1

The IMF downgrades global growth again for 2019, slowest pace since the financial crisis

21st October 2019

Introduction: the IMF’s latest global forecast…

The IMF has, yet again, downgraded its growth projections.1-3 Global growth was reduced to 3.0% for 2019 (3.2% in July), the slowest pace since the global financial crisis, tentatively (and “precariously”) rising to 3.4% in 2020 (3.5% in July). The IMF explained:4

• The global economy was in a synchronized slowdown, whilst growth continued to be weakened by rising trade barriers and increasing geopolitical tensions. The IMF estimated that the US-China trade tensions would cumulatively reduce the level of global GDP by 0.8% by 2020.

• Specifically, weakness was driven by a sharp deterioration in manufacturing activity (especially in the automobile industry) and global trade. Trade volume growth in 2019H1 had been the weakest since 2012.

• Moreover, the IMF emphasised the considerable downside risks to growth. Heightened trade and geopolitical tensions, including Brexit-related risks, could further disrupt economic activity, and “derail an already fragile recovery in emerging market economies and the euro area”.

The IMF’s pessimism, not least about the prospects for global trade, was echoed by a recent report by the WTO (1 October).5 The WTO explained that “escalating trade tensions and a slowing global economy” had resulted in a sharp downgrade to their forecasts for trade growth in 2019 and 2020. World merchandise trade volumes were expected to rise by only 1.2% in 2019, substantially slower than the 2.6% growth forecast in April. The projected increase in 2020 was 2.7% (3.0% in April). As the IMF, the WTO also cautioned that downside risks remained high and that the 2020 projection depended on a return to more normal trade relations. Whilst on the topic of trade tensions (and higher tariffs), the WTO recently ruled that the US could raise tariffs against EU products as part of the US-EU dispute over illegal EU subsidies for Airbus.

PERSPECTIVES

By Ruth Lea, Economic Adviser to the Arbuthnot Banking Group

Ruth Lea Economic Adviser Arbuthnot Banking Group ruthlea@arbuthnot.co.uk 07800 608 674

2

The US announced that tariffs would be set at 10% for aircraft and 25% on agricultural and other items.6 The WTO’s ruling, on whether the EU can impose extra retaliatory tariffs against the US for US state aid given to Boeing, was awaited (expected in 2020).

…and individual economies…

Charts 1a and 1b (and annex table 1) show the key data for the IMF’s country-specific GDP projections. The US is still expected to perform fairly well this year and next (with a modest downgrade to 2019’s growth offset by a modest upgrade to 2020’s growth). Moreover, by way of background, it should be noted that the US economy is effectively running at full employment. Recent US Labor Department figures showed that the unemployment rate fell to 3.5% in September, a 50-year low (lowest since May 1969), compared with 3.7% in August. Non-farm payrolls increased a fairly solid 136,000 jobs in September (though slightly below expectations), whilst the August data were revised up to 168,000 jobs created instead of the previously reported 130,000.7 Growth in the Eurozone, however, continues to disappoint, with the IMF now expecting 1.2% in 2019 (1.3% in July), before picking up to 1.4% in 2020 (1.6% in July). Germany’s growth projections, in particular, were downgraded to 0.5% for 2019 (0.7% in July) and to 1.2% for 2020 (1.7% in July). Germany’s economy is especially vulnerable to weakening international trade in manufactures. There were marginal downgrades to France’s economic performance, whilst Italy is now expected to show no growth this year and a weak 0.5% next. The IMF marginally downgraded its forecast for the UK to 1.2% for 2019 (compared with 1.3% in July, but the same as in April), but left 1.4% for 2020. The recent Spending Round 2019 was expected to support growth in 2020.8 The forecast assumed “an orderly Brexit followed by a gradual transition to the new regime”. Granted the projections for the UK are not especially buoyant, but they are very marginally “better” than for France and notably “better” than for Germany and Italy. Japan’s growth was expected to remain subdued. China’s growth was expected to slow to 6.1% in 2019 (6.2% in July) and to 5.8% in 2020 (6.0% in April). The IMF noted that “… the effects of escalating tariffs and weakening external demand have exacerbated the slowdown associated with needed regulatory strengthening to rein in the accumulation of debt”. The recently released GDP data for 2019Q3 confirmed the Chinese economy was indeed slowing.9 Growth was a marginally less-than-expected 6.0% (YOY) in the quarter, marking a further loss of momentum and reflecting softer domestic demand and the negative effects of the US-China “trade war”.

3

Chart 1a IMF GDP growth forecasts (%), October 2019, selected economies, 2018-2020

Chart 1b IMF GDP growth forecasts (%), April, July, October 2019, selected economies, year 2019

Sources: (i) IMF, World Economic Outlook, April 2019 forecast, (ii) IMF, World Economic Outlook, July 2019 update, (iii) IMF, World Economic Outlook, October 2019 forecast “Global manufacturing downturn, rising trade barriers”, 15 October 2019. There are four forecasts a year: Jan update, April forecast, July update, October forecast.

3.6

2.9

1.91.5

1.7

0.9 0.8

1.4

6.6

3

2.4

1.2

0.5

1.2

0

0.91.2

6.1

3.4

2.1

1.41.2 1.3

0.5 0.5

1.4

5.8

0

1

2

3

4

5

6

7

2018 2019 2020

3.3

2.3

1.3

0.8

1.3

0.1

11.2

6.3

3.2

2.6

1.3

0.7

1.3

0.1

0.91.3

6.2

3

2.4

1.2

0.5

1.2

0

0.91.2

6.1

0

1

2

3

4

5

6

7

World US Eurozone Germany France Italy Japan UK China

2019 (Apr 2019) 2019 (Jul 2019) 2019 (Oct 2019)

4

…and the IMF’s stability financial report made for sober reading

In addition to their economic forecasts, the IMF’s latest Global Financial Stability Report (GFSR) was also released in October. The GFSR identified the current key vulnerabilities in the global financial system as “…the rise in corporate debt burdens, increasing holdings of riskier and more illiquid assets by institutional investors, and growing reliance on external borrowing by emerging and frontier market economies”.10-11 The IMF explained:

• Since the last edition of the GFSR in April, global financial markets had been buffeted by trade tensions and significant policy uncertainty. A deterioration in business sentiment, weakening economic activity, and intensifying downside risks to the outlook had prompted central banks across the globe, including the ECB and the Federal Reserve, to ease policy. About 70% of economies, weighted by GDP, had adopted a more accommodative monetary stance.

