FrontierView’s global teams rely on scenario-based frameworks to prepare for changing, and often volatile, political and economic environments. Our analysts and practice leaders adapt their views in real-time as the UK election unfolds to ensure clients receive the most up-to-date and timely market monitoring insights.

In line with FrontierView’s expectations, the Conservative party, led by Prime Minister Boris Johnson, secured a clear majority of 38 seats in the UK’s general election. A hardline Brexit strategy, an alliance with the Brexit party, and the gamble of triggering an election at the right moment rewarded the Conservatives amid widely-held Brexit fatigue.

This strong Conservative majority will facilitate the ratification of the UK’s withdrawal agreement in Parliament, even if not all Tories support it in an upcoming vote. This reconfirms our base-case scenario that Parliament will approve a Brexit deal that ensures an orderly exit from the EU.

Firms should expect the PM to announce a meaningful vote in the coming days. Entering Brexit negotiations with the EU equipped with a clear majority undeniably solidifies the PM’s mandate to deliver Brexit. However, it does not alleviate Brexit uncertainty for multinational firms.

  • Negotiations on the new trade deal will be lengthy and arduous, generating uncertainty for the economic, political, and regulatory outlook. The current deal includes only the foundation of the future relationship between the UK and EU; the exact terms of this relationship will be negotiated during the transitional period, once the UK ceases to be a member of the EU. For the transitional period to end, the EU and the UK will need to agree on the terms of trade and the areas of regulatory divergence. Then, all EU-27 parliaments will be required to ratify the deal before it becomes international law. The withdrawal bill that Parliament is likely to pass shortly sheds limited light on the new terms of the UK-EU relationship. The new deal could potentially involve tariff and VAT checks, and possibly excise duties for some products. In the longer term, firms may see regulations diverging between Northern Ireland and the rest of the UK.
  • An extension of the transitional deal is the most likely scenario ahead of December 2020. The end of the transitional period – December 31, 2020 – will be the next key signpost for Brexit negotiations. Eleven months will prove inadequate for the UK to set the framework for a new free trade agreement between the UK and the EU and to develop advanced border infrastructure to facilitate ‘frictionless’ trade. This means that an extension to the timeline of the UK’s departure from the EU is likely as trade negotiations drag on.
  • Ducker Frontier maintains likelihood of No-Deal Brexit at 15%. Firms should be prepared for a renewed round of No-Deal threats from the PM in an attempt to absolve himself of responsibility for extending the transitional period beyond 2020. The Conservatives are reluctant to take No-Deal off the table, acknowledging that it is their top negotiation lever with the EU. Firms should maintain their contingency plans but should not further enhance them without further clarity, and only increase inventories in Q4 2020 if necessary.

FrontierView’s Europe team is at the forefront of key trends impacting the region. Our goal is to work with clients to deliver tailored growth solutions to support your critical business decisions and growth strategies. How can we help you deliver better outcomes for your business? Contact us here to connect with a team member to get started.