Get Brexit done ! Not yet fully !

The two sides have until the end of December 2020 to negotiate their future commercial relations.. If necessary, this transition period can be extended once, for a period of two years, i.e. up to 31 December 2022. During this transition period, the United Kingdom will preserve all its rights of access to the single market and will continue to apply European law (including the new regulations). By contrast, it will not be able to sign free trade agreements with third countries, have a seat in European institutions or participate in decisions.

So, the two parties only have a total of 3 years to negotiate everything, which appears relatively unrealistic, given the scope of the issues to be tackled and the historic precedents (for example, the negotiation of CETA between the EU and Canada took over 4 years and was followed by a further period of 5 years for ratification in the European countries).

Although some open questions have now vanished, the overall economic and political uncertainty remains at a high level:

• the negotiation phase for the future relationship will be very long, and so the general picture will remain unsettled and will continue to weigh down on investment decisions (see chart 1),

thereby causing a gradual decline of the “long-term growth rate” of the UK economy (which we evaluate at approximately +1.5%, see chart 2).

• In the political domain, the question of Ireland is far from being resolved and will reappear during the next phase of negotiations: in addition, the success of the Scottish Nationalists reawakens the possibility of a referendum on Scottish independence, putting the future of the Union in doubt.

In short, these parliamentary elections have certainly eliminated some of the unknowns, but new uncertainties will rapidly reappear, with structural implications both for companies and the business world.

 

DISCLAIMER

This document is for information purposes only.

Groupama Asset Management and its subsidiaries are not liable for any modification, distortion or forgery of this document.

All information contained in this document is confidential and reserved for the exclusive use of its addressees.

Any unauthorized modification, use or distribution of all or part of this document, by whatsoever means, is prohibited.

The information contained in this publication is based on sources that we consider to be reliable, but we do not guarantee its accuracy completeness, validity or relevance. This document was drawn up on the basis of information, projections, estimates, forecasts and hypotheses that involve a degree of subjective judgement. The analyses and conclusions express an independent opinion formed on the basis of publicly available information on a specific date and by applying a methodology specific to Groupama AM. In view of the subjective and indicative nature of these analyses, they cannot be construed to constitute a legally binding commitment or guarantee by Groupama AM or as personal financial advice.

This non-contractual document does not, under any circumstances, constitute a recommendation, request for offers, an offer to buy or sell or an arbitrage offer, and may in no case be interpreted as such.

The commercial teams of Groupama Asset Management and its subsidiaries are at your service if you wish a personal financial recommendation.