News ID: 256009
Published: 0120 GMT July 19, 2019

Chance of no-deal Brexit rises as Johnson leads Hunt – Reuters poll

Chance of no-deal Brexit rises as Johnson leads Hunt – Reuters poll
PETER NICHOLLS/ REUTERS
Boris Johnson, a leadership candidate for Britain's Conservative Party, speaks during a hustings event in London, Britain, on July 17, 2019.

The chance that Britain will leave the EU without a deal is the highest since October 2017, economists polled by Reuters say, as arch-Brexiteer Boris Johnson looks set to take over as prime minister next week.

Johnson was the face of the 2016 campaign to quit the EU and has said he would be willing to leave on Oct. 31 without a deal. The median forecast of that happening was 30% in the July 15-18 poll, up from 25% last month and 15% in May, Reuters reported.

“The likelihood of a Boris Johnson premiership and the rhetoric which has surfaced during the campaign suggests that this outcome is more likely than we previously believed,” said Peter Dixon at Commerzbank.

With Jeremy Hunt, Johnson's rival for the premiership, also keen to display his credentials as a hard Brexiteer, sterling GBP= has plunged this week to lows not seen in over two years as investors price in the growing risk of a disorderly Brexit.

Lawmakers voted on Thursday to make it harder for the next prime minister to try to force a no-deal Brexit, giving some support to sterling, and a strong majority of economists polled still think the two sides will eventually settle on a free-trade deal, as they have since late 2016, when Reuters first started asking the question.

But in second place this month was the more extreme option of leaving without a deal and trading under World Trade Organization rules.

The third most likely outcome was the other compromise option of Britain remaining a member of the European Economic Area, paying into the EU budget to maintain access to the single market yet having no say over policy.

Fourth place went to cancelling Brexit.

As the chance of a hard Brexit has increased, so has the likelihood of a recession. The median forecast for one in the coming year was 30% and of one in the next two years was 35%, up from 25% and 30% respectively in June’s poll.

Growth forecasts remained modest, with the economy expected to expand 0.3-0.4% per quarter through to the end of next year.

Those forecasts were either left unchanged or lowered, so what has shifted are expectations about what the Bank of England will do with interest rates.

No change is now expected to the bank rate, which has sat at 0.75% for nearly a year, until 2021 at the earliest. In June’s poll, a 25 basis point hike was expected in the third quarter of next year.

 

No-deal Brexit

 

British lawmakers on Friday met with the European Union’s chief Brexit negotiator, seeking an iron-clad guarantee that the 1.3 million UK citizens in the bloc won’t have their rights removed and their lives disrupted if Britain leaves the EU without a deal, AP reported.

The rights of UK citizens living in the 27 other EU nations, and of the more than 3 million EU citizens in Britain, are one of the thorniest issues of the Brexit negotiations.

Their rights to live, work and study are protected under an agreement struck between the two sides — but the divorce agreement has been rejected by Britain’s Parliament, raising the prospect of a no-deal Brexit.

Both men vying to take over as prime minister next week, Johnson and Hunt, say it’s imperative that Brexit happens, with or without a deal.

Conservative lawmaker Alberto Costa, who is leading the cross-party delegation that met EU negotiator Michel Barnier in Brussels, said “If there’s no agreement, there’s no protection.”

“British nationals will potentially lose access to pension entitlement, lose access to health care entitlement, lose access to welfare entitlement and a whole gamut of other issues,” he said.

Talks between the British government and the EU on guaranteeing citizens’ rights if the UK crashes out of the bloc have failed to produce a breakthrough. EU leaders insist the withdrawal agreement can’t be chopped into chunks — Britain must accept all of it or none.

Some EU member states have said they will preserve Britons’ rights, but only if the UK reciprocates. Britain says all EU citizens living in the country can stay, but has not enshrined that right in law.

 

   
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