Boris Johnson tells UK to prepare for no-deal Brexit

A no-deal Brexit may just have come a step closer. Yahoo Finance’s Oscar Williams-Grut shares the details.

Video Transcript

JULIE HYMAN: Let's turn to another mover today. It's the British pound. It's up actually a little bit versus the US dollar, even as we see the latest maybe not so encouraging developments when it comes to Brexit. No deal Brexit, is it actually finally happening? Can it even happen? Our Oscar Williams-Grut is here to explain to us, hopefully. Oscar.

OSCAR WILLIAMS-GRUT: Julie, some strong words today from Boris Johnson, who told the British people in an address this lunchtime to prepare for an Australian-style Brexit at the end of the year. Australian is, of course, the government's preferred term for a no deal Brexit. It means falling back onto World Trade Organization trading terms with the EU.

Now this comes after the passing yesterday of Boris Johnson's own self-imposed deadline on trade talks to try and reach a deal. That deadline passed with nothing much happening. In fact, the EU ended talks by saying that it was now up to Britain to make the next move. They, essentially saying they would have to yield in their position if they wanted to strike a deal.

Now Prime Minister Boris Johnson appears to be saying, no, it's over to you. Essentially, they're heading off in a game of chicken. He said that the EU was unwilling to give the UK a Canada-style deal, which is what they were hoping for, and therefore, talks were likely to fail. His spokesperson in fact, went even further. Shortly after the prime minister gave this statement, he briefed journalists, the spokesperson did, saying the trade talks are over. The EU have effectively ended them by saying they do not want to change their negotiating position.

Now the EU, for its part, are not buying into this rhetoric that the talks are over. Ursula von der Leyen, the head of the European Commission, tweeted that the European Union will continue to work for a deal, but not at any price. She said that the negotiating team will continue to go to London next week to continue negotiations. The Downing Street spokesman said there was no point, unless the negotiating team are prepared to discuss all of these issues.

Now business groups here in the UK have reacted with pretty much nothing short of horror to this announcement that we're heading for a no deal. The UK's Food and Drink Federation said that this would be bad for every household in Great Britain. The Institute of Directors said that it would be a Herculean task to prepare for no deal with a pandemic going on.

But as you said, interesting to look at the currency markets. The pound, which has been the bellwether of Brexit talks throughout this process, is actually up. It fell off the Boris Johnson's statement, but is now up slightly against both the dollar and the euro. That's because investors and analysts, they think this is all bluff and bluster. In fact, if anything, this suggests we could actually be closer to the final deal.

The sentiment appears to be that both the UK and the EU want to deal, but if you imagine a metaphor of them both standing in front of a door, neither of them want to open it, even though both want to go through the door. So hopefully in these next couple of weeks, we could see some kind of agreement, perhaps where they both agree to give some ground, something like that, that will allow them to save face. The potentially final deadline is now seen as November 16, when there will be an informal meeting of EU heads of states in Berlin, when hopefully, they can agree some text, if there is one.

JULIE HYMAN: Two key words in there. Hopefully and final deadline. I'm not, I'm skeptical, Oscar. Thank you very much for that update.