In what will be seen as a boost to Boris Johnson, economists polled by Reuters have said that they are either reasonably or very confident the UK would leave the EU with a free trade deal. The view that the UK will be able to do a deal with the EU will also be strengthened after reports that Brussels is preparing to launch intense negotiations with the UK to avoid a ‘no-deal’ cliff-edge exit. Johnson has ruled out any transition period to keep the UK in the EU’s single market and customs union. According to a draft text seen by the FT, EU members want to move on from Brexit and ‘build a future relationship with the UK’. The hope is that negotiations with the UK ‘should be organised in a way that makes the best possible use of the limited time available for negotiation and ratification by the end of the transition’.
The withdrawal agreement that Johnson has proposed involves a settlement figure of approximately GBP30bn to the EU, plus a very tight deadline of just 11 months to complete any agreement. However, as Johnson said in a recent interview ‘Have you ever known two countries start free trade negotiations or start negotiations on a new deal when they were already in perfect alignment in regulatory terms and had zero tariffs and zero quotas between them? That’s where we are’.
Of course, all this would be based on the Conservatives winning the election next Thursday with a workable majority, something that, if you look at sterling at least, is being priced in. Since the second week of October cable, (GBP/USD) has moved from a low of 1.2203 to a high today of 1.3147 (at time of writing), a 7 month high. Recent polls have indicated that the Tories are approximately 10 points ahead of Labour in the polls, and that lead seems to be holding steady. The general view is that anything above a 6 to 7 point lead in the polls would equate to a Tory majority.