Karen Ward, a contributor to J.P. Morgan Asset Management’s research material explained that, indeed, the White Paper draw up by UK’s PM May is a considerable step forward, which will allow the UK government to begin negotiations with the EU.
Key Quotes:
“There are still challenges ahead. It is not clear whether the EU will find all elements of the government’s ambition palatable (we will most likely start to hear more from Brussels when the government’s White Paper is released next week). The government maintains that there is a technological solution that will allow the UK to act as an EU customs border while also establishing trade deals with other countries. But the EU may not be willing to engage in such a deal until the solution is clearly workable.”
“And the government remains firm that it must regain control of migration. This could compromise the UK’s ability to reach a broad agreement on free trade in services. But our core assumption is that there will ultimately also be a deal on services. The fragmentation of financial services that would be caused if no deal is reached would raise the cost of capital for European businesses and could disrupt the much needed recovery in the eurozone.”
“We expect agreement to be reached on a joint oversight framework between the two regulators – the Bank of England and the European Central Bank – which will pave the way to a deal in services.”
“We remain of the view that, by year-end, the UK will have negotiated a relatively soft Brexit.”
“We would expect a broad-based rise in sterling, which will lower UK inflation at a time when wage growth is picking up.”
“This would promote an upgrade to the economic outlook heading in to 2019 and most likely a faster pace of rate increases from the Bank of England.”
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