MacroResearchBoard

Brexit: Not The Only Headwind For The U.K. – October 21, 2019

Brexit: Not The Only Headwind For The U.K.

The past week has witnessed some dramatic shifts in sentiment regarding Brexit, manifested in sharp swings in the pound. After being dealt a temporary setback on Saturday, the ruling Conservative party will attempt to bring its deal with the EU to a vote again this week, with good odds that it will pass parliament. However, the Brexit process is far from complete, as now the negotiations on a new trade relationship, and other issues, will proceed in what will likely be a difficult political environment, fraught with uncertainty.

Looking out beyond the near run, the outlook for the U.K. economy is challenging. Removing a big negative (a no-deal exit) will be a plus and a further relief rally in the pound is possible in the very near term. However, even a “soft” Brexit will hurt U.K. growth over the medium- to longer-term, and the report noted that ”a cheap pound will be an important ingredient in supporting the economy”.