• Brexit: The fallout from the cabinet’s acceptance of the Brexit withdrawal agreement (WA) has been larger than we expected. The PM was always likely to face problems gaining approval in parliament for the deal, but with a number of resignations already tendered, and speculation about a leadership challenge, momentum is building behind the possibility of (yet) another general election, or a second referendum.
  • Economy: Assuming the UK reaches a deal with the EU, growth should rebound next year, opening the way for the BoE to hike rates twice. No deal would likely entail significant economic disruption and a more cautious BoE.
  • Markets: The pound remains the main focus for the markets with volatility rising in recent days. Sending voters back to the polling booth would likely lead to a further period of uncertainty for the markets, as the result of any vote is highly unclear. This could keep sterling volatile and exposed to downside risk in the near term. Over the medium term, we expect the pound to strengthen against its peers.


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