LONDON (Reuters) – Britain and the European Union remain far apart in the negotiations for a new trade relationship, and analysts from many banks say that the risk of a Brexit without a trade agreement is firmly on the table again at the end of the year.
FILE PHOTO: European Union chief negotiator for Brexit, Michel Barnier, and UK Prime Minister David Frost 5's European advisor will be at the start of the first round of EU-UK trade agreements after Brexit on 2nd March 2020 in Brussels, Belgium, seen Oliver Hoslet / Pool via REUTERS / File Photo
Talks are taking place in Brussels this week, but the UK's refusal to extend the deadline until the end of 2020 has increased the pressure to reach agreement by then or to be closed without trade agreements.
"We believe there is a 50:50 chance of a trade-free Brexit," said Sarah Hewin, chief economist for Europe at Standard Chartered.
"There are still big hurdles and nobody is really talking about Northern Ireland at the moment," she said, referring to one of the major stumbling blocks in the past rounds of negotiations.
Berenberg analysts expect a 60% chance that an agreement will not be reached in time, but expect a transition to the rules of the World Trade Organization (WTO) in small steps with a probability of only 5% for a disorderly result.
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Commerzbank sees a 20% chance that the transition period will be extended beyond the end of the year, although the government insists that this will not happen. Though they have only a 10% chance of Britain leaving without an agreement, they think any deal will be "weak with very limited reach".
JPMorgan also predicts that an agreement will be reached, but only after the current deadline.
ING economist James Smith sees a 40% chance of a no-deal Brexit – twice as likely as a year ago – but sees little difference between a free trade agreement and a withdrawal without one.
"In both scenarios, the UK is leaving the EU internal market and that is where most of the new costs for businesses will come from," added Smith.
Societe Generale's FX strategist Kit Juckes assigns a no-trade deal outcome of 16.7%, but sees the UK heading for a bare bones deal, adding to the strain on the economy.
"If the global economy is bad and we have a bad trade deal, we will do worse than most of the others," he added.
Reporting by Elizabeth Howcroft; additional reporting by Olga Cotaga; Edited by Gareth Jones
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