Interview: UK crashing out of EU with no deal "very unlikely" despite Brexit worries: analyst

Source: Xinhua| 2018-07-07 06:41:25|Editor: xuxin
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LONDON, July 6 (Xinhua) -- The chances of Britain crashing out of the European Union (EU) without a deal when it completes its Brexit process are "negligible", according to an analyst.

"The outcome that looks so unlikely as to be negligible is the one that many, including business and financial markets, fear whereby Britain crashes out of the EU with no treaty," Christopher Granville of TS Lombard, a London-based investment research firm, told Xinhua on Friday.

"This is the so-called No Deal outcome. That is a very unlikely outcome to happen, so unlikely as to be negligible," said Granville.

British prime minister Theresa May on Friday entered into discussions with her Cabinet members to define what approach Britain should take in the current stage of the Brexit negotiations.

May became prime minister in the wake of the Brexit referendum vote in June 2016 which unexpectedly set Britain on a path to exit the 28-nation bloc.

The referendum result triggered the resignation of prime minister David Cameron, who had campaigned to remain in the EU. May was chosen by her party to succeed Cameron, despite also having supported the remain camp in the referendum.

May revamped the Cabinet, and appointed several strong supporters of the Brexit cause into key positions, notably David Davis to lead the Brexit negotiations, Liam Fox to strike trade deals with nations across the globe and Boris Johnson at the Foreign Office.

These Brexit supporters have variously campaigned for their vision of a Brexit agreement, but the discussions on Friday at the prime minister's country home of Chequers are likely to see serious arguments over the level of compliance Britain will adopt with EU policies after it has left the bloc.

Cabinet ministers have briefed the media in the run-up to the Chequers meeting and created a great deal of news and speculation.

Some of this has centered around the idea that no policy will be agreed, and Britain will choose to exit the EU without any deal at the end of March next year when the Article 50 exit process deadline is reached.

Over the past two weeks, heavyweight business leaders have spoken out against a No Deal exit, and have lobbied publicly for a deal which would see low tariffs and easy access for Britain into the EU market.


Warnings have come from Jaguar Land Rover, Britain's largest car manufacturer, and from Airbus, the pan-European aircraft maker which has a significant and high-tech presence in Britain.

Both firms have warned that their futures in Britain could depend on the ease with which they are able to buy, sell and transfer products and supply chain goods after Brexit.

Granville said: "The noise is reaching a fever pitch, but that noise is not that important. People are likely to pay attention and are curious to know and be eager for insight where this will be leading."

"The noise does not signify an increased risk of disorderly and disruptive outcomes. On the contrary, the risk of a disorderly outcome is low."

Granville said that a vote last month in the House of Commons revealed that there was a majority of MPs from different political parties who would step in and prevent Britain from leaving the EU without a deal.

"If we were to get close to the deadline for exit next March with no legal and formal framework for exiting, rather than going straight into this standstill transition, then that majority in the House of Commons would intervene and make sure that would not happen," said the analyst.


The British economy's current growth rate is behind that of most of its developed-nation peers and below its capabilities.

Granville noted that while business investment in the two years since the Brexit referendum has held up better than after previous shocks, it should have been much stronger given that, in contrast to those historic episodes, sterling's Brexit devaluation coincided with global economic strength and a tight labor market.

The reduction of nearly 20 percent overnight in the value of sterling against the U.S. dollar in the immediate wake of the referendum in 2016 sparked higher British inflation, raw material and supply chain costs but it should also have strongly stimulated exports.

Growth did occur, but Granville argued it should have been better, and that Brexit worries have hung over the economy.

"There are concerns for the real economy, various indicators reflect uncertainty. Business investment is weak, growing much more slowly than this time last year in what should be a very favorable environment for strong growth and business investment," Granville said.

"Various other indicators... to do with confidence which are more forward looking show that the business community is concerned and is probably holding back on investment decisions; there is definitely an anxiety," he added.

The upside of that is that once a firmer path of Brexit is revealed, then businesses may well press the button on their investment plans.

Granville said: "British business and businesses with big operations in Britain will likely have a sharp rebound in confidence, because there is evidence that they have been held back."

"But that will only be once we get past this noise, this fever pitch of what is happening at the moment," he added.