In our new CIO Special – UK economy: a perfect storm, we look at how COVID-19 has hit the UK economy, exacerbating previous weaknesses. Uncertainty around the Brexit process threatens to create a perfect storm.
The government’s economic strategy involves higher spending, with a focus on infrastructure, and debt. The UK’s historical record suggests that it can bear the associated rise in debt but Brexit and COVID-19 both add to the risks.
As the report argues, some sort of Brexit deal is still possible by end-2020, when the transition period is due to conclude, but the risk of a no-deal departure is significant. Progress in negotiations will be a major driver of UK asset volatility in coming months.