• The result was even easier financial conditions but also a continued build-up of financial vulnerabilities, particularly in the corporate sector and among non-bank financial institutions. Corporations in eight major economies were taking on more debt, and their ability to service it was weakening.

• The IMF looked at the potential impact of a material economic slowdown (half as severe as the global financial crisis of 2007-08). They concluded that it was “sobering”. Debt owed by firms unable to cover interest expenses with earnings (“corporate debt-at-risk), could rise to $19tn. That is almost 40% of total corporate debt in the economies studied, which included the United States, China, and some European economies, including the UK.

GDP grew 0.3% in the three months to August…

There have been several UK economic indicators released over the past fortnight (see annex table 2 for the economic data tracker).12 Perhaps the most significant data related to August’s GDP data. GDP slipped 0.1% (MOM) in August, after increasing 0.4% (MOM, revised up) in July, and was 1.1% (YOY) higher.13-15 The dominant services sector was, perhaps disappointingly, flat after a reasonable 0.3% increase in July.16 Construction output rose by 0.2% (MOM), after July’s 1.8% growth, but production fell back 0.6% in the month.17-18 The monthly growth rates for gross domestic product (GDP) are volatile and therefore should be used with caution and alongside other measures such as the three-month growth rate when looking for indicators of the longer-term trend of the economy. And the ONS reported that GDP in the three months to August rose a reasonable, if unspectacular, 0.3% (QOQ), to be 1.2% higher YOY. Services were up a fair 0.4% (QOQ), whilst construction edged up 0.1%. But production fell by 0.4%, dragged down by a volatile manufacturing sector. A key question is, of course, how GDP performed overall in 2019Q3. The ONS’s first estimates will be released on 11 November, a few days after the date announced for the Budget (6 November).19 The OBR will, therefore, probably have to part-forecast an estimate for the quarter for their Budget forecasts. As can be seen from chart 2, the OBR projected a 0.3% (QOQ) rise for 2019Q3 in March 2019. Markit recently estimated that GDP could fall 0.1% (QOQ) in 2019Q3, which seems

5

far too pessimistic, whilst the Bank estimated a rise of 0.2% in September.20-21 NIESR was even more optimistic, probably too optimistic, than the Bank and projected 0.5% (QOQ) growth (chart 2).22 One important indicator of activity, retail sales, has already been released for 2019Q3.23 Retail sales rose a reasonable 0.6% (QOQ) in 2019Q3 to be 3.1% higher (YOY). The ONS commented that all sectors within non-food stores had reported declines except “other stores”. Very approximately retail sales comprise about 20% of GDP (in 2019Q2 sales were around £110bn, whilst GDP was around £550bn, current prices), so a 0.6% quarterly increase would contribute 0.12% to GDP growth. There should also be growth from the other components of household consumption, government consumption and the trade balance (see below) so, all in all, quarterly growth of around 0.3% should be expected for GDP in 2019Q3.

Chart 2 GDP data (QOQ, %), OBR forecasts for March 2019, ONS, NIESR

Sources: (i) OBR, Economic and fiscal outlook, March 2019; (ii) ONS, “GDP monthly estimate, UK: August 2019”, 10 October 2019; (iii) NIESR, “Monthly GDP tracker - GDP data better than expected”, 10 October 2019.

…and the trade balance “improved” in the three months to August

The trade balance is, of course, also an indicator of activity, on the expenditure measure of GDP. Exports contribute to GDP, whilst imports detract. The total trade (goods and services) balance showed a very marked improvement in the three months to August (deficit £4.6bn), compared with the previous three months (deficit £17.6bn).24 But these data were probably still being distorted by high imports ahead of the original Brexit Day (29 March) as well as large movements in unspecified goods (including non-monetary gold (NMG)). Nevertheless, taking account of the distortions there did seem to some underlying improvement in the latest three months (to August), which will support GDP growth. Removing the effect of inflation, the total trade deficit narrowed £12.9bn to £4.3bn in the three months to August, acting as a boost to constant price GDP growth (in expenditure terms), other things being equal.25

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4

OBR, March 2019 ONS NIESR

6

The labour market remains robust, if slowing

The labour market continues to show laudable resilience, even though there are signs of some slowdown.26-27 Employment fell by 56,000 (QOQ) in the three months to August to 32.69mn, but was 282,000 higher (YOY). The annual (YOY) increase was mainly as a result of more people working full-time (up 263,000). Unemployment was 1.31mn in the three months to August, (unexpectedly) 22,000 higher than the previous three months but still 49,000 down YOY. The key statistic of the unemployment rate was 3.9%, compared with 4.0% a year earlier, but 0.1 percentage points higher than the previous quarter. Even with this marginal increase in the quarter, the unemployment rate has not been lower since December-February 1975. Meanwhile, job vacancies remain very strong, though they have eased since the beginning of 2019. There were 813,000 job vacancies in the three months to September 2019 (sic), still at near-record levels since comparable records began in 2001. The number was, however, down 11,000 (QOQ) and 33,000 lower (YOY). It can reasonably be argued the economy is around full employment. The rate of pay growth has been trending firmer since mid-2017 and the latest data were reasonably consistent with this “trend”. In the three months to August 2019, both total pay (including bonuses) and regular pay (excluding bonuses) were 3.8% higher YOY. In real terms (after adjusting for inflation), annual growth in total pay was estimated to be 1.9% and annual growth in regular pay was estimated to be 2.0%. This significant growth in real earnings, coupled with high employment, should support growth, albeit slowing, going forward.

Prices inflation is well contained…

Both the CPIH and the CPI inflation rates were unchanged at 1.7%, below the Bank’s 2% target, in September.28 Moreover, inflationary pressures in the pipeline seem modest. The inflation rate for the output PPI (goods leaving the factory gate) was 1.2% (YOY) in September (down from August’s 1.7%).29 And the inflation rate for the input PPI (materials and fuels used in the manufacturing process) fell to minus 2.8% (YOY) in September, compared with minus 0.9% in August. The ONS commented that crude oil provided the largest downward contribution to the annual rate of input inflation. Crude oil prices were 14.6% lower YOY.

…whilst house price inflation remains weak

According to official data, UK average house price inflation in August was 1.3% (YOY), remaining weak even though it was higher than July’s 0.8%.30 The ONS commented that house price inflation remained “…below the increases seen this time last year. Over the past three years, there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England. The lowest annual growth was in London, where prices fell by 1.4% (YOY), followed by the South East where prices fell by 0.6% (YOY).”

