Our Light Brexit scenario helps clients to understand the impact of a potential compromise between the UK and EU, where the UK government softens its stance on immigration control in return for access to the common market and passporting rights for the financial sector. Although the current deadlock in Brexit negotiations give this scenario a probability of only 5-15% (as we see a delayed Free Trade Agreement (FTA) or No-Deal Brexit scenarios more likely), should the complexity of what Brexit actually means result in this softer outcome, it would have the most positive consequence for the UK economy, industries and consumers. In this situation, we would expect a recovery in business and consumer confidence, resulting in real GDP growth increasing from our baseline projections.
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Economy: Inflationary pressures would ease to below the Bank of England’s target rate of 2.0%, averaging 1.8% annually in 2019-2021.
Consumers: The richest segment of consumers (with a household disposable income over US$75,000) would see the largest expansion in this scenario, as an improved economy results in movement up the income pyramid. This will enhance discretionary spending prospects by this segment with a US$6.0 billion increase in real terms from the baseline in 2019.
Cities: London in particular will experience healthier prospects for its richest consumers, buoyed by fresh confidence in the City of London as it retains passporting rights for the financial sector. This will mean a more positive outlook for the high-end and luxury goods sector. We expect 39,700 more top segment households in London in a Light Brexit in 2019 compared to our baseline.
Industries: Most consumer goods industries will see an uptick in performance in a Light Brexit. Industries reliant on imported goods will benefit, such as chocolate confectionary, or nuts, seeds and trail mixes in the snacks categories for Packaged Food.
One UK sector that will lose out from a Light Brexit is inbound tourism. A Light Brexit would result in 645,000 less potential tourists arriving to the UK in 2019, largely owing to the fact that the pound would rally and relative exchange rates would push up the cost of visiting the UK.
Find out more in our first Quarterly Brexit Report for Q3 2017.
Euromonitor International’s Brexit Scenarios Tool helps clients to understand the impact of different Brexit scenarios on our baseline forecasts for the UK economy, industries and consumers. It will enable you to be prepared for a range of outcomes, providing the tools to stress-test strategy, plan ahead and remain profitable in these challenging times.