Wednesday 23 August 2017

UK access to the single market is more likely after election - Moody's

In a note to investors, Moody’s said the election outcome could mean an electoral shift away from the hard Brexit stance taken in the wake of last June’s referendum result. Stock picture
In a note to investors, Moody’s said the election outcome could mean an electoral shift away from the hard Brexit stance taken in the wake of last June’s referendum result. Stock picture
Colm Kelpie

Colm Kelpie

The result of the UK election may push Theresa May towards a softer Brexit with some form of access to the single market, according to Moody's.

But the negotiations have now been complicated and the process will likely be delayed, it added.

Moody's also warned that the UK could face a cut in its international credit rating as a result of the vote.

In a note to investors, Moody's said the election outcome could mean an electoral shift away from the hard Brexit stance taken in the wake of last June's referendum result.

"Hence, a move towards 'softer' versions of Brexit - potentially with continued access of some sort to the single market - might now be considered," Kathrin Muehlbronner, senior vice president at Moody's investors service, said.

"Overall, we believe that the election outcome will hamper Brexit negotiations and increase fiscal risks, and therefore be negative for the UK's credit profile," said Ms Muehlbronner.

"However, the Conservative Party's reduced share of the vote may indicate a higher likelihood that a 'softer' form of Brexit might now be pursued, involving compromises with the EU that Mrs May would not have countenanced previously, and which would be positive."

Moody's said the inconclusive election result would complicate and probably delay the Brexit negotiations.

The timing of the Brexit talks process has been shrouded in uncertainty given the outcome of the UK general election last week, which left Mrs May having to seek support from the DUP to prop up a Conservative-led government.

UK Brexit Minister David Davis said talks will most likely be pushed back from next Monday's planned start, but would still begin next week.

This is in part because of a delay to the Queen's speech, which sets out the legislative agenda of a new government, and which was also due to take place on Monday.

Meanwhile, the European Commission has insisted it is "fully prepared and ready for the negotiations to start" - indicating any potential delay was on the British side.

It was a view echoed by former Taoiseach John Bruton in his Henry Grattan lecture at the Irish Embassy in London.

He said that a deal between the DUP and Conservatives could see the Tories drop their plans to leave the customs union post-Brexit.

"Given the commercial interest many Democratic Unionist supporters have in trade across the Border in Ireland, the Conservative Party may have to drop its insistence on leaving the EU customs union," Mr Bruton said.

He also warned of the potential for physical clashes on the seas if fishing rights are not agreed in the Brexit talks.

Irish Independent

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