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What Would be the Main Collateral Effects of a No-Deal Brexit on 29 March?

20 mins.
13 MARCH, 2019
Ignacio de la Torre de la Torre
Leopoldo Torralba Torralba
Macro Global Brexit UK AER Global
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A few days ago, the Japanese multinational Honda announced the closure of its British car factory in Swindon, which implies the disappearance of 3,500 direct jobs (and as many indirect). The news is remarkable because it is the first plant Honda has ever closed, and it was announced a few days before a possible ‘no deal’ Brexit outcome... there may not be a direct relationship, but it serves as food for thought. Yesterday, the British Parliament did not approve May's exit plan and another ‘no deal’ vote is expected today, which is unlikely to be passed either. However, it may pass in another vote tomorrow, alongside a proposal to ask the EU for an extension of the deadline, which is now set as the 29th of March. A ‘black swan' is an unpredictable or unforeseen event, typically of extreme consequences. At the beginning of 2008, hardly anyone believed that part of the financial system was insolvent, but if it had not been for public bailouts and the reaction of central banks, many institutions would have collapsed. The UK could be facing one of these ‘black swans’ at present, if the ‘no deal’ Brexit option finally is enacted in just a couple of weeks' time. Although this is not a base scenario (most swans are still white), we believe that it is useful to examine the main potential impacts on the UK and Spain in the short and long term, qualitatively and quantitatively and by sector.

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