Cyprus Mail 9 September 2020 - Reuters News Service
Credit rating agency Fitch has revised its Brexit view and now expects the UK-EU trade relationship to move to World Trade Organisation (WTO) terms at the start of next year due to the lack of progress in talks.
“With limited progress so far in negotiations on a free trade agreement (FTA) and time running out… we now assume that UK-EU trade will move to WTO terms in January,” Fitch’s chief economist, Brian Coulton, said during an online conference on Wednesday.
“It is very hard to model this but we have knocked around 2 per cent off our 2021 forecast for the UK because of this change in assumption,” he said, adding the ratings agency expected the UK’s economic recovery to stall in the first half of next year.
Fitch is due to review the UK’s AA- negative outlook rating on 25 September. The switch to WTO terms not only indicates the failure of Brexit talks, but also means that the UK will see slower growth in 2021, according to the ratings agency.
Trade talks between London and Brussels resumed on Tuesday, with prime minister Boris Johnson insisting a deal must be struck by 15 October. EU Chief Brexit Negotiator Michel Barnier replied “Good luck!” with regard to this demand by the British Prime Minister. The EU’s chief Brexit negotiator said there will be a “huge difference” between a deal and no deal outcome, warning “there is no reason to underestimate the consequences for many people, many sectors of a no deal”. Mr Barnier said at an event organised by an Irish think tank last week.
At the same time, the EU is demanding review of measures taken by the British government.
If the Brexit transition period ends on 31 January without an agreed trade deal in place, the UK will have to trade with the bloc on standard World Trade Organisation terms.