Brexit: firing on three fronts
- Nearly 15-months after the referendum result there are only 18-months left to agree on withdrawal terms. Lots has happened, but little has changed in my view of Brexit recently, but much nonsense exists on the domestic, EU and world fronts.
- Domestic: the government’s lost majority does not equal a soft Brexit. An unreliable majority may exist in that direction, but there is a full spectrum to disagree over. The default position in 2019 is no deal and votes are to soften that.
- EU: negotiations have belated begun and are naturally hung up on financial matters. The UK cannot force the EU to progress talks beyond the withdrawal treaty, which raises the risk of a disorderly outcome, or brinkmanship over that.
- The BoE assumes an orderly outcome. Anticipation or realisation of a disorderly one would crystallise contingency plans in a concentrated period at higher overall costs. This off-model risk should urge dovish restraint until it diminishes in 2018.
- World: rectification of tariff schedules is ongoing at the WTO, where conclusion is relatively uncontentious. A zero-for-zero deal with the EU is allowed and likely in an orderly scenario. Some EU trade deals may be grandfathered or transitioned.
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