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20th February 2019

Brexit: Deal or No Deal? Or Something in Between?

A wide spectrum of potential Brexit scenarios still remains. On balance, our base case is for Parliament ultimately to support a “Plan B” deal. Under this outcome or an “extend” scenario, the probabilities now tilt toward a softer or later Brexit; the odds of a "no-deal” Brexit have fallen.
 
Executive Summary
 
  • A wide spectrum of potential Brexit scenarios remains.
  • On balance, our base case is for Parliament ultimately to support a “Plan B” deal with further political and possibly legal assurances from the EU around the backstop agreement.
  • Under this outcome or an “extend” scenario, the probabilities are tilted towards a softer or later Brexit. Consequently the probability of a hard “no deal” Brexit has fallen.
  • Under our base case, we expect gilt yields to rise, UK credit assets to react positively and sterling to appreciate from current levels.
  • With growth likely to rebound somewhat and against an existing backdrop of a tightening labour market and rising wage pressures we think it is likely that the financial markets will start to price in policy tightening by the BoE.

Brexit: Deal or No Deal? Or Something in Between?


For anyone living in the United Kingdom since the Brexit vote in 2016 the unfolding tragicomedy has rivaled anything that even this country’s great bard William Shakespeare scripted at his creative peak. Reality has indeed been stranger than fiction. This brief note attempts to look beyond the current political hysteria and assess the impact of three alternative Brexit scenarios on UK financial markets.

 

Brexit, Investment Commentary, Investments, Partner Lead Story, Brexit

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Comments (3)

Try to please everyone and no-one will be pleased.

The majority who voted out, didn't vote out subject to a deal.

A good deal was possible, but we went about it the wrong way. We were too nice and well-mannered with the EU negotiators, which I think they saw as weakness.

We should simply have said, "We are walking away WTO but, if you want, you can talk about how to protect your 10 billion a month trade surplus with us, subject to our red lines. And you can stop these silly threats about no-fly zones etc., as we can do worse to you!"

The way Mrs May is going, she is almost assuring Mr Corbyn in number 10.

Norm d'Plume   21/02/2019   10:49
As Norm d'plume says.
Anyway there is no such thing as 'no deal. There is 'no deal with the EU' and that is a 'WTO deal'.

Steven Farrall   21/02/2019   11:11
Just so Mr Farrall!

Norm d'Plume   21/02/2019   11:45

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