The European Supermarket Sweep šŸž

The European Supermarket Sweep

Prime Minister Boris Johnson is leading Britain into yet more deal-making with the European Union (EU), and the fatalistic ā€œpint of milkā€ and ā€œloaf of breadā€ headlines are back out in force. Investors in Britainā€™s ā€œBig Fourā€ supermarkets are trading on trade!

The Brits were mostly game for a trading bloc in Europe, but not a political bloc. To start outsourcing governmental affairs to non-elected technocrats in Brussels was to, at least psychologically, shed sovereign pride and lose independence. Thatā€™s why ā€˜Leaveā€™ won the vote. Britain wanted ā€œBritainā€ back. However, the more free trade it can keep alive, the better!

Johnson has two plans up his sleeve. The first has been dubbed ā€˜Canada plus,ā€™ his preferred outcome from talks with the EU, and the deal that would lift retail stocks on Britain’s FTSE 100 exchange.

Emulating the comprehensive deal that Canada’s cooked up with the EU, Britain would stop contributing to the EU budget but keep 98% of its free trade going. It would leave the ā€˜single-marketā€™ and all the rules and regs concerning immigration, and corporate costs would be slashed by harmonizing supermarket standards and regulations. Britainā€™s immense financial services sector would get a near-seamless “passport” into Europe as well, something Canada doesn’t get (thatā€™s where the “plus” comes from).

BoJoā€™s plan B is to get on top down under, with the looser model used by Australia. A nuclear “no deal-deal,” it certainly doesn’t ensure free trade. Supermarkets and small British stocks would get hammered as most goods would cross the border on World Trade Organisation (WTO) terms. Telecoms stocks would also struggle without preferential treatment on the continent, but on the plus side, Britain wouldnā€™t make any contributions to the EU budget, and it wouldnā€™t be bound to any regulatory or immigration-related oversight from Brussels whatsoever. Freedom!

The real deal will lie somewhere on a scale between Canada or Australia. BoJo’s energy to get the Brits well and truly out, a short time-frame, and bargaining power weakened by most British food imports coming from the EU, could sway us towards an Aussie outcome. What do you think?

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