By Jonathan Cable
LONDON (Reuters) – Britain’s scheduled departure from the European Union on March 29 will be delayed by a few months, a Reuters poll found, and a majority of economists say the two sides will eventually agree a free-trade deal.
Prime Minister Theresa May is seeking to rework the Brexit deal she agreed with EU leaders and has raised the possibility of a delay of the departure date until June.
All but three of 54 economists who answered an extra question in the Feb. 28-March 5 poll said the more than four-decade marriage between Britain and the EU would not be dissolved in a little over three weeks time as planned.
Instead, there will be a brief extension, with over three-quarters saying it would be over before July.
“The wind seems to be blowing towards a shorter extension -at least from the UK side of the equation – but it could easily be longer given that two-three months is unlikely to be long enough to break the deadlock,” said James Smith at ING.
May reached a deal with the EU last year but it was resoundingly rejected by British lawmakers. However, she is hoping to win over enough of them to pass it by agreeing a legal addendum with the EU on the deal’s most controversial element.
A “backstop” to ensure no hard border between EU-member Ireland and British-ruled Northern Ireland has been the major hurdle. But with lawmakers eager to avoid a potentially disorderly no-deal exit, an extension appears likely to try and resolve the issue.
The chance of a disorderly Brexit fell to 15 percent in the latest poll, its lowest since Reuters began asking the question in July 2017, down from the 25 percent it has hovered around.
“It is clear that there is no majority in parliament for a “no-deal” Brexit,” said Howard Archer at EY ITEM Club.
Instead, as in all Reuters polls since late-2016, the vast majority of economists said the two sides would settle eventually on a free-trade deal.
In second place was Britain being a member of the European Economic Area, paying into the EU budget to maintain access to the EU’s single market.
The third spot again went to Britain leaving without an agreement and trading under World Trade Organization rules. Brexit being cancelled was deemed the most unlikely.
Britain’s economy came close to stagnating again in February against a backdrop of Brexit nerves and sluggish global growth, a private survey showed on Tuesday. [GB/PMIS]
According to the latest Reuters poll it is not going to pick up anytime soon, with quarterly growth predicted at 0.2-0.4 percent through to the middle of next year, unchanged from February’s poll.
Still, the chances of a recession in the coming year held steady at 25 percent, with the likelihood of one in the next two years holding at 30 percent.
Inflation will hover around the Bank of England’s 2 percent target across the same forecast horizon, potentially giving the bank room to act.
The central bank has stressed it would not have an automatic interest rate response to Britain leaving the EU without a transition deal and Governor Mark Carney has stuck to his message gradual and limited rate rises are coming if a no-deal Brexit is averted.
None of the 75 economists polled expect Bank Rate to be lifted from 0.75 percent on March 21. The median forecast is for a 25 basis point hike in the final quarter of this year, followed by another 25 basis points in the latter half of 2020.
(Polling by Sarmista Sen and Hari Kishan; Editing by Janet Lawrence)