UK and Brexit: The economic implications – BNPP

William De Vijlder, Research Analyst at BNP Paribas, suggests that the UK’s historic vote to leave the European Union is now likely to be followed by a long process of negotiating the exit and the new relationship.

Key Quotes

“Within the Conservative party speculation over a change of leadership will probably now mount.

With Scotland’s electorate having expressed a desire to remain in the EU there is a possibility for calls for a second Scottish independence referendum.

Uncertainty over the future UK-EU relationship and the UK political outlook will weigh on the economy. We expect it to stagnate over the next two to three quarters. Overall, we expect the level of GDP in 2018 to be almost 2% lower than previously forecast.

Sterling is expected to weaken which will put upward pressure on inflation. We see CPI inflation at 2.6% in 2018, against our previous 2.0% forecast.

We expect the Bank of England to ease policy cutting the Bank rate to zero and upping asset purchases (QE) by GBP 100 bn.”