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Edition 26 January 2018 - Crédit Agricole S.A.
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  • Edition 26 January 2018

    United Kingdom – 2018-2019 Scenario: Outlook at Q4-2017

    Brexit will be the dominant theme over the next few years. 2018 will be marked by the negotiations on a transition phase and on the future relationship between the United Kingdom and the European Union, while negotiations on the free-trade agreement should begin in 2019. Our central scenario is based on the key assumption that a withdrawal agreement will be reached between the UK and the EU under the terms of Article 50 of the Lisbon Treaty.

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  • Contents:

    - Overview of our scenario: heading for a soft 'hard Brexit'
    - Focus: Brexit still a total mystery
    - Latest economic developments
    - The basis of our scenario

  • Extract:

    The official withdrawal from the EU will come into force on 30 March 2019 and will probably be followed by a transition period during which the UK will remain a member of the EU and the customs union without being able to take part in the EU decision-making process. Assuming that the threat of a 'cliff edge' is averted, the growth slowdown is likely to continue gradually over the next two years as businesses progressively adjust to the new long-term relationship between the UK and the EU. After growth of 1.8% in 2017 (0.4% quarterly change forecast for Q417), we are expecting a slowdown to 1.3% in 2018, then to 1.1% in 2019. The economic prospects are underpinned by more upbeat global growth and sterling's past depreciation. The policy mix should remain accommodative: monetary policy is likely to be tightened only extremely gradually (with a single rate hike per year), and a significant easing of fiscal austerity has been announced for the next two years.

  • UK: Household consumption and consumer confidence

    Purchasing power should pick up slightly over the coming quarters due to the effect of a forecast gradual easing of inflation and a slight uptick in the rate of increase in wages, both factors that should have more impact than the slowdown in employment. Growth in real incomes should nevertheless remain weak.

    UK: Household consumption and consumer confidence
  • Associative topics : Economics | Europe


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