While Mr Johnson’s huge majority should make it easier for the government to operate more efficiently domestically and in discussions with the European Union (EU), a soft Brexit is no guarantee.
“The trade deal to be negotiated between the UK and the EU does present the lingering possibility that there could be a ‘hard Brexit’ – that is, the UK exiting the transition period without a trade agreement and reverting to World Trade Organization (WTO) rules,” said Christopher M. Dyer, director of global equity at Eaton Vance.
“As his opening salvo in the trade negotiations with the EU, Prime Minister Boris Johnson pledged on 17 December that the December 2020 transition period cannot be extended.”
While Brexit will likely go ahead on 31 January, the UK and EU will then enter into trade negotiations. Given the long timeframe for any trade negotiations – let alone politically volatile trade negotiations where both parties have plenty to lose – one year doesn’t seem like a lot of time to get things done.
“The news flow around these discussions could create some financial market volatility in 2020,” Mr Dyer said.
“But we believe that the strength of the Conservatives in Parliament should enable the government to reach a suitable trade deal with the EU. We expect this clarity after years of ambiguity about Brexit to result in an improvement in business and consumer confidence – as well as an acceleration in corporate investment in the UK and Continental Europe that had been delayed by Brexit uncertainty.”
