UK Crash Brexit revisited

While a crash Brexit is not our base case, the path towards PM Johnson’s declared goal – a deal with the EU without a backstop – remains unclear. A further delay may be necessary and PM Johnson may be stepping down. A care taker government could either bring a deal to a 2nd referendum or resort to snap elections.

  • Focal Point

Highlights:

  • While a crash Brexit is not our base case, the path towards PM Johnson’s declared goal – a deal with the EU without a backstop – remains unclear. A further delay may be necessary and PM Johnson may be stepping down. A care taker government could either bring a deal to a 2nd referendum or resort to snap elections.
  • Opinion polls see Tories plus the Brexit Party broadly on par with opposition parties, keeping the risk of a hard Brexit alive. In such a case, we expect GDP growth to suffer by 3.5 pp of GDP compared to baseline until 2021.
  • Despite the current low yields, a no-deal Brexit would trigger a new broad-based downward shift of sovereign yields on safe haven flows, a worsening economic outlook and an even more aggressive monetary policy accommodation
  • EUR/GPB would be headed towards parity, while also EUR/USD would decline on safe haven flows.
  • European stocks would suffer severely. The more defensive UK FTSE100 should outperform due to firms’ high organizational flexibility, international exposure, undervaluation vs EA and an already cautious investors’ positioning.

Read the full publication below.

UK CRASH BREXIT
REVISITED
DOWNLOAD
PDF
MORE INSIGHTS

RELATED INSIGHTS

READ NOW
COVID-19 FACTS & FIGURES
The World Bank is launching a $4 billion financing platform aimed at boosting the production and supply of critical healthcare products in developing countries.
READ NOW
GLOBAL VIEW – ENJOY SUMMER WHILE IT LASTS
As lockdowns have been lifted and global activity rebounded from the Q2 nadir, hopes of a strong recovery have helped risk assets advance further over July.
READ NOW
Generali Investments among preferred asset managers brands in Europe
We are pleased to share with you the outcome of the first survey on “Preferred Asset Management Firms by European fund selectors” run by Cerulli Associates, in which Generali Investments ranked #11.
MORE INSIGHTS