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On Friday a Morgan Stanley analyst said: “Although we still expect a deal in the end, the probabilities have shifted. The risks are skewed to a harder outcome. We are bumping up the probability of our bear case of a WTO-style outcome to 40 percent”.
Brexit negotiations have descended into a bitter row after the EU gave an ultimatum to the UK Government to scrap new legislation that would break international law by reneging on key parts of the withdrawal agreement.
If the UK Government pushes through with the internal market bill the nation could face crippling financial and trade sanctions.
The EU’s lawyers have even announced that the UK has already breached the withdrawal agreement by the withdrawal agreement by tabling the controversial internal market bill.
The EU Commission released a statement that said: “The EU does not accept the argument that the aim of the draft internal market bill is to protect the Good Friday agreement.
“In fact, it is of the view that it does the opposite.”
Germany’s ambassador to the UK, Andreas Michaelis, added to the impression that a deal would be much more difficult to achieve.
He tweeted: “In more than 30 years as a diplomat I have not experienced such a fast, intentional and profound deterioration of a negotiation.
“If you believe in a partnership between the UK and the EU like I do then don’t accept it.”
If the Brexit negotiation collapse UK exports to the EU could face damaging tariffs.
Export tariffs could rise from zero to around 60 percent.
This would coincide with a near 20 percent slump in the British economy due to the pandemic.
The pound could slump if a no-deal Brexit was the final outcome.
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A ‘hard Brexit’ would send the pound down to $1.15 according to Morgan Stanley.
A pound is currently worth $1.28.
This could cause a 20 percent plunge in British bank shares.
Alternatively, a reasonable trade deal could increase the worth of the pound to $1.40.
This would boost bank shares by 20-40 percent, the bank said.
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