7

Political update: non-Brexit

The 2019 Queen’s Speech was duly given on 14 October.31 Significantly, the Queen’s opening remarks were “My Government’s priority has always been to secure the United Kingdom’s departure from the European Union on 31st October. My Government intends to work towards a new partnership with the European Union, based on free trade and friendly cooperation.”32 There were 22 bills, in addition to other measures.33 The proposals are listed in annex table 3. Other political events have included:

• The Government announced the Budget would be on 6 November, as referred to above.34 The last Budget was on 29 October 2018.

• Heidi Allen, who resigned as a Conservative MP in February 2019, joined the Liberal Democrats on 7 October, giving the LibDems 19 MPs.35

• Louise Ellman MP resigned from the Labour Party on 16 October.36

Brexit update: the revised “deal”…

The Government and the European Commission agreed to a new “deal” on 17 October 2019 (see annex table 4 for the relevant documentation). The main features of the revised Withdrawal Agreement (legally binding) and the revised Political Declaration (not legally binding) are shown in annex tables 5a and 5b respectively.37-38

Concerning the revised Withdrawal Agreement (WA, October 2019) much of the original Withdrawal Agreement (November 2018) was unchanged, including:39-40

• The “standstill” transition period until December 2020, with the option of extension up to December 2022 (which has to be agreed by both the UK and the EU). During the transition period, when the future relationship is to be negotiated, common rules will remain in place with EU law continuing to apply in the UK, but the UK will lose its membership of EU institutions.

• The financial commitments remained in place, although the extension to Article 50 means that the total payment may be in the region of £33bn, rather than the oft-quoted “£39bn” figure.

• The agreements on citizens’ rights were also unchanged. There have, however, been crucial revisions to the Protocol on Ireland/Northern Ireland within the Withdrawal Agreement:41

• Customs: the highly contentious “backstop” (see annex table 5a) has been replaced with a “frontstop” special arrangement for Northern Ireland, which will come into force immediately after the end of the transition period.42 This ensures that Northern Ireland will leave the EU’s Customs Union along with the rest of the UK (meaning the UK will be able to strike trade deals with other countries in the future), but the UK will have to enforce EU Customs procedures at points of entry into NI. In other words, even though there will be a legal customs border between NI and the Irish Republic, in practice the customs border will be between Great Britain and the island of Ireland, with goods being checked at “points of entry” in NI. Duty will not automatically have to be paid on goods entering NI from GB. But where something is “at risk” of then being transported into the Irish Republic (which remains part of the EU customs union, of course), duty will be paid. A joint committee

8

made up of UK and EU representatives will decide what goods are considered “at risk”. If duty has been paid on goods that do not end up being sent on from NI into the EU, the UK would be responsible for whether to refund the duty in these circumstances.

• Regulations: NI will also follow the EU’s regulatory framework in certain respects, meaning there will be no “regulatory” border with the Irish Republic. Specifically, concerning the regulation of goods, NI would keep to the rules of the EU’s single market, rather than UK rules. This will remove the need for product standard and safety checks on goods at the border between NI and the Irish Republic, because both will be part of an “all-island regulatory zone”. But it will add to the checks between GB (outside the EU’s single market rules) and NI.

• VAT: the new agreement says that EU law VAT will apply in NI, but only on goods, not services. This also means NI could have different VAT rates from GB, which would not normally be allowed under EU law. For example, if the UK (GB) decided to reduce the VAT on household fuel to zero, NI would still have to keep it at 5%, which is the EU minimum. It also means that NI may get the same VAT rates on certain goods as the Irish Republic, to stop there being “an unfair advantage” on either side of the border.

• Consent: the special arrangements will be subject to the consent of the people of NI and include an exit mechanism, with the devolved Assembly being granted the right to opt out of the Northern Ireland-specific procedures on the basis of a majority vote.

• Finally, of great relevance to the future UK-EU relationship, the WA no longer includes a customs union as the default basis for the future UK-EU relationship, which was included under the backstop. The potential future UK-EU relationship is only addressed in the non-binding Political Declaration, which points to a free trade agreement rather than a customs union (see below). Similarly, the “level playing field obligations” that accompanied the proposed UK-EU customs union under the backstop have been removed from the revised WA and moved to the Political Declaration as an issue for further negotiation in the context of the future UK-EU relationship (see below).43

Briefly, the main changes to the Political Declaration on the future relationship are as follows:44-45

• The main change relates to the future EU-UK economic relationship where the current UK government has opted for a model based on a Free Trade Agreement (FTA), rather than a customs union (the default under the backstop, see above). A high-level meeting will be convened in June 2020 to assess progress towards such a deal, before the end of the post-Brexit transition period.

• There are still references to commitments on a “level playing field” to ensure “open and fair competition”. But the precise nature of commitments will remain open to negotiation in the transition period, rather than being circumscribed by obligations under the backstop (now removed, see above).

…and the Commons debate

The Commons convened on Saturday 19 October to debate the main government motion on whether or not to back the revised Brexit deal. But the expected vote on the deal was deferred after the passing of Oliver Letwin’s amendment to the motion on the Brexit deal, which started that parliamentary support for the government’s deal would be withheld until legislation implementing the agreement in UK law had been passed.46 This

9

would, so went the argument, force the PM to request a Brexit extension under the “Benn Act” (EU (Withdrawal) (No. 2) Act 2019). Under this Act, 19 October was the deadline for the PM to send letter to EU requesting a Brexit extension to 31 January 2020, if the Commons had failed to agree to a “deal” (or, alternatively, failed to agree to a “no deal” Brexit) by this date (the EU may then agree to 31 January, or choose its own date, or refuse an extension).47 The amendment was passed by 322/306, a majority of 16. Subsequently, the Prime Minister authorised the sending of three letters to the EU: an unsigned photocopy of the Brexit extension request as outlined by the “Benn Act”, an explanatory note from the UK’s ambassador to the EU and a personal, signed, letter saying why he did not want a delay.48

Other Brexit developments

In addition, there were several reports/announcements over the past fortnight worth noting: • The Government released its updated “no deal readiness” report on 8 October.49 The report

included details of the Government’s work to ensure citizens and businesses were ready for Brexit on 31 October in the event of “no deal”. The report also set out the preparation underway to ensure that goods continue to flow smoothly across the UK and EU border after Brexit, with measures in place and information given to traders, businesses and hauliers on what they need to do to prepare before 31 October.

