Yahoo Finance City warns no-deal Brexit is most likely outcome of trade talks
A string of City analysts are predicting a no-deal Brexit amid growing fears talks with the European Union will collapse.
Credit rating agency Fitch expects the UK to deal with the EU on World Trade Organisation (WTO) terms from Jan 1 as a row grows over changes to the Withdrawal Agreement which would violate international law.
Fitch expects a sizeable economic hit from the disruption this would cause as businesses are hit by tariffs and red tape as result. Its chief economist Brian Coulton has knocked 2pc off next year's forecasts.
It comes after the Government confirmed its intention to annul key provisions of the Withdrawal Agreement with Brussels by publishing its Internal Market Bill. This disapplies EU law in areas such as state aid, contrary to what the UK signed up to last year.
Mujtaba Rahman, European managing director of the Eurasia Group consultancy, now puts the likelihood of departure without a trade deal at 60pc, up from his previous 40pc prediction.
He said: "Beyond seeking to retaliate using provisions in the Withdrawal Agreement and the joint committee process, the bigger question is how long the current negotiations can keep on running, given trust has now been completely destroyed."
One senior EU official told him: "This is not exactly what we would call a good day in the office."
Kallum Pickering, senior economist at Berenberg, agreed that the risk of a disorderly hard exit has been heightened.
In a note to clients, he said: "It suggests the UK is trying to increase the pressure to get a deal more to its liking rather than going for a hard exit. Either way, the strategy does not raise the chance of a good outcome.
"A hard exit with few or no intermediate steps to manage the adjustment in key areas like goods trade and financial services could tip the UK back into recession in early 2021 and temporarily slow the EU recovery.
"The persistent threat of a major second wave of Covid-19 and the return of national lockdowns – although unlikely – add to the cocktail of risks to the UK economy."
