LONDON- The British economy will eliminate some of the Brexit uncertainty that has kept it back since 2016 after PM Boris Johnson’s election triumph. However, the risk remains of another “cliff-edge” showdown with Brussels within a year.
With Britain’s exit from the EU on Jan. 31 now a foregone conclusion, the question plaguing the minds of investors is whether Johnson will stick to the election campaign promise to not delay the end-of-2020 deadline for a new EU trade deal.
The set deadline is seen as incredibly tough to meet, considering the scale of issues to be resolved. In his victory speech on Friday, Johnson said that Britain would exit the EU on Jan. 31- “no ifs, no buts, no maybes.”
His election win also banishes the prospect of a sharp shift to the left under the Labour Party which promised nationalisations, more power for trade unions and a much bigger role for the state, which had worried many business leaders. “But more importantly, it could give the prime minister the political breathing room to ask for an extension to the transition period.”
The pound jumped by the most in nearly three years on the first sign of the scale of Johnson’s victory and shares in companies that rely on domestic British economy rose. [GBP/]
Investors pared back their bets on the Bank of England cutting interest rates as the uncertainty about the way ahead for Britain’s economy lifted, at least in the short term.
The world’s fifth-biggest economy has slowed since voters decided to take Britain out of the EU nearly 3-1/2 years ago. Leaving the bloc, which accounts for nearly half the country’s exports, is seen as a drag on its economic growth over the long term. But the new sense of clarity about Brexit, at least in the short term, is likely to lead to a pick-up in the pace of growth in the coming quarters, economists said.
(Photos syndicated via Reuters)
This story has been edited by BH staff and is published from a syndicated field.