Morgan Stanley: Risk of disorderly Brexit has fallen

Morgan Stanley has predicted that the snap general election means Britain is almost certain to leave the single market.

But it also reduces the risk of a disorderly Brexit (assuming the polls are right, and the Conservatives win a larger majority).

That’s according to a new research note from MS on the general election. It says:

Why it virtually rules out staying in the single market: On Brexit, we expect the “sovereignty” red lines on UK control over borders, courts and laws, which were set out in the Lancaster House speech, to be put into the Conservative manifesto, effectively ruling out a Remain or EEA outcome.

A Conservative government would then imply leaving the single market: either a WTO-like outcome where the UK re-establishes national control but at the cost of economic barriers with the EU, or a “clean Brexit” FTA outcome where the UK re-establishes national control while avoiding major barriers to business with the EU.

Why it reduces the risk of a disorderly Brexit: In the base case the UK government would have the Parliamentary majority to push through difficult decisions to seal a deal.

In addition, the next Parliament should have time to complete Brexit negotiations before the next scheduled UK election in June 2022.