- The UK deliberately missed the end-June deadline to seek an extension of the Brexit transition period. Thus, by the end of this year at least a rudimentary agreement will be necessary or trade will fall back to WTO rules.
- Both sides agreed to intensify stuck talks. The stalemate is due to opposing underlying views: While the UK sees its Brexit dividend in breaking free from EU rules, the EU fears that the UK will undercut its regulations to get a competitive advantage. The implementation of the Northern Ireland backstop could also further complicate talks.
- We see a (weak) compromise still more likely than not as a hard Brexit shortly after the Corona crisis would be detrimental to both parties, and most so to the UK. However, both sides need to substantially move which is by no means guaranteed.
- Chief EU negotiator Barnier issued a deadline for a deal by end-October in order to get it ratified by year-end. PM Johnson is pushing for much progress to be done in July, but we see the “hot” phase to truly start after the summer break in August, creating additional uncertainty for markets.