Brexit: Likely to see negotiations about how to negotiate at the beginning – Danske Bank

According to analysts at Danske Bank, while the EU wants to settle the divorce bill first before discussing the future relationship, the UK wants to discuss both simultaneously –we are likely to see negotiations about how to negotiate at the beginning and the risk of ‘no deal’ seems to be the highest here.

Key Quotes

“The UK and EU will probably have to negotiate about how to negotiate after the triggering of Article 50. Due to the ratification process, a deal (or at least a transitional deal) has to be reached by October 2018 the latest.”

“The UK is set to leave the single market and the custom union, as staying within means it cannot make free trade deals with other countries.”

“It is unlikely that a full deal can be reached within the two years of negotiations so the UK and EU are likely to agree on a transitional phase, especially for exposed industries such as autos, agriculture and financial services.”

“The UK has ruled out contributing significantly to the EU budget, which may create tensions among EU27, as the UK is one of the biggest net contributors to the EU budget. This is one of the UK’s best negotiation weapons.”

“In our base case, the final deal will be something similar to the EU-Canada CETA deal, which reduces/removes trade barriers for goods but remains weak on service. The UK is set to lose passport rights for banks.”

“Risk of a so-called ‘cliff edge’ Brexit with no agreement has increased, as May has said that ‘no deal is better than a bad deal’. We think that the risk is highest at the beginning of the negotiations due to disagreement on the ‘divorce’ bill.”