- Fitch, one of the “Big Three” credit ratings agencies, believes Brexit is now too complicated to call.
- It has removed its base case, because “there is such a wide range of potential Brexit outcomes that no individual scenario has a high probability.”
- The ratings agency also believes that the possibility of a no deal Brexit is rising.
- Follow all of Business Insider’s Brexit coverage here.
LONDON – Fitch, one of the “Big Three” credit ratings agencies, now believes that the manner of the UK’s exit from the European Union is now so unclear that it is impossible to forecast.
In a statement on Thursday afternoon, Fitch said it is abandoning its previous base case – effectively the Brexit scenario it saw as most likely – because there is too much uncertainty to forecast with any accuracy.
“We no longer believe it is appropriate to identify a specific base case,” the agency said in a statement.
“An intensification of political divisions within the UK and slow progress in negotiations with the EU means there is such a wide range of potential Brexit outcomes that no individual scenario has a high probability,” it added.
Previously, Fitch identified a scenario in which the UK leaves the EU in March next year with “a transition period until around December 2020 and a framework for a future Free-Trade Agreement” as its base case, but it now says that it “no longer ranks as significantly more likely than other possible outcomes.”
With just over six months until the UK is scheduled to leave the EU, things remain highly uncertain, particularly after numerous government ministers and EU officials raised the serious possibility of a no deal Brexit. Trade Secretary Liam Fox recently said there is a 60% chance of it happening, for example.
While the government has set out its plans for leaving the EU in the so-called Chequers Agreement, many issues remain unsolved, including the Irish border question and how EU citizens will be registered in the UK after Brexit.
Fitch said that an “acrimonious and disruptive no deal Brexit is a material and growing possibility.”
The agency warned that no deal would be a huge negative for the UK, saying that it would “substantially disrupt” trade and the economy.
“No deal is also a material possibility. This would substantially disrupt customs, trade and economic activity, with the depth of disruption depending on how quickly a ‘bare bones’ deal could be reached,” the statement said.
As a result of these warnings, Fitch reaffirmed its negative outlook on the UK’s sovereign debt, saying that it could downgrade the UK’s credit rating in the event of a no deal Brexit.
“An outcome that adversely affected growth prospects could lead to a downgrade, as we said when we affirmed the rating in April,” the agency said.
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