Quarterly Brexit Report Q1 2018: Executive Summary

We are pleased to announce the update of our Quarterly Brexit Report for Q1 2018. This report is a partner piece to the Brexit Scenarios Tool, our interactive market intelligence dashboard available on our website and on Passport. Our analysis helps clients to stay informed with the Brexit process as it unfolds, and to understand the impact of different Brexit scenarios on the UK economy, industries and consumers.

One year on from the UK’s triggering of Article 50, a milestone was reached in the Brexit negotiations in March 2018, when the UK and EU came to a conditional agreement on the details of the transition period. This was designed to reassure businesses who have been in limbo about the timescale of Brexit and whether or not to implement their contingency plans. A status quo 21-month transition period will be implemented for the UK until 30^th December 2020. Although the country will have no voice in the EU decision-making process, the government will be free to negotiate other trade deals for after transition, while the free movement of people will also be maintained during this period.

A question mark still hangs over future relations, with the EU maintaining “that nothing is agreed until everything is agreed” including the draft transition agreement. The UK has now got two clear directions for Brexit – an ambitious, bespoke trade agreement under the current government or being part of a customs union as outlined by the opposition labour party. So far, it seems the EU has had the upper hand in the negotiating process with the UK making concessions, notably to the idea of Northern Ireland staying aligned to the EU in the absence of any other solution to avoid a hard Irish border.

Although the transition period is more certain, uncertainty will remain a dark cloud over the UK’s economic horizon. Euromonitor International forecasts real GDP growth of just 1.4% for the UK in 2018, amongst the weakest of the G7, as Brexit continues to dominate the investment environment.

Euromonitor International’s Brexit Scenarios

Euromonitor International’s baseline scenario already incorporates the likelihood (40-50% probability) of a Delayed Free Trade Agreement. The quarterly report examines the impact of a No-Deal Brexit scenario (35-45% probability) on our baseline, alongside the much slimmer prospect of a Light Brexit (5-15% probability).

Did you know?

• A No-Deal Brexit would weaken the UK property market, especially at the top. Spending on housing by the top segment will rise by 27.0% in real terms over 2017-2022, a significant 7.1 percentage points lower than the baseline forecast;

• In the event of a No-Deal Brexit, Social Class D segment’s total net wealth will decrease by 4.0% relative to the 5.9% decline in the baseline in the 2017-2022 period in real terms, as the population moves down the wealth pyramid;

• Retaining the EU regulatory framework would help UK food companies pursue their premiumisation strategies unimpaired by using EU-recognised labelling, benefitting UK packaged food sales.

Find out more in our Quarterly Brexit Report for Q1 2018.