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Brexit: No Time for No Deal

The U.K. and European Union are in the home stretch for reaching a deal on a free trade agreement. Will they be successful? Our Chief Investment Strategist EMEA & APAC, Wouter Sturkenboom, gives our take.

  • 3 Remaining Issues
  • Poor Timing for No Deal
  • A Deal Priced In


With the Brexit negotiations restarted and intensified, the UK and European Union are in the homestretch for reaching a free trade agreement. Will they be successful and prevent a disastrous no-deal outcome? Let's take a closer look.

Brexit negotiations, while bumpy, never really stopped. And both sides have made steady progress towards a deal. As a result, the focus is now on three remaining issues-- fishing rights, fair competition rules, and the mechanism for resolving future disputes.

And although these are contentious issues, abandoning a deal, knowing what the consequences would be, seems unlikely. After all, we are still in the midst of a pandemic and both the UK and European Union are battling a second wave of COVID-19 cases. The risk of a double-dip recession is already rising as a result. And adding a no-deal Brexit to that mix would be painful and irresponsible.

As a result, we remain cautiously optimistic that a trade deal will be struck. Its scope will be much smaller than we hoped for, but at least it will prevent a prolonged period of border chaos and trade uncertainty at a time when Europe cannot afford it. Of course, we do take the risk of a no deal seriously. However, we are hopeful that intensified talks along the lines of a mutually agreed, 10-point plan will overcome this impediment.

Investors have used a British pound as a barometer of no-deal Brexit risk. Currently, the pound is pricing in a relatively high likelihood of a deal being struck. That means risks to investors are to the downside should the negotiations fail and a potential upside of a deal is relatively small.


Wouter Sturkenboom, CFA

Chief Investment Strategist, EMEA and APAC
Wouter Sturkenboom, CFA, CAIA, is chief investment strategist for EMEA and APAC at Northern Trust. He is also a member of the Interest Rate Strategy Committee and Investment Policy Committee.