Chance of #HardBrexit holds at 25%, economists say - Reuters poll

The Reuters 29 August-3 September poll was conducted as pressure mounts on British Prime Minister Theresa May, who is struggling to sell what she calls her business-friendly Brexit to her own party and across a divided country.

With less than two months before Britain and the EU want to agree on the terms of Britain’s leaving the bloc, the two sides are still sparring.

When asked the probability of a disorderly Brexit, whereby no agreement is reached by the end of March 2019, the median forecast in the poll was 25% - unchanged from an August estimate.

However, nine of 34 common contributors in this poll and the last raised their numbers and the highest prediction was 60%. Four reduced their odds and 21 left them unchanged.

“The chances of the UK leaving the EU has undoubtedly risen recently, and we have become less confident of an orderly exit,” said Howard Archer at EY ITEM Club.

“Nevertheless, we still think it is more likely than not that the UK and EU will come to a deal, although it could very well be uncomfortably late for ratification by March 2019.”

With a deal considered likely, the chance of a recession remains remote. Medians gave the likelihood of one in the coming year as 15%, down from 20% given in July, and within two years at 25%.

But as there is still little clarity on how Britain will trade from April, and as a global trade war escalates, median forecasts for post-Brexit economic growth were revised down from August projections.

Expansion is now put at 1.4% next year, down from 1.5% given last month, and an unchanged 1.6% in 2020.

British manufacturers had their weakest month in over two years and export orders suffered a rare decline in August, a warning that a world economic slowdown, as well as the approach of Brexit, is weighing on the country’s factories. [GB/PMIM]

Inflation jumped after the Brexit vote - in large part driven by a fall in sterling - and is not expected to fall back to the central bank’s 2% target until the end of next year.

Asked when Bank Rate would reach 1.5%, the earliest date given was 2020.

“It is likely to be a slow haul on rates with the BoE proceeding cautiously in the face of Brexit-related uncertainty,” said Peter Dixon at Commerzbank.

“Getting to 1.5% as quickly as possible may make sense on the basis that it gives the BoE more policy flexibility.”