With the clock now ticking on Brexit talks, analysts expected the U.K. would face an economic slowdown, stagflation and corporate defections.
Sarah Hewin, chief economist for Europe at Standard Chartered Bank, told CNBC’s “The Rundown” on Thursday that investors’ main concern was the lack of clarity on negotiations and whether there would be an agreement with the European Union by April 2019.
On Wednesday, the U.K. triggered Article 50 of the Treaty of Lisbon, which began the formal two-year process of Britain’s departure from the EU.
“The EU is the U.K.’s most important trading partner. If we can continue to get some access to the single market that’s going to be very important for a lot of businesses that have invested in the U.K. with a view really to having access to the EU market,” she said. “It’s unlikely that we’re going to get a trade deal done in two years’ time.”
Hewin added that many companies doing business in the U.K. were unlikely to wait the full two years before deciding whether the pull the plug on some or all of their operations there.
“We’re starting to see some businesses already making contingency plans about opening up in a different EU country,” she said. “I think that the deadline for many businesses is going to be by next March. If there’s only one year to go between potentially losing access to the single market, then businesses will need to know one way or another and if there’s still uncertainty at that point, say March 2018, then I think that contingency plans will be enacted.”
Other analysts expect deeper damage to the U.K. economy.
“We look at it as approximately a loss of between two and three percentage points of GDP, which Is massive, over a period of years,” David Roche, global strategist at Independent Strategy, told CNBC’s “Squawk Box” Thursday.
He noted that while the U.K. has a trade deficit with Europe, it has a surplus when it comes to services, as it benefited from access to the single market.