'Still much to do' on border and trade as pullout of EU looms
The Government has "no time to lose" in negotiating a trade agreement with the EU as Brexit looms in 12 months' time, it's been claimed.
As Prime Minister Theresa May embarks on a tour of the UK to mark one year until it is due to leave the EU, Danske Bank chief economist Conor Lambe said that while progress had been made, there was still much work to do.
He said the lack of agreed solution over how to avoid a hard border on the island of Ireland remained of particular concern.
A 'backstop' solution proposed by the EU in which Northern Ireland effectively remains inside the customs union was initially rejected by the Prime Minister, but later included in the agreed text of the draft deal, with the UK aiming to come up with a solution that will negate the need for its implementation.
Mr Lambe said: "With maintaining membership of the EU customs union - which would have gone part of the way to solving the problem - ruled out by the UK Government, other solutions must be identified.
"Most of the focus of the discussions related to Northern Ireland that will take place over the coming weeks is likely to be placed on the 'backstop' option.
"This could see Northern Ireland maintain very close links to the EU in the absence of an alternative way to avoid a hard border. But the UK Government is hopeful that it will find a solution to the border challenge during the detailed trade talks and that the 'backstop' won't be needed."
Mr Lambe said the timeline for negotiating a trade agreement remained tight, and while the chances of a 'no deal' scenario - with no trade agreement between the UK and EU and the parties falling back on World Trade Organisation (WTO) rules - had lessened, there were not down to zero.
"Businesses are still facing a cloud of uncertainty when it comes to their future long-term access to EU markets," he added.
"While the progress made recently is welcome, the UK Government must keep up the pace in the negotiations. There is no time to lose." Brian Telford, head of markets at Danske Bank, said businesses should treat the transition deal concluded earlier this month as allowing them extra time to get their planning right.
"There are a lot of companies out there with decisions to make in relation to major capital expenditure or other strategic planning and I don't think many of them can afford to further defer those decisions because of the transition period," he said.
"I think the smart companies will do their research, pick a direction and go for it."
He said the 'bounce' in sterling's value after the transition deal announcement was not as pronounced as anticipated
Mr Telford added sterling swings had been limited as expectations grew of an orderly Brexit, but there was "no guarantee" it would remain that way.
And he said Brexit was far from the only geopolitical factor affecting companies.
"The Russian situation, the frequent questions about the Trump administration, the developing situation in North Korea, to name but a few - all of these have added more volatility, in particular to the currency pairs involving the US dollar," he said.
"Those geopolitical factors are also having a big impact on the equity markets around the world, with all major indices experiencing a greater degree of volatility."