Brexit volatility to remain ‘elevated’

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Oct 24, 2019

Parliament must be given a ‘straight up-and-down vote’ on prime minister Boris Johnson’s Brexit deal, No 10 says. It comes after Saturday’s parliament sitting where MPs voted for a third Brexit extension.

The amendment – the Letwin amendment, drawn up by Sir Oliver Letwin the independent MP (formerly Conservative) for West Dorset – means the government must not give final approval of the deal until the Withdrawal Agreement Bill is passed.

Johnson is now required to ask the EU to extend the 31 October deadline.

Axa Investment Management senior economist David Page says: “At this point it is difficult to assess what we have learned from the process. The vote in favour of the Letwin amendment saw all 10 Democratic Unionist Party (DUP) members and 10 of the 21 Tory rebels vote in favour of the amendment. If these numbers voted against the prime minister’s new deal it is very difficult to see it passing.”

“Volatility associated with Brexit uncertainty looks set to remain elevated over the coming two weeks at least. However, we continue to view the prospect of a no deal exit on 31 October as unlikely and an eventual extension to Article 50 still, on balance, appears the most likely outcome.”

Meanwhile, Hermes Investment Management chief executive Saker Nusseibeh says: “Practically speaking, leaving with no deal will unlikely result in the catastrophic cliff edge feared by the remain camp, because both the UK and the EU will try to smooth the period leading up to a new trade deal. Similarly, the optimistic forecast for a better trade environment for a UK independent economically from the EU will equally unlikely materialise.

“The crux of the matter remains for the Brexit voters a matter of control over sovereignty as well as a swipe at what they see as a distant political class, and for the remain voters a matter of economic expediency, and perhaps also of cultural identity.”

He adds: “At this stage, any prediction for the future of this process is by definition perilous, but the popular mood for some sort of closure and an end to uncertainty would argue for an eventual Brexit. The economic price of that divorce as well as any mitigants from a more independent economic policy will not be fully apparent for several parliamentary cycles. The UK has already suffered some economic loss, and I would argue more importantly, deep wounds to its social fabric and political framework, as a result of this process. One’s hope for the country is that with time these will heal, and that any economic set back will be reversed.”

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