UK: Economy guided by politics – Westpac

According to Tim Riddell, analyst at Westpac, UK’s politics are increasingly factious and fractious as Parliament returns after its proroguing (suspension).

Key Quotes

“Uncertainty is likely to increase, weighing on an already volatile GBP. Parliament may have passed into law the requirement of the PM to request an extension to the current 31st Oct Brexit deadline, but if no form of exit deal is found in the next few weeks, the risk that EU may not agree to such an extension is material. Therefore failure to find any form of agreement could still trigger the legal default of a no-deal Brexit.”

“In the hope of avoiding an unintended no-deal Brexit, opposition parties are unwilling to table an early vote of “no confidence” in the Johnson gov’t and so trigger an election.”

“Polls are unclear as to whether a majority gov’t may result from an election and so Brexit uncertainty could be extended rather than reduced. The Labour opposition’s insistence of being non-committal on Brexit may reduce its likelihood of success at the polls, but it unveiled a host of market unsettling measures at its conference.”

“Continued uncertainty, no-deal risk and concerns over Labour policies should cap GBP and could retest recent lows unless some form of agreement can be found.”