Hamburg-based investment bank Berenberg has estimated the risk of a hard Brexit, with the UK leaving the EU without a deal, at 35%, in an economic commentary on the Tory leadership election.
Berenberg said that both Boris Johnson and Jeremy Hunt will face the same situation as former PM Theresa May did, despite their claims to be ready to leave with no deal on 31st October. It added that Johnson could face tougher talks with the EU27, as he is seen as less trustworthy and potentially more likely to yield in the end. In addition, a new prime minister may not be able to agree an extension, even if he wants one, as EU patience with Brexit is running out. At the same time, the EU27 may see political turmoil in the UK as giving little reason to make concessions to the UK which some EU members could object to. And the EU27 feel that they are now prepared for no-deal and that it would hit the UK far harder than the EU27.
Berenberg chief economist, Holger Schmieding, said under a hard Brexit, immediate economic disruption would probably be limited. “In practice, the transition to general border controls and the ensuing damage to cross-Channel supply chains would probably be gradual. The UK would feel the pain mostly over time through significantly lower trend growth.”