Extract from Redwood Financial’s Economic Review July 2019
The possibility of a no-deal Brexit has increased significantly over the course of the past month despite further warnings over the potential economic consequences such a situation could incur.
On 23 July, Boris Johnson was officially confirmed as the new leader of the Conservative party and thereby, the country’s new Prime Minister. Although widely expected, the decision has undoubtedly increased the prospect of a no-deal Brexit, with Mr Johnson firmly committed to leaving the EU on 31 October, with or without a deal.
While the new Prime Minister has stressed that he does plan to renegotiate the Brexit deal his predecessor had previously agreed with the EU, time is tight and there is clearly no guarantee any discussions will prove fruitful. And the man Mr Johnson has tasked with preparing the country for a no-deal Brexit, Michael Gove, recently confirmed that the Government is now “working on the assumption” of a no-deal Brexit.
It does, however, remain unclear whether MPs could ultimately frustrate Government plans and effectively block a no-deal Brexit. Indeed, while the chances of no deal have certainly increased, a range of other possible scenarios still appear plausible. These include leaving the EU with a new or amended deal on 31 October; delaying departure; a General Election; a second referendum, and cancellation of Brexit altogether.
The Government’s insistence that it is prepared to leave without a deal did have an immediate economic impact with sterling slipping to a two-year low against the dollar. In addition, warnings have been issued over the likely consequences a no-deal Brexit could have on public finances. In its first assessment of a no-deal scenario, the Office for Budget Responsibility suggested that such an outcome could add £30 billion a year to public borrowing by the 2020/21 fiscal year.