• The government also published an update to the UK’s temporary tariff regime in the event of a “no deal” Brexit on 8 October 2019.50

• The Bank’s Financial Policy Committee released its latest report on 9 October.51 It concluded that “…the core of the UK financial system, including banks, broker dealers and insurance companies, is resilient to, and prepared for, the wide range of risks it could face, including a worst case disorderly Brexit.” But it also noted that “…entrenched Brexit uncertainties, particularly in an environment of weaker global growth, continue to weigh on economic activity in the UK. Brexit uncertainty is weighing on business investment, the prices of UK assets and flows of foreign capital into the UK, most notably in commercial property and leveraged lending markets. Although actions by businesses and authorities have resulted in some improvement in the preparedness of the UK economy for a no-deal Brexit, material risks of economic disruption remain”.

In addition, the think tank Open Europe released a report on the impact of a “no deal” Brexit, concluding that the consequences were “manageable but material”.52 The UK and the EU had already put a number of mitigation measures for “no deal” in place. Though these were unilateral measures rather than “mini-deals”, they did eliminate some of the worst potential consequences of No Deal on day one (such as disruption to flights). They also noted that, whilst the UK Government had done a lot of preparation, managing “no deal” also relied on the level of business preparedness – and there were other issues beyond the control of either, which relied on actions taken by the EU. More specifically, Open Europe commented that the impact of “no deal” on the UK economy would be uneven:

• Sectors which faced high tariffs, were heavily regulated, or were particularly reliant on trade with the EU, were likely to experience more disruption than those which did not.

• Goods, particularly agriculture, were generally more exposed than services – the UK’s

10

trade in the latter was much less EU-orientated. Moreover, the difference between a “deal” and “no deal” was far greater for goods than for services.

• UK exporters were likely to experience more disruption than UK importers, due to asymmetry in the tariffs, checks and controls the UK and EU were set to introduce.

References

1. IMF, World Economic Outlook, “Global manufacturing downturn, rising trade barriers”, 15 October 2019.

2. Kristalina Georgieva assumed the role of Managing Director on 1 October 2019. 3. Ruth Lea, “The slowing global economy: the Central Banks respond”, Arbuthnot Banking

Group, 3 August 2019, discussed the IMF’s July update. 4. Gita Gopinath, “The World Economy: Synchronized Slowdown, Precarious Outlook”, IMF, 15

October 2019. 5. WTO, “WTO lowers trade forecast as tensions unsettle global economy”, press release, 1

October 2019. 6. BBC, “US set to impose tariffs on $7.5bn of EU exports in Airbus row”, 2 October 2019. The

tariffs were raised on 18 October. 7. BBC, “US unemployment rate falls to 50-year low of 3.5%”, 4 October 2019. 8. HM Treasury, Spending Round 2019, CP170, September 2019. 9. BBC, “China economy: Third quarter growth misses expectations”, 18 October 2019. 10. IMF, “Global Financial Stability Report (GFSR): Lower for Longer”, 16 October 2019. 11. IMF, “Lower for Longer: Rising Vulnerabilities May Put Growth at Risk”, blog, 16 October 2019. 12. Ruth Lea, “Balance of payments current account: still running deficits”, Arbuthnot Banking

Group, 7 October 2019, for the last data tracker. 13. Ruth Lea, “July’s better-than-expected GDP data suggest economy not slipping into recession”,

Arbuthnot Banking Group, 23 September 2019, discussed the July GDP data. 14. ONS, “GDP monthly estimate, UK: August 2019”, 10 October 2019. 15. These GDP data are consistent with the ONS’s annual “UK National Accounts: The Blue Book

2019”, due to be published on 31 October 2019. The “UK Balance of Payments: The Pink Book 2019” is also due on 31 October 2019.

16. ONS, “Index of services, UK: August 2019”, 10 October 2019. 17. ONS, “Index of production, UK: August 2019”, 10 October 2019. 18. ONS, “Construction, GB: August2019”, 10 October 2019. 19. Gov.UK, “Budget 2019 date announced”, 14 October 2019. 20. Markit/CIPS services PMI, “Service sector activity contracts in September”, 3 October 2019. 21. Bank of England, “Monetary Policy Summary and minutes of the Monetary Policy Committee

meeting ending on 18 September 2019”, 19 September 2019. 22. NIESR, “Monthly GDP tracker – GDP data better than expected”, 10 October 2019. 23. ONS, “Retail sales, GB: September 2019”, 17 October 2019. 24. ONS, “UK trade: August 2019”, 10 October 2019. 25. Note, however, the equal and offsetting impacts on “net acquisition of valuables” and on the

trade balance of movements of non-monetary gold (NMG). 26. ONS, “Labour market overview, UK: October 2019”, 15 October 2019 and accompanying

releases. 27. ONS, “Vacancies and jobs in the UK: October 2019”, 15 October 2019.

11

28. ONS, “Consumer price inflation, UK: September 2019”, 16 October 2019. The CPIH is the Consumer Prices Index including owner-occupiers’ housing costs and is the ONS’s preferred measure of consumer prices inflation.

29. ONS, “Producer price inflation, UK: September 2019”, 16 October 2019. 30. ONS, “UK house prices index: August 2019”, 16 October 2019. The UK’s four countries

continued to show different inflation rates in July: England (1.1% YOY, 0.5% in July), Wales (4.5% YOY, 3.8% in July), Scotland (1.6% YOY, 1.5% in July) and Northern Ireland (+3.5% (2019Q2, YOY)). In England, there was, as always, a significant range across the regions. The complete list of annual price changes is: North East (3.3%), North West (3.1%), East Midlands (2.6%), West Midlands (2.4%), Yorkshire & Humberside (1.0%), South West (0.9%), East (0.1%), South East (-0.6%) and London (-1.4%).

31. Ruth Lea, “Given continuing public sector deficits, there is little alternative to “austerity””, Arbuthnot Banking Group, 3 July 2017, discussed the last Queen’s Speech, of 21 June 2017.

32. Brexit Central, “Queen’s Speech promises legislative programme to ‘seize the opportunities’ of Brexit”, 14 October 2019.

33. Conservative Home, “The full list of 22 Bills from today’s Queen’s Speech”, 14 October 2019. 34. Gov.UK, “Budget 2019 date announced”, 14 October 2019. 35. BBC, “Heidi Allen: Former Tory MP joins Liberal Democrats”, 7 October 2019. 36. BBC, “Louise Ellman: MP quits Labour over anti-Semitism concerns”, 17 October 2019. 37. Ruth Lea, “The world economy is slowing and growth forecasts are revised down”, Arbuthnot

Banking Group, 3 December 2018, discussed the Withdrawal Agreement and the Political Declaration (the latter in detail).

