The Wall Street Journal - 31.07.2019

THE WALL STREET JOURNAL. ***** Wednesday, July 31, 2019 |A

WORLD NEWS

at Paddy Power. Some Brexit

supporters took offense.

“They’re pretty intense on

Twitter,” Mr. Price said.

Xabier Santesteban, a

Frenchman living in the U.K.,

shot back at Mr. Cantona on

Facebook. “Eric,” he wrote,

“you’re French...Brexit con-

cerns the Brits, so mind your

business.”

Ancestry.com LLC, a Utah-

based genealogy company, last

year started running an online

video spot in Britain with

shots of continental Europeans

singing Rick Astley’s “To-

gether Forever.”

The video ends with the

tag: “The average British per-

son’s DNA is 60% European.

We may be leaving Europe, but

Europe will never leave us.”

The response on social me-

dia was quick: “Get your facts

straight we’re not leaving Eu-

rope, we’re leaving a protec-

tionist racket called the EU,”

one critic tweeted.

An Ancestry.com spokes-

woman said the aim of the ad

was to transmit a positive

message about the long-last-

ing links between Britain and

Europe. “It was never our in-

tention to make a political

statement,” she said.

One of Britain’s best-known

pub chains, J D Wetherspoon

PLC, unabashedly joined the

fray ahead of the 2016 referen-

dum. Its founder and chair-

man, Tim Martin, already a

leading pro-Brexit voice, dis-

tributed half a million coasters

across the company’s nearly

900 U.K. pubs, urging Britain

to leave the U.K.

“Somehow, it caused out-

rage,” said Mr. Martin. He has

more recently campaigned at

Wetherspoon pubs for a “no-

deal” exit from the EU.

A group of Wetherspoon

employees, calling themselves

“Spoons Workers Against

Brexit,” accused Mr. Martin of

using the pub chain as a pro-

paganda vehicle.

Mr. Martin said he has

stopped the promotion, but

only because he ran out of

coasters.

Virgin Atlantic, the airline

controlled by British entrepre-

neur Richard Branson, rolled

out a “Brexit calculator” in

2017 to help U.S. travelers

tally up how much cheaper a

visit to Britain would be

thanks to the weaker pound.

In an online spot, a bar-

tender in a London pub pours

a slightly alarmed American

visitor four pints for the price

of three.

The calculator and bright-

side-of-Brexit ads boosted the

airline’s brand awareness to a

two-year high, a Virgin

spokesman said.

Unilever PLC used Brexit

malaise to promote its Mar-

mite spread, a yeast extract

that Britons tend to either

love or hate.

“Hard Breakfast? Soft Break-

fast? No Breakfast?” print and

social-media ads asked in

March, alluding to the debate

on whether the U.K. should

leave the EU without a deal, a

“hard Brexit.” The tagline: “Di-

viding the nation since 1902.”

LONDON—For much of Brit-

ain, the protracted divorce

from the European Union is no

laughing matter.

But a few intrepid compa-

nies did away with the corpo-

rate reticence that is custom-

ary with a political hot potato,

and tried poking fun at Brexit

to sell their wares. Results

have been mixed.

Some of the ad campaigns

proved risky, triggering back-

lashes over the divisive issue.

Paddy Power, a bookmaker

owned by London-listed Flut-

ter Entertainment PLC, rolled

out a campaign in March fea-

turing former French soccer

star Eric Cantona offering a

chance to stay at a “Brexit

bunker,” a modified platform

in the English Channel.

The company held a draw-

ing to spend two nights in a

hotel retreat at the offshore,

Victorian-era Spitbank Fort

while Britain pulled out of the

EU on its original deadline of

March 29.

The idea was to help “peo-

ple exit from Brexit,” said Lee

Price, head of public relations

BYMICHELANGELOFANO

Brexit Humor Emerges in Ads

Demonstrators on both sides of the Brexit debate recently shared a bench in London. Some companies have used the divisive topic in ads.

SIMON DAWSON/BLOOMBERG NEWS

Some campaigns

have triggered

backlashes over the

divisive issue.

EU, until a trade deal is place.

Mr. Johnson says the

clause is unacceptable be-

cause Britain couldn’t then

quit the customs union on its

own. Mr. Varadkar told Mr.

Johnson on Tuesday the

clause must be in place to en-

sure peace and stability

across Ireland, according to

an Irish statement.

Mr. Johnson and others in

his government have started

referring to the backstop as

undemocratic. Irish politicians

argue it was the former Brit-

ish Prime Minister Theresa

May who requested the cur-

rent version of the clause in

the first place.

“A lot of the rhetoric is

about Ireland forcing the U.K.

to do something,” said Lisa

Chambers, Brexit spokes-

woman for Fianna Fáil, the

largest opposition party in

Ireland, which supports Mr.

