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“An intensification of political divisions within the UK and slow progress in negotiations with the EU means there is such a wide range of potential Brexit outcomes that no individual scenario has a high probability,” Fitch said in a note that did not constitute an official rating action. “We no longer believe it is appropriate to identify a specific base case.”
A group of pro-Brexit MPs is drawing up plans for how a no-deal Brexit would work, to be published ahead of the Conservative Party’s annual conference next month. Their paper is expected to argue that a “no deal” Brexit scenario, in which all imported goods from the EU would be subject to World Trade Organization tariffs, would respect the result of the referendum.
Fitch cited “the depth of division within the ruling Conservative Party and parliament” to argue that “any deal is likely to provoke brinkmanship and may not gain parliamentary approval [and] this could trigger a general election and greater talk of a second referendum”.
A disruptive or disorderly Brexit could “substantially reduce” the UK’s economic forecasts and the outlook for inflation and unemployment, Fitch warned. [...]
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