DUP's 'No' to Brexit deal puts brakes on Irish shares surge as expert question merit of customs deal
The surge in Irish shares exposed to Brexit came to a halt as the chances of Boris Johnson getting MPs to support his deal with the EU waned.
AIB and Bank of Ireland shares, which had surged in recent days in the countdown to the deal, slid 3.5% and 1%, respectively, as the DUP said it opposed the accord.
Nonetheless, sterling which had also advanced this week traded at 86.53 pence, little changed on the day despite the political obstacles that stand in the way of a British endorsement.
Deutsche Bank said it sees a 55% chance that Mr Johnson’s Brexit deal will be rejected by parliament on Saturday, although it may ultimately get ratified after a general election.
It pegged the chances of the agreement getting through at the weekend at 45%.
European markets were nervous ahead of the key test on Saturday when Johnson faces a knife-edge vote in parliament to get it approved.
“In our view, it seems slightly more likely than not the deal will fail to pass parliament,” Deutsche Bank macro strategist Oliver Harvey said.
“But the most likely outcome in these circumstances is a Conservative majority in a general election, after which Prime Minister Johnson’s deal is then ratified,” he said.
A leading Irish expert on Brexit, Professor Edgar Morgenroth at DCU Business School, questioned the merits of the customs deal.
He said that the system of tariff rebates for goods crossing the Irish Sea into the North will likely give rise to large scale international smuggling, and not the petty cross-border smuggling at present.
Mr Morgenroth -- who helped contribute to much of the research into tariffs and Brexit while at the Economic and Social Research Institute in recent years -- said that in time the whole of Ireland could be isolated from the rest of the EU's customs market should the agreement lead to high-value smuggling from the island of Ireland into France or other EU countries.
"There is plenty in the text which is very wishy-washy and a lot of it is conditional. I think there is too much complexity that will be exploited by large scale smuggling into the EU, not small scale smuggling in Ireland," Mr Morgenroth said.
"I think what has been created is a heaven for smugglers," he said. Chris Beauchamp, chief market analyst at online broker IG, said that Mr Johnson's deal now faces the "tough environment" of a parliamentary vote.
"It has been a volatile day for the pound, and for UK assets, and there will be more to come as MPs gear up for their Saturday sitting. We have a deal, but the future is far from certain," he said.
Bloomberg reported that a few countries wanted to talk about how EU leaders would respond if the UK parliament rejects the deal in the vote expected on Saturday, according to one EU official.
That discussion, however, was quickly shut down by others around the table, the official said.
Most EU leaders are keen to avoid interfering with Mr Johnson’s domestic battles -- either by increasing pressure on undecided MPs, or by offering them a way out via an extension.
John McGrane, director-general of the British Irish Chamber of Commerce, said that "business strongly urges all involved to embrace this initiative without delay, to avoid the worst consequences of a no-deal outcome for jobs and prosperity”.
And the Northern Ireland Chamber of Commerce and Industry said the deal marked progress in preventing a crash-out Brexit. Additional reporting Reuters