38. Ruth Lea, “UK economy: growth firm in 2018Q3 but set to slow in 2018Q4”, Arbuthnot Banking Group, 19 November 2018, discussed the draft Withdrawal Agreement in detail.

39. DExEU website, “Revised Protocol to the Withdrawal Agreement”, 17 October 2019. 40. BBC, “Brexit: What is in Boris Johnson’s new deal with the EU?”, 17 October 2019. 41. European Commission, “Brexit: European Commission recommends the European Council

(Article 50) to endorse the agreement reached on the revised Protocol on Ireland/ Northern Ireland and revised Political Declaration”, press release, 17 October 2019.

42. Open Europe, “What’s new about the new Brexit deal? An explainer”, 17 October 2019 43. Open Europe, “What’s new about the new Brexit deal? An explainer”, 17 October 2019. 44. DExEU website, “Revised Political Declaration”, 17 October 2019. 45. Martin Howe, “Flawed outcome is a tolerable price to pay for our freedom”, Daily Telegraph,

18 October 2019. 46. BBC, “Brexit: Johnson vows to press on despite defeat over deal delay”, 19 October 2019. 47. Ruth Lea, “Spending Round 2019: planned to comply with current fiscal rules”, Arbuthnot

Banking Group, 9 September 2019, discussed the Benn Act. 48. BBC, “Boris Johnson’s Brexit delay letters in full”, 20 October 2019. 49. GOV.UK, “No-Deal Readiness Report”, 8 October 2019. 50. GOV.UK, “Temporary tariff regime updated”, 8 October 2019. 51. Financial Policy Committee, “Financial Policy Summary and Record - October 2019”, 9 October

2019. 52. Open Europe, “Manageable but material: the consequences of No Deal and how the

Government should respond”, 4 October 2019.

12

Annex

Table 1 IMF GDP forecasts, growth rates (%), last 3 forecasts

Oct 2019 (changes from Jul, in brackets)

Jul 2019 (changes from Apr, in brackets)

Apr 2019 (changes from Jan, in brackets)

2018 2019 2020 2018 2019 2020 2018 2019 2020 World output (GDP)

3.6 3.0 (-0.2)

3.4 (-0.1) 3.6 (0) 3.2 (-0.1)

3.5 (-0.1)

3.6 (-0.1)

3.3 (-0.2)

3.6 (0)

Advanced economies:

US (G7) 2.9 2.4 (-0.2)

2.1 (0.2) 2.9 (0) 2.6 (0.3)

1.9 (0) 2.9 (0) 2.3 (-0.2)

1.9 (0.1)

Eurozone, of which:

1.9 1.2 (-0.1)

1.4 (-0.2) 1.9 (0.1)

1.3 (0) 1.6 (0.1)

1.8 (0) 1.3 (-0.3)

1.5 (-0.2)

Germany (G7)

1.5 (0.1)

0.5 (-0.2)

1.2 (-0.5) 1.4 (-0.1)

0.7 (0.1)

1.7 (0.3)

1.5 (0) 0.8 (-0.5)

1.4 (-0.2)

France (G7)

1.7 1.2 (-0.1)

1.3 (-0.1) 1.7 (0.2)

1.3 (0) 1.4 (0) 1.5 (0) 1.3 (-0.2)

1.4 (-0.2)

Italy (G7) 0.9 0 (-0.1) 0.5 (-0.3) 0.9 (0) 0.1 (0) 0.8 (-0.1)

0.9 (-0.1)

0.1 (-0.5)

0.9 (0)

Japan (G7) 0.8 0.9 (0) 0.5 (0.1) 0.8 (0) 0.9 (-

0.1) 0.4 (-0.1)

0.8 (-0.1)

1.0 (-0.1)

0.5 (0)

UK (G7) 1.4 1.2 (-0.1)

1.4 (0) 1.4 (0) 1.3 (0.1)

1.4 (0) 1.4 (0) 1.2 (-0.3)

1.4 (-0.2)

Canada (G7)

1.9 1.5 (0) 1.8 (-0.1) 1.9 (0.1)

1.5 (0) 1.9 (0) 1.8 (-0.3)

1.5 (-0.4)

1.9 (0)

Emerging market & developing economies:

China 6.6 6.1 (-0.1)

5.8 (-0.2) 6.6 (0) 6.2 (-0.1)

6.0 (-0.1)

6.6 (0) 6.3 (0.1)

6.1 (-0.1)

India 6.8 6.2 (-0.9)

7.0 (-0.2) 6.8 (-0.3)

7.0 (-0.3)

7.2 (-0.3)

7.1 (-0.2)

7.3 (-0.2)

7.5 (-0.2)

Brazil 1.1 0.9 (0.1 2.0 (-0.4)

1.1 (0) 0.8 (-0.3)

2.4 (-0.1)

1.1 (-0.2)

2.1 (-0.4)

2.5 (0.3)

Russia 2.3 1.1 (-0.1)

1.9 (0) 2.3 (0) 1.2 (-0.4)

1.9 (0.2)

2.3 (0.6)

1.6 (0) 1.7 (0)

13

Sources: (i) IMF, World Economic Outlook, April 2019 forecast, (ii) IMF, World Economic Outlook, July 2019 update, (iii) IMF, World Economic Outlook, October 2019 forecast “Global manufacturing downturn, rising trade barriers”, 15 October 2019. There are four forecasts a year: Jan update, April forecast, July update, October forecast (see annex table 2 below).

Table 2 UK economic data tracker

Date Release Source Quarter, year

Outcome

13 Sep Index of labour costs per hour (2019Q2)

ONS 2019Q2 +3.4% (YOY)

24 Sep Public Sector Net Borrowing (PSNB) (Aug)

ONS 2019Q3 £6.4bn (Aug 2019), compared with £6.9bn (Aug 2018).

24 Sep Public Sector Net Borrowing (PSNB) (FY2019, year-to-date)

ONS FY2019 £31.2bn deficit (Apr-Aug 2019), compared with £24.4bn deficit (Apr-Aug 2018).

