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Edition August 17, 2018 - Crédit Agricole S.A.
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  • Edition August 17, 2018

    United Kingdom – Brexit enters a critical phase

    In the autumn, the UK and the EU have to reach an agreement on the terms of the UK's departure from the EU and a ‘framework for a future relationship'. Our central scenario remains that a last-minute deal will eventually be reached (most likely at the European Council meeting on 13 December) and that a ‘cliff-edge' scenario will be avoided. Arguably, the political risks surrounding our scenario are varied and extreme, and can shift the Brexit process in one direction or another.

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  • Content:

    - The state of progress in the negotiations
    - Ratification process of the Brexit deal
    - Our baseline scenario
    - The risk scenarios

  • Extract – Our baseline scenario

    Our baseline scenario remains that the UK will reach a deal on the WA and the PD by the end of the year. The framework of the future relationship set in the PD would be based on the framework exposed in the Chequers proposal: an Association Agreement including a free trade agreement for the aspects of the economic partnership. The details of the FTA (free trade in goods and only partial access to the single market in services) and the other aspects of the Association Agreement will be negotiated in earnest once the UK exits the EU on 29 March, ie, during the transition period itself. The current 21-month transition will likely prove too short. The possibility to extend the transition period beyond the current December 2020 end-date will likely be included in the WA.

    An alternative scenario for the future relationship would be membership of the EEA and a customs union with the EU. However, we believe that such a reversal of Theresa May's official position is unlikely, due to the strong opposition from the Eurosceptic caucus of the Conservative Party and the risk that it may trigger a leadership contest. Full-blown membership of the single market is not the preference of the Labour Party either. A soft Brexit is not unconceivable though, but it would only come after a major political crisis, as we explain below.

  • Associative topics : Economics | Europe


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