UK government unlikely to deliver good Brexit deal, Moody's says

Ratings agency Moody’s has joined the chorus warning of a slowdown in the UK economy and said things could get a lot worse as the government was unlikely to secure a Brexit deal that was not damaging.

Britain voted to leave the EU last year, and despite a sharp decline in the value of sterling, the economy has held up better than many economists predicted in the months leading up to the referendum.

With the loss of the Conservative majority in last month’s snap election however, Moody’s report concludes that the government will struggle to deliver a beneficial Brexit deal ahead of the March 2019 deadline.

Moody’s expects the economy to weaken significantly towards the end of the year, citing a baseline growth declining to 1.5% in 2017, and as low as 1.0% in 2018.

Moody’s report concludes that the government will struggle to deliver a beneficial Brexit deal

"While the negotiations with the EU have recently started, it remains unclear whether the UK government can eventually deliver a reasonably good outcome for the UK," said Kathrin Muehlbronner, a Moody's Senior Vice President.

Muehlbronner added: "The likelihood of an abrupt - and damaging - exit with no agreement and reversion to WTO trading rules has increased compared to our expectation directly after the referendum, with the government so far pursuing objectives that imply a 'hard' exit."

The ratings agency did add that it expected a deal to be agreed between the UK and EU’s negotiating teams, as a failure to do so would be a negative result for both sides.

While the research from Moody’s does not constitute any form of downgrade from the agency, the economy would face a possible lowering of its credit rating if it is not able to ‘preserve core elements of the UK's current access to the EU Single Market’.