24 Sep Public sector finances, public sector net debt (PSND) (end-Aug)

ONS 2019Q3 £1,779.9bn (end-Aug 2019, 80.9% of GDP), compared with £1,755.4bn (end-Aug 2018, 82.4% of GDP)

30 Sep Current Account, Balance of Payments (2019Q2):

ONS 2019Q2 Deficit: £25.2bn (4.6% of GDP), £33.1bn (6.0% of GDP, 2019Q1)

30 Sep Trade (goods & services) balance:

ONS 2019Q2 Deficit: £11.4bn (2019Q2), £22.7bn (2019Q1)

30 Sep • Visible trade balance ONS 2019Q2 Deficit: £34.1bn (2019Q2), £48.1bn (2019Q1)

30 Sep • Services balance ONS 2019Q2 Surplus: £22.7bn (2019Q2), £25.3bn (2019Q1)

30 Sep Primary income balance ONS 2019Q2 Deficit: £7.1bn (2019Q2), £3.4bn (2019Q1)

30 Sep Secondary income balance ONS 2019Q2 Deficit: £6.7bn (2019Q2), £6.9bn (2019Q1)

30 Sep GDP, quarterly, 2019Q2, revised

ONS 2019Q2 GDP: -0.2% (QOQ), 1.3% (YOY)

30 Sep GDP: industrial breakdown (2019Q2)

ONS 2019Q2 Production: -1.8% (QOQ); Manufacturing output: -2.8% (QOQ); Construction: -1.2% (QOQ); Services: 0.1% (QOQ)

30 Sep GDP: expenditure breakdown (2019Q2)

ONS 2019Q2 Household consumption: 0.4% (QOQ); GGFC: 1.1% (QOQ); GFCF: -0.9% (QOQ), within which business investment -0.4% (QOQ). Inventories: -£0.7bn (2019Q2), +£5.5bn (2019Q1). Net contribution of net trade (KP): +£12.8bn.

14

Exports -6.6% (QOQ), imports -13.0% (QOQ)

30 Sep Unsecured credit (Aug) BoE 2019Q3 Growth rate (YOY): 5.4% (Aug), 5.6% (Jul)

30 Sep Secured on dwellings (Aug) BoE 2019Q3 Growth rate (YOY): 3.2% (Aug), 3.2% (Jul)

30 Sep Mortgage approvals for house purchase (Aug)

BoE 2019Q3 65,500 (Aug), 67,000 (Jul)

30 Sep Net bank lending to non-financial businesses (Aug), of which:

BoE 2019Q3 Growth rate (YOY): 3.1% (Aug), 3.0% (Jul)

30 Sep • Large businesses BoE 2019Q3 Growth rate (YOY): 4.4% (Aug), 4.2% (Jul)

30 Sep • SMEs BoE 2019Q3 Growth rate (YOY): 0.7% (Aug), 0.8% (Jul)

1 Oct Manufacturing PMI (Sep) Markit-CIPS

2019Q3 Index: 48.3 (Sep), 47.4 (Aug)

2 Oct Construction PMI (Sep) Markit-CIPS

2019Q3 Index: 43.3 (Sep), 45.0 (Aug)

3 Oct Services PMI (Sep) Markit-CIPS

2019Q3 Index: 49.5 (Sep), 50.6 (Aug)

8 Oct Productivity (output per hour) (2019Q2)

ONS 2019Q2 -0.2% (QOQ), -0.5% (YOY)

8 Oct Productivity (output per job) (2019Q2)

ONS 2019Q2 -0.6% (QOQ), flat (YOY)

10 Oct GDP, monthly (Aug) ONS 2019Q3 GDP: -0.1% (MOM), 1.1% (YOY) 10 Oct GDP: industrial breakdown

(Aug) ONS 2019Q3 Production: -0.6% (MOM);

Manufacturing output: -0.7% (MOM); Construction: 0.2% (MOM); Services: flat (MOM)

10 Oct GDP, monthly (3 months to Aug)

ONS 2019Q3 GDP: 0.3% (QOQ), 1.2% (YOY)

10 Oct GDP: industrial breakdown (3 months Aug)

ONS 2019Q3 Production: -0.4% (QOQ); Manufacturing output: -1.1% (QOQ); Construction: 0.1% (QOQ); Services: 0.4% (QOQ)

10 Oct NIESR GDP tracker NIESR 2019Q3 GDP change: -0.2% (QOQ) in 2019Q2, +0.5% (QOQ) in 2019Q3.

10 Oct UK trade in goods & services (3 months to Aug)

ONS 2019Q3 Trade deficit: £4.6bn (3 mths to Aug), £17.6bn (3 mths to May), narrowed by £13.0bn (QOQ).

10 Oct UK trade in goods (3 months to Aug)

ONS 2019Q3 Goods deficit: £28.4bn (3 mths to Aug), £40.8bn (3 mths to May), narrowed by £12.4bn (QOQ).

15

10 Oct UK trade in services (3 months to Aug)

ONS 2019Q3 Services surplus: £23.8bn (3 mths to Aug), £23.3bn (3 mths to May), rose £0.5bn.

15 Oct Employment (3 months to Aug) ONS 2019Q3 -56k (QOQ), +282k (YOY) 15 Oct Unemployment (3 months to

Aug) ONS 2019Q3 +22k (QOQ), -49k (YOY)

15 Oct Unemployment rate (3 months to Aug)

ONS 2019Q3 3.9%; 4.0% (3 months to Aug 2018)

15 Oct Vacancies (3 months to Sep) ONS 2019Q3 Total vacancies: 813k, -11k (QOQ), -33k (YOY)

15 Oct Earnings (3 months to Aug), nominal

ONS 2019Q3 3.8% (YOY, total pay, including bonuses), 3.8% (YOY, regular pay, excluding bonuses)

15 Oct Earnings (3 months to Aug), real

ONS 2019Q3 1.9% (YOY, total pay, including bonuses), 2.0% (YOY, regular pay, excluding bonuses)

16 Oct CPIH (Sep) ONS 2019Q3 YOY inflation: 1.7% (Sep), 1.7% (Aug) 16 Oct CPI (Sep) ONS 2019Q3 YOY inflation: 1.7% (Sep), 1.7% (Aug) 16 Oct PPI (output) (Sep) ONS 2019Q3 YOY inflation: 1.2% (Sep), 1.7% (Aug) 16 Oct PPI (input) (Sep) ONS 2019Q3 YOY inflation: -2.8% (Sep), -0.9%

(Aug) 16 Oct Crude oil prices (Sep) ONS 2019Q3 +0.6% (MOM), -14.6% (YOY) 16 Oct Sterling effective exchange rate

index (ERI) (Sep) ONS 2019Q3 +2.4% (MOM), -2.0% (YOY)

16 Oct House prices (Aug, official) ONS 2019Q3 YOY growth: 1.3% (Aug), 0.8% (Jul) 16 Oct House prices (Aug, official) ONS 2019Q3 +0.8% (MOM, non-seasonally

adjusted), +0.6% (MOM, seasonally adjusted)

17 Oct Retail sales (Sep) ONS 2019Q3 Volume: flat (MOM), 3.1% (YOY) 17 Oct Retail sales (3 months to Sep) ONS 2019Q3 Volume: +0.6% (QOQ), 3.1% (YOY)

Table 3 Queen’s Speech, proposed bills and other measures

Objective 22 Bills Brexit (5) The EU (Withdrawal Agreement) Bill

This will give legal effect to the Prime Minister’s deal, should he manage to win a Meaningful Vote on it.