Varadkar’s position on Brexit.

Mr. Johnson told Mr. Var-

adkar that he would pursue

talks with the EU “in the

spirit of friendship,” his office

said Tuesday.

If Mr. Varadkar says he

would accept no backstop, he

would risk appearing weak to

his Irish voter base, said Mr.

Grant. “He would be toast po-

litically,” he said.

If Mr. Varadkar doesn’t

concede, a no-deal Brexit

could send economic shock

waves through the Irish econ-

omy and endanger the accord

that put an end to decades of

sectarian violence in the re-

gion.

The EU Commission has

backed Mr. Varadkar’s posi-

tion. Once the U.K. is out of

the EU, Northern Ireland will

become a gateway into Eu-

rope’s single market—and the

EU says it will need to enforce

the border.

On Tuesday, Mr. Johnson

told Mr. Varadkar the British

government wouldn’t put

physical checks on the Irish

border for fear of risking a

1998 peace accord. It is un-

clear what the EU would do in

that circumstance.

LONDON—It took nearly a

week for new British Prime

Minister Boris Johnson and

Irish Prime Minister Leo Var-

adkar to talk on the phone.

When they finally conversed

on Tuesday it was to under-

score a position they shared

on Brexit: no compromise.

With the two firm in their

views—Mr. Varadkar demand-

ing that Britain respect the di-

vorce deal it reached with the

European Union last year and

Mr. Johnson emphatic about

renegotiating and pulling out

of the bloc on Oct. 31—a com-

promise deal is looking like a

bigger challenge.

Relations between Ireland

and Britain haven’t been this

bad for decades, politicians

and analysts say.

The two countries joined

the EU at the same time in

1973 and joint membership of

the bloc helped bring an end

to old antagonisms. Those are

now being fanned by Brexit.

“One of the consequences

of Brexit that has not been

much discussed is the growth

of Irish nationalism,” said

Charles Grant, the founder of

the Centre for European Re-

form, a think tank.

Brexit has thrown Ireland

into the middle of the fraught

face-off between the U.K. and

the EU. Mr. Johnson says he

wants a new separation agree-

ment with the EU or he will

wrench the U.K. out of the

bloc in three months. The EU

says negotiations are closed.

At the heart of the tug of

war is whether Mr. Varadkar

will endorse the removal of a

clause in the Brexit deal

aimed at avoiding a physical

border on the island of Ire-

land.

The Irish “backstop” would

see the U.K. remain in a cus-

toms union with the EU to

maintain the seamless flow of

goods across a border be-

tween Northern Ireland, which

is in the U.K., and the Repub-

lic of Ireland, which is in the

BYMAXCOLCHESTER

ANDPAULHANNON

U.K., Ireland

At Loggerheads

On Terms of Exit

chance investors will move to

yen from dollars and euros as

the U.S. and Europe cut inter-

est rates and make invest-

ments in their currencies less

attractive.

The yen has risen against

the dollar and euro in the past

few months and edged up

against both Tuesday in To-

kyo.

The Federal Reserve is ex-

pected to lower its benchmark

rate on Wednesday by a quar-

ter percentage point from its

current range of between

2.25% and 2.5%—the first cut

since the 2008 financial crisis.

Last week, the European

Central Bank signaled that it

is preparing to cut short-term

interest rates and restart a gi-

ant bond-buying program.

In new language, the Japa-

nese central bank said it

would ease further “if there is

a greater possibility that the

momentum toward achieving

the price stability target will

be lost,” referring to its 2% in-

flation target.

Gov. Haruhiko Kuroda said

the new promise was a “very

sharp expression” and meant

the bank was more positive

about additional easing.

Economists say the central

bank is concerned about a rise

in the yen that would hurt

Japanese exporters struggling

because of U.S.-China trade

friction.

Mr. Kuroda shrugged off

the issue for now, saying Fed

and ECB easing would eventu-

ally benefit the global econ-

omy and Japan’s economy.

“We shouldn’t focus on

how their policies would af-

fect financial markets or for-

eign-exchange rates in the

short term,” he said.

BNP Paribas economist Ry-

utaro Kono said the central

bank would avoid taking dras-

tic measures, such as cutting

the short-term interest rate

deeper into negative territory,

unless the yen appreciated to

95 yen to the dollar or stron-

ger. Late Tuesday in New

York, a dollar bought buys be-

tween ¥108.60.

“Unlike the Fed and ECB,

the BOJ’s message doesn’t sig-

nal the possibility of mone-

tary easing in the near fu-

ture,” he said.

TOKYO—Japan’s central

bank said it wouldn’t hesitate

to ease monetary policy fur-

ther should the need arise, an

attempt to keep pace with

other major central banks that

are preparing to cut rates.

