Back on the Brexit rollercoaster: buckle up for a bumpy ride

What’s happening with Brexit?

The UK and European Union (EU) resumed Brexit negotiations over the summer but made limited progress. The political drama and posturing that accompanied the proceedings look certain to persist in the coming weeks.

It appears the UK intends proposing domestic laws to weaken its Withdrawal Agreement commitments on the border between Ireland and Northern Ireland. This would be a backward step for negotiations and could provoke a sharp reaction from the EU. Moreover, it will reignite the issue of governance. This appeared almost to have been settled. However, it will flare up again if the Johnson government signals genuine reluctance to honour existing treaty obligations.

Despite this latest development and fractious talks in prospect, our base case is still for the UK and EU to initially achieve a narrow free trade agreement (FTA). Nevertheless, this would mean a big increase in barriers to trade between the UK and EU, compared with pre-Brexit. Sectors reliant on smooth cross-border supply chains, and the services sector in general, would be most affected.

Table 1: Possible trade deal outcomes between the UK and EU

Brexit scenarios

 

View Full Article – published by Aberdeen Standard Investments on 16th September 2020