Britain’s €60bn exit bill could disrupt EU talks

Arguments about the potential €60bn bill that the UK may owe the EU as it prepares to quit the Union could eat into the time left for the UK to strike a new trade deal, a leading economist has warned.UK economist Ruth Gregory at Capital Economics in London said the dispute over the outstanding bill which the EU’s negotiator Michel Barnier has estimated at €60bn means that Britain could face paying €24.5bn- €72.8bn to the EU.

Making payments over a number of years could also prove politically “unpalatable” to Prime Minister Theresa May’s government, the economist has warned.

In an assessment of the size of the bill, Capital Economics said the potential exit payment could include the UK’s contribution to meet the EU’s past spending commitments; its obligations to the EU up to 2020; and the UK’s contribution for EU pension liabilities.

“It is not yet clear how the €60bn figure — which is likely to be the EU chief negotiator Michel Barnier’s opening gambit — is broken down but some estimates such as those in a report by the Centre for European Reform suggests that the final bill could range from just €24.5bn to almost three times that amount (€72.8bn), depending on which of these liabilities or assets are included,” Ms Gregory said.

“Overall, given the number of contentious issues, it is possible that talks on the exit bill could drag on for a while and eat into the time remaining for trade negotiations,” she said.

Yesterday, sterling fell against all its major peers on a report that May’s team is preparing for Scotland to potentially call for an independence referendum.

Sterling, which has been held hostage by politics since a Scottish referendum in 2014, fell up to 0.6% after the newspaper cited unidentified government sources as saying May could agree to a new Scottish vote, but on condition it is held after the UK leaves the EU. It stayed lower even after May’s spokesman Greg Swift said there should be no second Scottish vote.

“The eventuality hasn’t been largely factored in the pound’s value so far,” wrote Ipek Ozkardeskaya, a senior market analyst at London Capital Group.

“If Scotland decides to proceed with the second referendum to quit the UK, there would certainly be another fundamental downshift in the pound’s value, both against the US dollar and the euro.”

The House of Lords yesterday began a detailed examination of the bill authorising May to trigger the UK’s withdrawal from the EU.

In another sign of market jitters, bullion prices have rallied more than 9% as investors seek havens amid anxiety over anti-establishment electoral candidates in the Netherlands, France and Germany. Concern has mounted that victories for those candidates could cause more exits from the EU following the UK’s decision in June.

Investors are also trying to gauge the impact on economic growth of US policies under President Donald Trump.

“Demand for gold as a safe haven is likely to remain high amid uncertainty,” Commerzbank analysts including Eugen Weinberg said.

“The increased buying interest is reflected both in exchange-traded fund inflows and the market positioning of speculative financial investors,” he said. n Additional reporting Bloomberg

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