UK on track for ‘hard Brexit’ as deadline approaches
The UK’s Brexit deadline is fast approaching and the country still lacks a deal with the European Union, leaving the country at risk of a ‘hard Brexit’.
A deal needs to be reached by 15 October and the UK’s transition period would end on 31 December 2020. If no deal was achieved then the UK would follow World Trade Organisation (WTO) rules from 1 January, 2021.
Prime Minister Boris Johnson, who was on the ‘leave’ side of the Brexit campaign back in 2016, also gave the possibility of a ‘Australia-style deal’ but this was a misleading term as Australia did not currently have a free trade agreement with the EU. While Australia had been in negotiations since June 2018, the term effectively was another version of ‘no deal’ Brexit.
Paul O’Connor, head of multi-asset at Janus Henderson, questioned Johnson’s comments that the UK would “prosper mightily” following the exit.
“Time is running out for a deal to be established by the year-end deadline, when the transition period expires and the UK effectively exits the EU,” he said.
“It seems more likely that a no-deal exit would hit the UK economy hard in the short to medium term and would energise the movement in favour of Scottish independence.
“Even if a deal does emerge, it is unlikely to come before many weeks of hostilities and threats of a no-deal outcome. Any deal that is bodged together at the last minute is likely to be fairly narrow in scope, focusing largely on avoiding tariffs and quotas on manufacturing, with limited coverage of the service sector.”
Since the Brexit results were announced on 24 June, 2016, the UK’s FTSE 100 had returned 12.1% versus returns by the ASX 200 of 38.4%.
Performance of FTSE 100 versus ASX 200 since 24 June 2016
AUTHOR
Laura Dew
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