Danske Bank analysts note that UK’s Prime Minister Boris Johnson won a big victory at yesterday’s general elections with an estimated 360 seats versus the 326 needed for a majority.
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“The election was a big defeat for both Labour and the LibDems and Jeremy Corbyn has stepped down as party leader and Jo Swinson lost her seat in Scotland.”
“PM Johnson can now get his Brexit deal through without too many problems, which means the UK is leaving the EU by 31 January 2020. A Parliamentary vote on Brexit may happen as early as Friday, 20 December.”
“It is only the end of the beginning of Brexit. PM Johnson’s deal is only about securing an orderly withdrawal and negotiations on the future relationship are only about to start. The problem is that PM Johnson has pledged not to extend the transition period, which is set to end on 31 December 2020. This leaves only 11 months to negotiate the future relationship covering everything from goods, services and financial markets to exchanging data.”
“If the two sides cannot agree on a permanent deal and the transition is not extended, there is still a risk of an economic no deal Brexit by 31 December 2020, where the UK and the EU would trade on WTO rules.”
“We expect growth to be around 1% with downside risks. One wild card is how expansionary fiscal policy will be in the coming years.”
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