UK: Economy governed by Brexit outcome – ABN AMRO

Han de Jong, Chief Economist of ABN AMRO, points out that the British PM Theresa May and her team have reached a deal with the EU about how the UK will leave the EU and in the immediate aftermath several ministers and junior ministers resigned.

Key Quotes

“The PM then headed to parliament where a ‘lively’ session took place. Meanwhile, a number of senior members of the Conservative Party are preparing a leadership vote to get rid of Mrs May.”

“It remains hard to say how this will develop further. My understanding is that Mrs May has a good chance to survive the party leadership challenge. Whether she gets her deal through parliament remains to be seen. Don’t be fooled by the emotion shown in the parliamentary debate.”

“That was a chance for MPs to let themselves be heard, too good an opportunity for politicians to miss. But when it comes to voting, they must and will consider the alternatives. Rejecting the deal will cause significant chaos. It risks the UK crashing out of the EU without a deal, which will be a shock to the economy.”

“Rejecting the deal may also lead to general elections and the chance that Labour will gain a majority with Jeremy Corbyn replacing Theresa May as PM. Our baseline scenario, therefore, is that parliament will eventually approve the deal, but our confidence level is relatively low. The chance of a total political stalemate and chaos is significant.”