But the Bank of Japan

didn’t add any actions to its

words, highlighting its limited

policy options after six years

of aggressive asset purchases

and 3½ years of negative in-

terest rates.

That leaves open the

BYMEGUMIFUJIKAWA

Japan’s Central Bank Says It Is Open to Easing if Necessary

Haruhiko Kuroda says Japan will

benefit from global easing.

KIMIMASA MAYAMA/EPA/SHUTTERSTOCK

The new U.K. government’s

tough line on Brexit negotia-

tions is pummeling the pound,

reflecting increased investor

fears the country could crash

out of the European Union

without an exit agreement.

Concerns about economic

disruption have grown since

Boris Johnson became prime

minister last week. A top of-

ficial overseeing no-deal

preparations jarred investors

over the weekend with a

statement saying the British

government is “operating on

the assumption” of a no-deal

Brexit.

Two days of heavy selling

have raised fears that sterling

is heading toward its lowest

level against the dollar in

more than 34 years. The cur-

rency fell to as low as $1.

on Tuesday morning, accord-

ing to FactSet data, before re-

gaining some ground later in

the day.

The pound is still above its

lowest point since the Brexit

vote, which was at $1.2065 in

mid-January 2017. Should it

breach that level, the pound

would be at its cheapest

against the dollar since early

1985, when it almost reached

parity, except for a minutes-

long “flash crash” in October

2016.

The pound is falling as in-

vestors and companies adjust

their expectations of Britain’s

role in global trade and mar-

kets.

Though investors had

priced in Mr. Johnson’s elec-

tion as prime minister, most

thought his rhetoric and will-

ingness to leave without prep-

arations in place would soften

once he assumed residence at

10 Downing Street. Mr. John-

son has shown no indication of

wanting to push back the

U.K.’s leave.

“People had thought that

Boris Johnson may soften his

stance once he was in power,

but now the market is realiz-

ing that a no-deal Brexit is a

very real possibility,” said

Seema Shah, chief strategist at

Principal Global Investors in

London.

Mr. Johnson won the Con-

servative vote to become party

leader and then succeeded

Theresa May as prime minister

last week. He has since named

a leadership team packed with

Brexiteers, politicians deter-

mined to get out of the EU by

the next deadline of Oct. 31 by

whatever means necessary.

Investors and traders were

still assuming that something

would turn up to stop such a

potentially chaotic outcome

and weren’t yet pricing in no-

deal as the main scenario, Ms.

Shah said. The pound could

fall to $1.18 as Oct. 31 ap-

proaches, she said.

While the pound has

tracked Brexit concerns, U.K.

stocks have remained largely

impervious because many of

the largest companies trading

in London are international

businesses whose fortunes

aren’t linked to the British

economy. The FTSE 100 index

wavered between gains and

losses on Tuesday, after ad-

vancing for two straight days.

The equity gauge and the

pound have moved in opposite

directions 71% of the time over

the past 30 days, and the

FTSE 100 is up about 22%

since the Brexit referendum in

June 2016.

Meanwhile, investors con-

cerned about the health of the

U.K. economy have actually

sought safety in U.K. govern-

ment debt, known as gilts. The

yield on 10-year U.K. govern-

ment bonds declined 1.3 basis

points Tuesday to 0.641%, ac-

cording to Tradeweb. That is

the lowest since August 2016.

Analysts are now placing

the probability of a no-deal

Brexit between 35% and 45%,

up from 20% to 30% at the

start of July.

It is hard to know if the

pound will stay at its current

levels given that its fluctua-

tions have been attributable to

politics and not economic

data, analysts said.

If the currency does remain

at the present level, that could

push inflation higher next year

by about 1% for consumers,

said Samuel Tombs, chief U.K.

economist at research consult-

ing firm Pantheon Macroeco-

nomics. That could ultimately

hurt households, giving them

less money to spend outside of

basic necessities and curtail-

ing purchasing power for ser-

vices.

“I don’t think it’s a price

worth paying for an unpopular

no-deal Brexit,” Mr. Tombs

said. “It will hurt households

in a very real way.”

The pound is likely to be

particularly volatile now be-

cause many foreign exchange

contracts run for three

months, according to Ms.

Shah. Speculators, investors

and businesses are trying to

predict where the pound will

be around the deadline for the

U.K.’s departure.

“A lot of U.K. businesses re-

alize that a no-deal Brexit

doesn’t mean certainty; in fact

it’s the definition of uncer-

tainty,” Ms. Shah said.

—Pat Minczeski

and Anna Isaac

contributed to this article.

BYCAITLINOSTROFF

ANDPAULJ.DAVIES

Pound Is Punished Amid Worry Over Government’s Stance

While the pound has tracked Brexit concerns, U.K. stocks have remained largely impervious.

WILL OLIVER/EPA/SHUTTERSTOCK