer credit also increased slightly compared to the previous month. 

Not so good news  

The CBI (Confederation of British Industry) warned of a “significant fall” in activity over the next three months amid rising fears of a recession as business chiefs warn they will be forced to ramp up job cuts as Rachel  Reeves’s tax raid hits growth. 

Accountants EY reported that one in five UK-listed companies issued a profit warning in 2024, the third highest  share of firms issuing warnings in 25 years, behind only the pandemic and the aftermath of the Dot-Com  Bubble. 

Insolvency Practitioners Begbies Traynor reported that the number of firms facing financial distress climbed  by 50% in the final quarter of last year. 

The BCC (British Chambers of Commerce) reported that fewer firms expanded headcount following the  Budget. 

Neso (National Energy System Operator) has warned that UK households face a £3bn bill to switch off turbines  during high winds as the power generated can overwhelm transmission lines and force Neso to intervene. 

The BRC (British Retail Consortium) shop price index showed that food prices surged at their fastest pace in  nine months in January and will “rise across the board” this year.

AstraZeneca has cancelled a planned £450m investment in a vaccine manufacturing plant, saying Labour  have failed to match the previous government’s offer of funding. The investment has been pulled just two days  after Rachel Reeves cited life sciences as a key UK strength, in a speech on her plans to kickstart economic  growth and make Britain appear attractive to international investors. 

Lloyds, Halifax and Bank of Scotland announced plans to close 136 branches between May 2025 and March  2026. 

WHSmith, Sainsbury’s and Iceland are set to close some of their stores across the country in February. The UK high street suffered 20 million retail theft incidents last year alone with £2.2bn of goods stolen.  USA 

In the Federal Reserve’s first policy meeting under the Trump presidency, Jerome Powell, the Fed chairman,  and his colleagues held interest rates at 4.5%, ending a run of three consecutive cuts which brought borrowing  costs down from a peak of 5.5%. This marks a moment of resistance to President Trump who last week told  delegates at the WEF (World Economic Forum) in Davos that he wants lower interest rates from the Fed and  other central banks around the world. However, the tone from both the statement and Powell’s press  conference made it clear that rate cuts aren’t on the horizon just yet. 

The US economy grew at a slightly weaker pace than expected at the end of 2024, but analysts say the underlying momentum remained strong. 

US inflation rose slightly but core prices were weaker than expected. This was only the second quarterly  acceleration since late 2022. 

US consumer confidence dropped in January to a four-month low thanks in part to renewed pessimism about  the labour market and the outlook for the broader economy.  

President Trump imposed a 25% tariff on goods coming into the US from its neighbours, Mexico and Canada and 10% on China, prompting fears of a global trade war and inflation crisis. Imports from China, Mexico and  Canada account for almost half of US goods trade, and analysts have warned that tariffs will be passed on to  consumers in the form of higher prices. 

The EU 

As expected, the ECB (European Central Bank) cut eurozone interest rates by 0.25% and warned of a weak  economy. It’s the ECBs fifth rate cut since June 2024. The reduction brings the ECB’s deposit facility, its key  rate, to 2.75%.  

Eurostat, the European Union’s statistics agency reported that the eurozone economy flatlined in the fourth  quarter of 2024.  

The German economy shrank more than expected in the fourth quarter of 2024 whilst inflation and retail sales  data shows a significant disinflationary trend is building in Europe’s largest economy. The employment data  in January also disappointed with the unemployment rate rising to 6.2%, the highest since 2021. 

Less than four weeks before Germany’s snap election on 23 February, Friedrich Merz, head of Germany’s  Christian Democratic Party has unveiled controversial plans for a sweeping crackdown on migrants as their  number living in Germany reached a new high last year. Immigration has become a hot topic in the country’s 

forthcoming elections. Merz who hopes to become the next chancellor, stunned his political opponents after  promising to table motions in parliament that would initiate a blanket ban on all illegal immigrants entering  Germany. Mr Merz’s proposals have been criticised strongly by his opponents, who accuse him of cosying up  to the Alternative for Germany (AfD) party. Ex Chancellor Angela Merkel unexpectedly weighed into Germany’s  election campaign today with a potentially devastating slap down of Merz, her conservative party’s leader. 

In France, President Emmanuel Macron’s approval ratings have plunged to their lowest since he took office in  2017. His latest faux pas, an ill-advised exchange with a TikTok influencer whom it later emerged was an  Islamic fundamentalist. 

Others 

Australia’s annual inflation rate fell to its lowest reading since the first quarter of 2021 increasing expectations  the RBA (Reserve Bank of Australia) will cut Australian interest rates on 18 February. 

The BoC (Bank of Canada) cut its key interest rate by 0.25% to 3% last week to mark 2% in rate cuts since June  2024 and announced the end of quantitative tightening and the restart of asset purchases in early March to  support liquidity and traction of economic activity. In response to the 25% tariff increases announced by  President Trump, Canada is preparing a counterstrike on a broad list of targets that could reach $105 billion  worth of US imports. 

Norway has plunged into political turmoil as its government collapsed amid a row over the EU after the euro sceptic Centre party left the ruling two-party coalition over adopting EU green energy laws. It is possible that  Labour could continue to govern until the Norwegian elections in September, although the party may struggle  to pass legislation due to lacking a parliamentary majority. 

Gold prices reached record highs on Friday with economists saying the fundamentals are firmly in place for  further outperformance. Gold has recorded a month-on-month gain of 5.17%. Gold is often seen as a hedge  against inflation which is expected to rise on the back of the proposed Trump trade tariff increases. 

Quote 

Nelson Mandela “May your choices reflect your hopes, not your fears”.

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