Agriculture Bill This will create a seven-year period for British farmers to transition away from the current EU subsidies regime, the Common

16

Agricultural Policy. Fisheries Bill A new system of licences for foreign vessels in UK territorial waters,

and a new regime of controls on British fishermen to replace the EU system.

Trade Bill Allows for existing trade deals to be ‘carried over’ if the Government can secure agreement to that effect with the country concerned.

Immigration and Social Security Co-Ordination (EU Withdrawal) Bill

End to freedom of movement between the EU and the UK; paves way for new points-based system for assessing immigration applications; sets December 2020 deadline for EU nationals applying to stay.

Prison and Sentencing (3)

Sentencing Bill Moves the typical release point from halfway through a prisoners’ sentence to two-thirds of the way; expands reasons judges can issue ‘whole-life’ sentences; and introduces tougher sentences for violent and sexual offenders.

Foreign National Offenders Bill

Will substantially increase sentences for foreign offenders who have breached a deportation order to return to the UK.

Prisoners (Disclosure of Information About Victims) Bill

This will make it easier to deny parole to murderers and child abusers who refuse to identify their victims.

Police and Prevention (5) Police Protections Bill A new test for police drivers to help protect them in the event of

injuries during chases; new protections for Special Constables; Home Office to report annually on the Police Covenant.

Serious Violence Bill This will create new obligations for councils, social services, schools, healthcare services, and more to share information in order to ‘prevent serious violence’.

Extradition (Provisional Arrest) Bill

Intended to give police powers to arrest foreign criminals without waiting for a UK warrant if target is subject to an Interpol ‘red notice’ and from an approved country.

Domestic Abuse Bill Will prevent cross-examination of accusers by alleged perpetrators; create a statutory definition of domestic abuse; and accusers will be assumed to qualify for special measures in court.

Air Traffic Management and Unmanned Aircraft Bill

Gives police more powers to ground drones and investigate crimes where a drone has been employed.

Finance (3) Financial Services Bill Simplifies process for overseas funds being sold in the UK and allows

for long-term access to British markets for Gibraltar-based firms. Pension Schemes Bill Plans for new ‘collective’ workplace pension schemes; companies

will be compelled to join new ‘pensions dashboard’ programme; and new controls about transferring pension.

Employment (Allocation of Tips) Bill

Restaurants will be forced to hand over tips to staff and share pooled tips fairly, and a new Code of Practice will be introduced.

Animals and Environment (2)

Animal Welfare (Sentencing) Bill

Maximum sentence for animal cruelty to rise from six months to five years. Plans for a legal statement on the sentience of animals to be

17

published separately. Environment Bill Charges on single-use plastics; new Office for Environmental

Protection, which can take Government to court; new powers for councils to tackle air pollution; and more.

Other Bills (4) Divorce, Dissolution and Separation Bill

Will make divorce easier by removing the ability of one party to contest separation, introduces 20-week timeline for divorce proceedings.

Health Service Safety Investigations Bill

Will create a new body to investigate NHS incidents, leaks from which will be banned; local bodies will receive new guidance on medical investigations; and more.

Telecommunications Infrastructure Bill

According to the Government, this aims to roll out “gigabit capable broadband across the UK to achieve nationwide coverage as soon as possible”.

Private International Law (Implementation of Agreements) Bill

Tackles problems relating to disputes over children which cross national borders, enables inter-governmental cooperation on family cases.

Other measures Voter ID crackdown to “rig the election”

The Queen’s Speech paved the way for measures to force voters to show photo ID before being allowed to vote.

A White Paper on mental health

There will be a White Paper “by the end of this year” setting out the government's response to possible reforms to the Mental Health Act.

Pledges on NHS and police

The Queen’s Speech will sit alongside measures already announced to invest in the NHS, strengthen environmental protections and raise living standards through increasing the national living wage to £10.50 an hour by 2024 for over-21s. Also mentioned was the pledge to hire 20,000 more police officers.

Stopping a repeat of Thomas Cook

A new law will attempt to stop a repeat of the Thomas Cook debacle by giving the Civil Aviation Authority oversight over airlines in distress. There are no confirmed plans or a set Bill yet

Six other Bills

There were six Bills not mentioned by the Queen herself in addition to the 22, quoted above. They include allowing the building of part of HS2 - despite the risk the rail line will be scrapped altogether in a government review. There is also a Bill to make it easier for NHS hospitals to manufacture and trial medicines and medical devices. Other technical Bills will allow further payments under the Windrush compensation scheme to Brits who arrived from the Caribbean before the 1970s - and technical changes to legal sentencing in the criminal courts.

Not detailed in the Queen’s Speech

A firm plan for social care

No specific plans yet announced.

Immediate punishments for Grenfell-style

The speech documents talk of a “fundamental change” in the regulations on high-rise tower blocks to ensure “accountability and

18

building owners responsibility” from their owners. Rail reforms now

There will be a White Paper “later this autumn” on reforms to the rail industry and reforms “from 2020”. But reforms to the franchising model - which were briefed out ahead of time - are not certain yet and there's no firm Bill to make changes in the next year.

A Bill on online harms

Ministers will “continue to develop proposals” to improve internet safety for children and vulnerable people. But no Bill has been announced yet.

Sources include: Conservative Home, “The full list of 22 Bills from today’s Queen’s Speech”, 14 October 2019.

Table 4 Withdrawal Agreement and Political Declaration: DExEU documents

Withdrawal Agreement Political Declaration November 2018

DExEU website, “Agreement on the withdrawal of the UK from the EU & the European Atomic Energy Community, as endorsed by leaders at a special meeting of the European Council on 25 November 2018”, 25 November 2018.

DExEU website, “Political Declaration setting out the framework for the future relationship between the EU and the UK”, 25 November 2018.

