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James Smith, developed markets economist at ING, suggests that with less than a month to go until the current 31 October Brexit deadline, the probability of a deal being struck is falling rapidly.

Key Quotes

“UK prime minister Boris Johnson has a little over two weeks to both secure a revised Brexit deal from the EU and gain parliamentary approval for it. Failure to do so by the 19th of  October would, under the terms of the so-called Benn bill passed by lawmakers in mid-September, oblige the prime minister to ask the EU for another Article 50 extension.”

“The government will reportedly table fresh proposals for the contentious Irish backstop this week – that’s the mechanism to avoid a return to a hard border between Northern Ireland and the Republic of Ireland. But while the UK appears more open to allowing NI to abide by EU rules on certain goods, it is much more reluctant to allow alignment on customs and VAT.”

“All of this means a compromise looks unlikely to be reached by the mid-October European Council meeting. If nothing else, EU leaders will be acutely aware that there is still probably no majority in parliament for a mutually-acceptable deal.”