In a recently published report, Moody’s Investors Service said that the UK’s withdrawal from the European Union without an agreement to replace existing arrangements “would damage the UK economy and be credit negative for a range sectors and debt issuers in the UK and Europe.”
Key quotes
- The precise impact of a ‘no deal’ outcome is impossible to define because both the UK and the EU would likely take swift steps to limit short-term disruption.
- The immediate impact would likely be seen first in a sharp fall in the value of the British pound, leading to temporarily higher inflation and a squeeze on real wages over the two or three years following Brexit.
- EU countries including Ireland, the Netherlands, Cyprus and Malta could experience negative consequences, particularly in areas such as trade.
- The UK banking sector’s overall credit fundamentals would weaken due to lower asset quality and weaker profits.
- In the event of a no-deal outcome, it would not be a foregone conclusion that the UK’s credit profile would be irreparably weakened.
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