October 2019

DExEU website, “Revised Protocol to the Withdrawal Agreement”, 17 October 2019.

DExEU website, “Revised Political Declaration”, 17 October 2019.

Source: DExEU website.

Table 5a Withdrawal Agreement, main features

Heading November 2018 October 2019 Citizens’ Rights Provides certainty for EU citizens

living in the UK, & UK nationals living in other EU countries.

Basically unchanged

Implementation (Transition) Period

A time-limited implementation (transition) period agreed until 31 December 2020. During this time, common rules will remain in place with EU law continuing to apply in the UK. The Joint Committee may, before 1 July 2020, adopt a single decision extending the transition period for up to one or two years (Article 132).

Basically unchanged: the standstill transition period lasts until December 2020, with the option of extension up to December 2022; the references in the Protocol to transition extension have been deleted, but their legal basis elsewhere in the Withdrawal Agreement remains.

The EU and the UK have committed that they will use their best

19

endeavours to conclude and ratify an agreement on the future relationship by 1 July 2020, to apply after the end of the transition period (31 December 2020). If agreement on the future relationship is not applicable by 31 December 2020, there are two options. Firstly, a “backstop solution” will apply until such a time as a subsequent agreement is in place (see below). Secondly, the UK may request an extension of the transition period (see above).

Financial Provisions

The negotiated financial settlement covers the UK’s financial commitments to the EU & the EU’s financial commitments to the UK. A “reasonable” central estimate is around £35-39bn.

Basically unchanged: although the extension to Article 50 means that the total payment is likely to be in the region of £33bn, not the oft-quoted “£39bn” figure.

Protocol: Northern Ireland/Ireland

Significant changes

Backstop The key features of the “backstop” are: There will be a “single customs territory”. The UK will align tariffs and rules applicable to its customs territory to the EU’s. Regulatory alignment measures to ensure a “level playing field”. These include alignment with the EU’s state aid rules, competition policy, labour and social protection, and environmental protection and climate change. There are additional alignment conditions and checks on goods for Northern Ireland. Any termination of the Protocol (the “backstop”) would be decided by the EU-UK Joint Committee. No unilateral termination.

The backstop has been replaced with a ‘frontstop’ special arrangement for NI which will come into force immediately after the end of the transition period. Customs: the “frontstop” ensures that NI will leave the EU’s Customs union along with the rest of the UK, but the UK will have to enforce EU Customs procedures at points of entry into Northern Ireland. The customs border will, therefore, now be between GB and the island of Ireland, rather than between NI and the Republic of Ireland. This means incoming goods will be checked at Northern Irish ports, not at the internal border. So, the default is that EU tariffs will be applied on goods entering NI from GB, or from the rest of the world (RoW). There are, of course, exceptions to this. If it can be proved that the goods will not pass into the Republic of

20

Ireland, no tariffs will apply. There will also be a rebate system. If goods are considered “at risk” of moving into EU territory, tariffs will be applied. But if they never leave NI, the government will grant a refund. A joint committee will be set up to determine which goods fall within this category. Essentially, the measures will create a dual tariff system at the Northern Irish border, where the default is EU tariffs, but exceptions apply.

Northern Ireland: alignment & additional checks

Northern Ireland will remain aligned to a limited set of EU rules that are deemed indispensable for avoiding a hard border, namely: VAT and excise, goods standards, Sanitary rules for veterinary controls (‘SPS rules’), agricultural production/marketing, state aid rules The EU’s Customs Code will also continue to apply in Northern Ireland within the overall context of the single customs territory between the EU & the UK. There would be a need for additional checks on goods (industrial and agricultural) travelling from the rest of the UK to Northern Ireland.

Regulations: NI will also follow the EU’s regulatory framework in certain respects, meaning there will be no regulatory or customs border with the Irish Republic. VAT: in addition to trade tariffs, goods moving across borders can be subject to VAT, a tax added to purchases. Under the new proposals, VAT will apply to goods in Northern Ireland, but not to services. However, Northern Ireland would be able to have different VAT from the rest of the UK, allowing it to align its rates with the Republic of Ireland.

Consent: the special arrangements will be subject to the consent of the people of Northern Ireland and include an exit mechanism, with the devolved Assembly being granted the right to opt out of the Northern Ireland-specific procedures on the basis of a majority vote.

The Withdrawal Agreement no longer includes a customs union (and accompanying “level playing field” obligations) as the default basis for the future UK-EU relationship, which was included under the backstop.

21

Table 5b Political Declaration, main features

Issue November 2018 October 2019 Trade agreement, single customs territory

Free Trade Agreement (FTA), with zero tariffs, combining deep regulatory & customs cooperation. No tariffs, fees, charges or quantitative restrictions across all sectors, with ambitious customs arrangements that…build & improve on the single customs territory provided for in the Withdrawal Agreement. The Parties envisage making use of all available [trade] facilitative arrangements & technologies. Technologies may be used for ensuring no hard border in Ireland.

Economic partnership should through a FTA ensure no tariffs, fess, charges or quantitative restrictions across all sectors with appropriate accompanying rules of origin, and with customs arrangements in line with Parties’ objectives and principles. No reference to the single customs territory (dropped from revised Withdrawal Agreement).

Services Liberalisation of services. On financial services the start of equivalence assessments by both Parties, endeavouring to conclude these assessments by end-June 2020.

Unchanged.

Free movement

The principle of free movement of persons between the EU & the UK will no longer apply

Unchanged.

Fisheries New fisheries agreement on access to waters & quota shares

Unchanged

Level playing field

Competition must be open & fair. Provisions to ensure this should cover state aid, competition, social & employment standards, environmental standards, climate change & relevant tax matters, building on the “level playing field” arrangements provided for in the Withdrawal Agreement & commensurate with the overall economic relationship.

Competition must be open & fair. Parties should uphold common high standards applicable to EU and UK at the end of the transition period in the areas of state aid, competition, social & employment standards, environment, climate change & relevant tax matters. No reference to the “level playing field” arrangements provided for in the Withdrawal Agreement (dropped from revised Withdrawal Agreement).

Sources: (i) Open Europe, “What’s new about the new Brexit deal? An explainer”, 17 October 2019, (ii) European Commission, “Brexit: European Commission recommends the European Council (Article 50) to endorse the agreement reached on the revised Protocol on Ireland/ Northern Ireland and revised Political Declaration”, press release, 17 October 2019; (iii) BBC, “Brexit: What is in Boris Johnson’s new deal with the EU?”, 17 October 2019.