- David Davis says that a deal can be shot down by Westminster
- EUR is holding steady against the Sterling despite concerns about Italy’s budget
- A lengthy recession may happen if Theresa May fails to get a deal, warns S&P
The Sterling has slumped against the Euro despite the Eurozone’s problem with the Italian budget, and while there aren’t any fresh headlines regarding the current situation in Britain, the Autumn Budget and the uncertainty about the Brexit are dragging down the British pound. The GBP/EUR exchange rate was €1.123 on Monday, despite the slowdown in the Eurozone’s growth. Experts say that the situation can get worse.
In a recent analysis from Standard & Poor, a ‘no deal’ scenario will result in a long recession in the United Kingdom, but the prediction is no longer just an analysis of what-ifs, according to observers as the S&P has already issued a warning.
It all depends on Westminster
Former official David Davis says that negotiations will be fruitful and that the possibility of a ‘no deal’ Brexit is nothing but an “irrational fear”. Davis notes that the European Union and the UK can reach an agreement, but that deal can be shot down by parliament. While speaking at the Institute of Economic Affairs, the former Brexit Secretary said: "It may take [a] few passes, there maybe a deal passes in Brussels and fails in Westminster."
The possibility of parliament not approving a deal is high observers say, considering the infighting currently happening at Westminster.
The possibility of a recession
While Davis is positive that a deal will be reached, Standard & Poor’s analysis of a ‘no deal’ Brexit has been published. According to S&P, the country will suffer from a high unemployment rate effectively triggering a recession. Inflation is also predicted to spike to over 5% and property prices will go down. The S&P warning came with the possibility of a downgrade to the United Kingdom’s credit rating says the Guardian.
Standard & Poor said that the EU and Britain will still reach a deal before March 2019, but it did reiterate that the possibility of a ‘no deal’ Brexit has escalated in recent months, prompting S&P to publish a warning for the sake of international investors.
However, it warned that the chance of a “no-deal” Brexit had risen in recent months to such an extent that it needed to warn international investors about the potential challenges ahead.
According to one of S&P’s credit analysts Paul Watters, their “base-case scenario is that the UK and the EU will agree and ratify a Brexit deal, leading to a transition phase lasting through 2020, followed by a free trade agreement. But we believe the risk of no deal has increased sufficiently to become a relevant rating consideration. This reflects the inability thus far of the UK and EU to reach agreement on the Northern Irish border issue, the critical outstanding component of the proposed withdrawal treaty.”
