Brexit: One step forward, two steps back – Deutsche Bank

PM May returns from holiday this week and the press is reporting that a major Brexit speech is in the pipeline over coming weeks as well as the release of position papers, this could provide further clarity on the government’s approach to transition and a future trade deal with the EU27, explains the research team at Deutsche Bank.. 

Key Quotes

“As a whole, the weekend’s developments are consistent with our baseline scenario that a political/economic crisis will be necessary to force the UK into an EEA-style + customs agreement transitional agreement. The Conservative Party remains divided on the Brexit endgame and over the political costs involved. May’s authority has been undermined after the election, and the Prime Minister is unlikely to be strong enough to force the issue one way or another.”  

“In terms of timelines, the EU27 will assess whether the UK has made sufficient progress on the divorce agreement at the 18th October EU Council summit, after which talks could move onto a sketch of a future trade deal and then a transitional deal. Before then, divisions within the Conservative Party over the issues above could come to ahead at the Party Conference in early October. If agreement is not reached by the 18th, the European Council summit on 14th December 2017 could represent a second chance to reach agreement on divorce before year-end.”